Can I Reinstate My Mortgage?

Posted by kevin on September 7, 2017 under Foreclosure Blog | Be the First to Comment

Many times, borrowers served with a foreclosure complaint have asked, ‘if we are only $18,000 behind on the Note, how can the bank take the position that $500,000 is due?’ The answer is two-fold. First, in a foreclosure, the borrowers are not being sued for what is called a “money judgment”. The object of the foreclosure is to sell the collateral (your home) and pay off the loan. What gives the the lender the right to sell your home? That leads to the second point. Your Note and Mortgage give the lender the right to sell the collateral to pay off the loan. Moreover, the Note and Mortgage give the lender the right to accelerate the loan upon a default. That means even if you are late even one payment and that triggers a default, the entire amount of $500,000 is due at the option of the lender.

Is there anyway to de-accelerate the Note and Mortgage? Well, if your Note and Mortgage give you the right to reinstate, then you have an out. Otherwise, in the “old days”, you were basically at the mercy for your lender. It was the lender’s decision to de-accelerate the mortgage. If the lender consented, they usually tacked conditions on the consent in the form of payments of late fees, penalties and collection costs which sometimes seemed exorbitant under the circumstances.

In New Jersey, that all changed in 1995 with the passage of the Fair Foreclosure Act. That law applies to any residential mortgage, and gives the debtor the right at any time up to the entry of final judgment in a typical foreclosure to cure the default, and de-accelerate and reinstate the mortgage by paying the amounts due as set forth in the statute. The term “residential mortgage” clearly applies to your home. But it also applies to dwelling of up to 4 units one of which is occupied by the debtor of members of his/her family. In addition, the term residential mortgage can apply to a vacation home.

How much must you pay prior to the entry of final judgment? The law says all sums which would have been due in the absence of default. That means all principal, interest and escrow payments that you missed. In addition, the debtor is responsible to pay all late charges, court costs and attorneys fees permitted in foreclosure matters by the New Jersey Court Rules. Payment must be in the form of cash, cashier’s check or certified check. Although not specifically mentioned, a wire transfer into an account designated by the lender should satisfy the condition.

As with any statute, there are terms which are not exactly clear. So, besides the statute, borrowers may have to look at court opinions dealing with the statute. However, the short answer to our question is that under the right circumstances, borrowers have a right to reinstate a residential mortgage in New Jersey.

Let’s Get Realistic

Posted by kevin on September 13, 2015 under Foreclosure Blog | Comments are off for this article

If you have read my blog over the last few years, you know that I represent borrowers. You know that I have pointed out forcefully what lenders and servicers have done wrong. Moreover, I have pointed out my frustrations with the courts, servicers, and government.

We are in the latter stages of the mortgage crisis. It is not clear that the federal government will continue the MHA- HAMP programs for much longer. However, there are still hundreds of thousands of mortgages that are in default and those cases need to be resolved.

So, you are a borrower. You may have gone into default when your option arm mortgage had an interest rate change. You could not afford the $3500 per month new payment You may have been in default for 2 or 2 1/2 years. Then, you were able to get a modification at $2800. Not a great deal, but it was better than being thrown out on the streets. You paid that for a year, but have not made any mortgage payments or real estate tax payments or insurance payments since the beginning of 2012. That comes out to more than $200,000 of payments that you have not made over the years and you still have a roof over your head.

Whoa! That does not sound too empathetic. But that is how most chancery judges in NJ are going to look at you. Chancery is the old equity court. Equity, they tell us, tries to balance the pro’s and con’s of a case to come out with a just decision. On the one hand, you, the borrower, took 200K, 400K, 600K and did not pay it back. On the other hand, the bank has shoddy paperwork or fudged your income (usually with the borrower’s knowledge). Does that mean you get a free house? That is tough for a judge to swallow.

Many of the procedural defenses such as standing in securitized trusts and violations of the Fair Foreclosure Act are no longer bases for relief. Potential clients call all the time and tell me that they were the victims of predatory lending because they were given a mortgage that they could not afford except by looking to the collateral. That is a primary definition of predatory lending under the federal regs and OCC guidelines, but it generally falls on deaf ears in court. In NJ, we have three published opinions (and a few more unpublished opinions) dealing with predatory lending and consumer fraud violations. One deals with a black family in Newark. The other deals with a Hispanic person on a modification. The third deals with an 83 year old woman who lost her house in a scam involving a contractor that took back a mortgage on her property to finance the installation of new aluminum siding.

What do these cases have in common? They all involve taking advantage of unsophisticated people who did not have a lawyer. Moreover, those unsophisticated people were either minorities or old people. In other words, in practical terms, it appears there is a demographic element to the way the law of predatory lending/consumer fraud is applied in NJ. Now, I do not believe that is a proper interpretation of what predatory lending is, but that is how it applied in NJ.

Each week, I have people call me and state that they are victims of predatory lending and/or they were jerked around by servicers in modification applications or they were scammed by a Florida or California outfit in the modification. They want me to guarantee that if I take their case, they will not be foreclosed on, or guarantee that there will not be a sale after judgment, or guarantee that they will get a modification that they deem affordable. And while you are at it, could you keep your fees low because money is an issue.

