Mortgage Forbearance Disputes: Limits on Federal Claims Against a Private Bank Holding Company

1. Introduction

This case arose from a substantial residential mortgage, a subsequent default and foreclosure, and unsuccessful efforts to obtain federal relief against the lender’s holding company. The central question was whether the borrowers’ allegations about mortgage servicing and proposed forbearance arrangements stated an actionable federal claim.

In 2013, Blue Foundry Bank, then known as Boiling Springs Savings Bank, extended a mortgage loan exceeding $4 million to Chryssoula and George Arsenis and their adult son, Spyridon, concerning property in Bernardsville, New Jersey. Following default approximately a decade later, the bank obtained a foreclosure judgment in New Jersey state court. The family unsuccessfully attempted twice to remove the foreclosure proceeding to federal court.

In 2024, the family brought this separate action against Blue Foundry Bancorp, which had become the bank’s parent and holding company in 2021. Seeking more than $100 million, they invoked federal-question and diversity jurisdiction and alleged violations of several federal statutes, the Fifth Amendment, and duties of good faith and fair dealing.

The Third Circuit affirmed dismissal because the asserted federal theories lacked an adequate legal or factual foundation. Importantly, the court did not decide whether the holding company could otherwise be responsible for its subsidiary’s conduct.

2. Background and Procedural History

The complaint asserted claims under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the National Banking Act, the Truth in Lending Act (“TILA”), and the Fifth Amendment. It also broadly referenced the Real Estate Settlement Procedures Act (“RESPA”) and the Fair Debt Collection Practices Act (“FDCPA”).

A recurring allegation concerned a proposed forbearance and loan-modification agreement. The borrowers maintained that the bank inadequately explained its terms, pressured them to accept an unfavorable modification, and failed to offer further loss-mitigation options. The document eventually submitted was unsigned and contained redlining and comments. The court therefore treated it as an offered draft, not a completed agreement.

The District Court granted Blue Foundry Bancorp’s motion to dismiss for failure to state a claim and dismissed the complaint with prejudice. It also declined to entertain the state-law claims and disallowed amendment. A separate submission accusing Horizon Blue Cross Blue Shield of defamation in unrelated proceedings was not treated as a genuine amendment of this mortgage dispute.

Although Chryssoula alone filed the notice of appeal, the Third Circuit treated it as covering George as well, noting his signatures on other filings. Their adult son was not an appellant, and his parents, as nonlawyers, could not represent him. The notice was timely because the District Court received it within the appeal period, notwithstanding its later docketing.

The court exercised appellate jurisdiction under 28 U.S.C. § 1291 and reviewed the dismissal independently. It summarily affirmed under Third Circuit L.A.R. 27.4 and I.O.P. 10.6 because the appeal presented no substantial issue.

3. Summary of the Opinion

4. Analysis of the Court’s Legal Reasoning

A. Naming federal laws does not establish an actionable federal claim

The opinion distinguishes between invoking federal law and alleging facts that support relief under it. A complaint must connect the defendant’s conduct to an enforceable legal duty. The borrowers’ dissatisfaction with foreclosure and proposed accommodation terms did not itself identify a statutory violation.

This distinction is especially important because the complaint named several federal enactments. Their presence did not overcome missing elements, the absence of a private enforcement mechanism, or an expired limitations period.

B. Private lending conduct did not support the Fifth Amendment claim

The Fifth Amendment restricts governmental action, not ordinary private conduct. The court found no basis in the alleged circumstances for imposing Fifth Amendment liability on Blue Foundry Bancorp, a private company.

The holding is contextual. It does not establish that a private entity can never be implicated in a constitutional claim. Rather, the allegations here supplied no governmental-action connection sufficient to transform the mortgage dispute into a federal due-process violation.

C. The National Banking Act theory lacked a private enforcement basis

The borrowers invoked 12 U.S.C. § 24(7), but the court concluded that their National Banking Act claims were not privately enforceable. It relied on authority distinguishing statutory restrictions on banks from rights that individual litigants may enforce through suit.

