Posted by kevin on October 30, 2010 under Foreclosure Blog | Comments are off for this article

You are behind on your mortgage.  You call your lender or, more probably, your servicer and ask for a forbearance or a modification.  You get bounced around on the telephone, no one calls back, and then finally after about a month you speak with a real person.  You are sent modification papers.  You fill them out, send them in.  Nothing happens.  You call again.  In the meanwhile, you get a notice to foreclose followed by a foreclosure complaint.  After a month or two of calling the servicer, you get someone on the phone who is responsive.  She tells you that they lost or did not get your papers, and you have to send in a new set with updated information.

So, you start the process again.  You do not think that you need to get a lawyer to answer the complaint because you are working with the lender.  Moreover, every letter they send to you tells you that the lender is there to help.  After another month or two, you are put on a trial modification.  You make the payments for 3 months.  You tell yourself that everything is all right.  Then, out of nowhere, you get papers in the mail from the lender’s lawyers saying that they have entered final judgment by default.  The double whammy comes two weeks later when you get a letter saying that your permanent modification has been denied.

I have heard this story dozens of times.  Unfortunately, in New Jersey, you are usually up the creek.  Why?  Because you did not file a timely  answer to the complaint.

New Jersey has three tiers when it comes to answering a complaint.  The first tier is that you file your answer on time.  The case proceeds in the normal course.

The second tier comes when default is entered.  If you have not filed an answer in the allotted time, the lender can enter default.  This is a notice that no answer was filed.  This phase lasts for about 7-8 months until a judgment is entered.  The borrower is not allowed to file an answer unless it gets permission from the court.  The borrower must file what is called  a motion to set aside the default.  You must demonstrate to the court good cause for not filing an answer and a meritorious defense.  Good cause is not defined but one judge stated that there must be a “lack of contumacious conduct on the part of the defendant”.  Basically, you are not thumbing your nose to the court.  If there is only a default, then a borrower still has a good chance of setting it aside.

The third tier is when there is a default judgment.  This does not happen until almost a year after the complaint is filed.  In this case, you have to file a motion to set aside the default judgment.  But the standard is no longer “good cause and a meritorious defense” but “excusable neglect and a meritorious defense”  Notice that term- excusable neglect.  The Court has already concluded that you are negligent because you did not file an answer.  The question is whether you can prove that the negligence was excusable under the circumstances.

The ordinary person who is not a lawyer says, “No problem”.  The bank jerked me around for 4 months, lost my papers 3 times, requested updates on my financials 2 times, took 3 payments from me and then denied my mod.  On top of it, the bank never told me that the foreclosure was continuing.  I trusted those guys.

Loser in almost every situation in New Jersey.  The Judge does not want to hear it. You got served with a summons that said that if you did not answer within 35 days, you will be in default.  You got a notice under the Fair Foreclosure Act saying first that default was going to be entered and, second, that a judgment was going to be entered.  YOU IGNORED THOSE NOTICES.  It does not matter to the  Judge that you dealt with the bank or the bank jerked you around.  You are SOL.

Unfortunately for defendant borrowers, it is very difficult to prove excusable neglect at the trial level.  If you read the cases, it is very rarely granted by the trial judge.  Moreover, even if you appeal, the appeals court finds excusable neglect in less than half the cases.  And that is going to cost you upward of ten thousand dollars in legal fees- win or lose.

THE LESSON- IGNORE A COMPLAINT AT THE RISK OF LOSING YOUR HOUSE.  Sounds dramatic but true.  If you are behind on your mortgage, your lender is not your friend.  The lender hires lawyers to protect its interests.  You should be doing the same, and the sooner the better.

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