Neither I nor any other attorney can make such assurances except as follows: if you repay all arrearages before final judgment, your mortgage will be reinstated. Moreover, if you file bankruptcy, the foreclosure action will be stayed for a limited period of time in a Chapter 7 and could be effectively stayed for 5 years in a Chapter 13 if you make all required payments going forward including your current mortgage payments and all arrearages. Short of that, no guarantees.

What we can do is explain to you your defenses and come up with a strategy to defend the case through trial and possibly appeal. We can review your modification applications or put together a new one. We can analyze whether there are any violations of the Dodd-Frank regulations. We can analyze whether Chapter 13 makes sense for you. And we can tell you the approximate cost for each type of service. But we cannot pull rabbits out of hats no matter how much we would like to.

So, be realistic when you seek legal counsel.

NJ Supreme Court Fair Foreclosure Act Decision

Posted by kevin on March 4, 2012 under Foreclosure Blog | Comments are off for this article

Since November, we have awaited anxiously for the NJ Supreme Court decision US Bank, NA v. Guillaume. This was touted to be the definitive ruling on the Notice of Intent to Foreclose (NOI) requirements under the Fair Foreclosure Act (FFA). Well, the decision was released this week.

The FFA requires the mortgage lender to send to the mortgage debtors an NOI prior to filing a foreclosure complaint relating to a residential mortgage. The NOI statute states that the notice must contain 11 different points of information. One of the critical points of information is the name and address of the Lender. However, the FFA does not say what the penalty should be if the mortgage lender fails to comply with the NOI requirements.

There have been 5 major cases dealing with the NOI requirement before Guillaume. The first decision indicated that substantial compliance was good enough (in other words, you did not have to include all 11 items of information). Under this case, the plaintiff could leave out the name and address of the lender. Decisions 2-5 said that you had to strictly comply; that is, you had to include the name and address of the lender. One case seems to suggest that dismissal of the complaint was not necessary for a violation (Frankly, it is not clear to me what that court was saying on this issue). Two cases said that dismissal without prejudice was appropriate but not necessary. The fifth case said dismissal with prejudice was mandatory. Dismissal was the remedy favored by borrowers.

Because the decisions on the remedy for a violation of the NOI requirements were not uniform, judges were coming down with different decisions based on the same facts. Whether the case was dismissed, in effect, depended on which judge was assigned the case. This is not good.

In Guillaume, the borrowers sat on their rights for the better part of 16 months, a default judgment had been entered against them, and a sheriff’s sale had been scheduled. That is when the Guillaumes finally retained an attorney. (Message to all readers-that is a big mistake.) On a motion to set aside the default judgment, it was argued that the plaintiff failed to comply with the NOI requirements. The trial court refused to dismiss, and told the plaintiff to send out a revised notice which included the name and address of the lender. Two revised notices were sent but both were deficient. Still the trial court would not vacate the default or dismiss the case. The appellate level decision in Guillaume said substantial compliance was good enough. If plaintiff gave the name of the servicer, it satisfied the purpose of the statute. That decision did not even mention the 5 major cases on the issue.

The case went up to the Supreme Court. The lenders, in effect, put all new foreclosures on hold, pending the decision of the Supreme Court. Attorneys for both sides were happy that the Supreme Court was finally going to decide what the remedy for a FFA violation was. Good or bad, we would have a definitive decision and be able to advise our clients.

The Supreme Court held that a lender must strictly comply with the NOI requirements- in other words, the notice had to include the name and address of the lender. That was definitive. Then, the Court said that since the Legislature did not provide a remedy, they would consider the appropriate remedy. So far, so good. Then, the Court said that foreclosures are decided by chancery judges. In the old days, chancery courts were called courts of equity. Traditionally equity allowed judges wide flexibility in making their rulings based on the specific facts before them. So in keeping with this tradition,, the Supreme Court said that if there was an NOI violation, the judges were free to shape their own remedies as long as they did not abuse their discretion.

What does that mean in practical terms? Judge A could decide to dismiss. Judge B could decide to stay the case for 30 days so that a new NOI could be sent. Judge C could decide something different. As long as the given judge does not abuse his or her discretion, the ruling cannot be overturned on appeal. No clarity.

So, we waited a decade to get a definitive decision on the NOI requirement, and did not get a definitive decision. That is disappointing.

New Standing Foreclosure Case

Posted by kevin on August 21, 2011 under Foreclosure Blog | Comments are off for this article

The second shoe fell on August 9 when the Appellate Division case of Deutsche Bank, as Trustee v. Mitchell was published.  This involved a mortgage foreclosure rescue scam but the decision rested on standing issues.  The appellate panel followed Ford and Raftogianis and found that DB did not have standing.  DB filed the complaint on May 13, 2008 in which it asserted that it was the owner of the note and mortgage but it was not until May 14, 2008 that WAMU assigned the mortgage to DB.  DB then filed an amended complaint which listed the assignment.

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Fair Foreclosure Act

Posted by kevin on under Foreclosure Blog | Comments are off for this article

Lenders  in foreclosure actions had a bad couple of days (August 8 & 9) in NJ.  On the 8th, an appellate panel came down with a published opinion in BONY, as Trustee v. Laks.  This is a Fair Foreclosure Act case.  We use the FFA as a procedural defense to dismiss cases without prejudice.  It is important because it is a published opinion right out of the blocks and it involves a pro se plaintiff (someone who is not represented by a lawyer)

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