The important limitation is that the decision concerns these claims. It should not be expanded into a proposition that every provision of the National Banking Act is categorically unavailable to private litigants. The cited authority addresses prohibitions lacking an applicable penalty or forfeiture for executed transactions and reserves the relevant challenge to the United States.

D. The CARES Act claims failed without resolving the full private-right question

The court noted decisions rejecting private rights of action under various CARES Act provisions. Nevertheless, it did not rest exclusively on that issue. Its independently sufficient reasoning was that the borrowers failed to explain how the alleged negotiations violated the Act.

The complaint identified dissatisfaction with disclosure, pressure to accept proposed terms, and the absence of additional loss mitigation, but it did not specify the statutory provision breached or explain how the conduct met its requirements.

The draft agreement mattered because it clarified the factual premise: the dispute concerned an offered proposal, not an executed modification. The court did not hold that an unsigned agreement necessarily eliminates all statutory duties. Its narrower point was that these allegations did not establish a CARES Act violation.

E. The age of the mortgage defeated transaction-based disclosure claims

The complaint placed the mortgage transaction in 2013, while the federal action began in 2024. The court therefore agreed that the TILA claims were untimely on the face of the complaint and that any RESPA claims related to that transaction were likewise out of time.

This reasoning is transaction-specific. It does not mean that every later servicing violation concerning an older mortgage is necessarily untimely. The opinion addressed claims connected to the original transaction and identified no adequately pleaded, timely alternative basis for relief.

F. Corporate-parent liability remained undecided

Most allegations concerned Blue Foundry Bank, but the named defendant was Blue Foundry Bancorp. The court expressly put aside whether the parent could be liable for its subsidiary’s acts or omissions.

The affirmance therefore supplies no holding on veil piercing, agency, or another theory for attributing the bank’s conduct to its parent. Even assuming that attribution could be established, the pleaded federal theories still failed.

G. State-law jurisdiction and amendment required separate discretionary judgments

After the federal claims were dismissed, the District Court declined to entertain the remaining state-law allegations. The attempted reliance on diversity jurisdiction did not supply an independent basis for retaining them: the court concluded that the parties were not diverse. The amount demanded could not cure that defect.

The opinion affirmed that discretionary jurisdictional decision rather than independently determining the substantive merits of the state-law claims. Although it describes the judgment as dismissing the complaint with prejudice, its discussion should not be read as a developed merits ruling on every possible state-law theory.

The court also upheld the refusal to permit amendment for the reasons supplied by the District Court. Its express discussion confirmed that submitting an unrelated complaint against a different company did not constitute a genuine effort to repair this complaint. The opinion does not reproduce all of the District Court’s reasons, so its amendment ruling should not be generalized beyond this record.

5. Precedents Cited and Their Influence

A. Appellate participation and timing

United States v. Jones, 994 F.2d 1051, 1054 (3d Cir. 1993)

Cited alongside Federal Rule of Appellate Procedure 3(c)(2), this decision supported treating Chryssoula’s notice of appeal as including George. Its role was procedural: it helped determine who was before the appellate court, not whether the mortgage claims had merit.

Osei-Afriyie v. Med. Coll. of Pa., 937 F.2d 876, 882–83 (3d Cir. 1991)

This authority established the relevant limit on nonlawyer representation. The parents could pursue their own interests but could not represent their son in federal court. Combined with the notice’s failure to include him, that principle excluded Spyridon from the appeal.

United States v. Solly, 545 F.2d 874, 876 (3d Cir. 1976)

The court relied on this case to recognize the notice as timely when received within the applicable period, despite later docketing. It prevented an administrative delay from defeating an otherwise timely appeal.

B. Standard of review

Smith & Wesson Brands, Inc. v. Att'y Gen., 105 F.4th 67, 72 (3d Cir. 2024)

This case supplied the plenary-review standard for dismissal of the complaint. The appellate court independently assessed the legal sufficiency of the pleading rather than deferring to the District Court’s legal conclusions. That standard differed from the abuse-of-discretion review applied to supplemental jurisdiction and amendment.

C. Constitutional and statutory enforceability

Pub. Utilities Comm'n of D.C. v. Pollak, 343 U.S. 451, 461–62 (1952)

Cited with a comparative “Cf.” signal, this decision supported the governmental-action limitation relevant to the Fifth Amendment. It helped explain why the private-company defendant was not constitutionally liable on the alleged facts. The opinion did not undertake a comprehensive analysis of circumstances in which private conduct might be attributable to government.

Thompson v. St. Nicholas Nat. Bank, 146 U.S. 240, 251 (1892)

This was the principal authority for rejecting the asserted National Banking Act enforcement theory. The quoted passage states that when the Act prohibits conduct without imposing an applicable penalty or forfeiture on executed transactions, their validity may be questioned by the United States, not private parties. It supplied the distinction between a statutory prohibition and a privately enforceable remedy.

Thompson v. Evolve Bank & Tr., 791 F. Supp. 3d 236, 250 (D. Mass. 2025)

This district-court decision described a broad federal consensus against a private right of action under the CARES Act’s foreclosure moratorium. It provided persuasive support for skepticism about the borrowers’ enforcement theory. It was not indispensable to the result, however, because the Third Circuit separately found that the alleged facts did not explain a statutory violation.

D. Limitations and remaining state-law claims

In re Cmty. Bank of N. Virginia, 622 F.3d 275, 283, 305 (3d Cir. 2010)

Cited with 15 U.S.C. § 1640(e), this decision supported the limitations analysis for TILA and RESPA claims associated with the original mortgage transaction. The court applied that framework to dates apparent from the complaint. It did not provide an extended discussion of tolling or distinct later violations.

De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 311 (3d Cir. 2003)

This decision supported the District Court’s discretion to decline supplemental jurisdiction over state-law claims once the federal claims were gone. It reinforced that a federal court need not resolve the remaining state-law dispute merely because it appeared in the same complaint.

6. Potential Impact and Limits

Although nonprecedential, the opinion offers practical guidance for mortgage litigation:

• Identify the enforceable duty. Borrowers must connect specific conduct to a particular statutory requirement and an available remedy.
• Separate negotiation grievances from legal violations. An unfavorable proposal or perceived negotiating pressure does not, without more, establish a CARES Act claim.
• Address timing at the pleading stage. Transaction-based claims may be dismissed when their untimeliness is apparent from the complaint.
• Distinguish the lender from its holding company. This decision leaves attribution of subsidiary conduct unresolved.
• Plan for the loss of a federal forum. State-law claims may not remain in federal court after federal claims fail, particularly when diversity is absent.

The decision does not establish comprehensive CARES Act immunity, resolve every mortgage-servicing theory, or determine whether the borrowers had viable state-law remedies. Nor does it rely on the prior foreclosure judgment or removal attempts as an independently developed preclusion ground.

7. Complex Concepts Simplified

Private right of action

A legal entitlement allowing an individual to sue to enforce a statute. A law can regulate banks without authorizing every affected borrower to bring a damages action.

Governmental action

The connection to government needed for constitutional restrictions to apply. Ordinary private mortgage conduct does not automatically satisfy that requirement.

Plenary review

Independent appellate review of a legal question, without deference to the lower court’s legal conclusion.

Abuse of discretion

A more deferential standard used for decisions entrusted to the trial court’s judgment, including the jurisdictional and amendment decisions reviewed here.

Supplemental jurisdiction

Authority to hear related state-law claims alongside federal claims. Exercising that authority may become discretionary when the federal claims are dismissed.

Summary affirmance

Affirmance through a streamlined appellate process because the appeal presents no substantial issue.

Dismissal with prejudice

A dismissal ordinarily ending the opportunity to replead the dismissed claims in that action. Here, the opinion separately treated the state-law claims as claims the District Court declined to entertain.

8. Conclusion

The Third Circuit affirmed because the borrowers’ allegations did not establish viable federal claims: the constitutional theory lacked governmental action, the asserted statutory theories lacked an available enforcement basis or adequate factual support, and transaction-based disclosure claims were untimely.

The opinion’s broader significance is methodological rather than precedential. Mortgage disputes require claim-specific analysis of enforceable rights, pleaded violations, limitations periods, and jurisdiction. Invoking multiple federal laws cannot substitute for satisfying those requirements.