NJ Supremes Do the Right Thing

Posted by kevin on August 10, 2017 under Foreclosure Blog | Be the First to Comment

Last week, the New Jersey Supreme Court came down with a pro-borrower decision relating to enforcement of a modification agreement. Although this is good news for borrowers, my take is that the decision is driven by the facts of the case and may have limited application especially when applied by trial courts.

In GMAC v. Willoughby, the borrower closed a mortgage loan in February, 2006 and defaulted in June, 2006. Not good facts for a borrower going to court. GMAC foreclosed and received a final judgment. The trial court, however, stayed the sale (scheduled for September, 2009) so that the parties could go to court sponsored foreclosure mediation.

In May, 2010, the parties entered into a settlement. The mediator used the court approved form. The lender’s attorney wrote in the terms which included the borrower would pay $600 down and make trial payments of $1678. Upon payment during the trial period, a permanent modification would be offered which was final upon signing of the permanent mod agreements.

Well all the trial mod payments were made thru the end of May, 2011, but instead of a permanent mod, GMAC sent the borrower a new mod offer with a higher payment required. The borrower refused to sign the new mod, but made the higher payments and protested that the new deal was improper (to no avail). Then, in November, 2011 and then again in May, 2012, GMAC sent the borrower new modification agreements which she initially orally agreed to but she refused to sign the written agreements. However, she continued to make payments. So, GMAC (on behalf of the lender) decided to play hardball. They sent back the August, 2012 payment and the lender foreclosed. The borrower tried to enforce the May 2010 settlement agreement but the trial court said that the May 2010 agreement was provisional and not final, and the property went to sale. Note that the borrower paid over $58,000 on the May, 2010 modification agreement but apparently this fact did not move the trial court. On appeal, the appellate division affirmed the trial court.

Ms. Willoughby took the case up to the Supreme Court. The Supreme Court reversed and ordered the trial court to vacate the sale and reinstate the May 2010 settlement. The legal analysis was straightforward. The Supremes found that the settlement agreement constituted a valid contract. There was an offer and acceptance and the terms were definite. To the extent that any terms were not definite, the Supremes found that since the lender’s attorney filled in the terms, any ambiguity had to be construed against the lender. This is basic statutory construction. Moreover, the agreement stated that it was a final, binding and enforceable agreement. Finally, Ms. Willoughby relied on the finality of the agreement and made over 58K of payments.

I think four factors influenced the Supreme Court’s correct decision. First, GMAC was playing it pretty fast and loose. My experience has been that this is typical of lenders and servicers in many foreclosure situations. Second, the contract terms were pretty straightforward. Third, the borrower paid over 58K, and GMAC not only played games with her but pulled the rug out from under her. Fourth, (and this surprised me), the Supremes put a fair amount of emphasis on the NJ Mediation program as a vehicle for settlement. Reading between the lines, the Supremes seemed offended that the servicer treated the mediation process in such a cavalier manner If this were a straight modification without court sponsored mediation as a vehicle, would the decision be the same.

Factors One and Two should be enough for a victory but, I believe, they did not win the day for Willougby. What clearly was more important was that Willougby, in reliance on the settlement agreement, made over 58K of payments which GMAC glomed. This shows incredible good faith on the part of the borrower (which was totally ignored by the trial and appellate courts). The wildcard in this opinion is that fact that the settlement came out of court sponsored mediation. The opinion spent pages on this fact and the policy behind mediation. Would the decision have been the same if it was a straight modification application made through the servicer? I do not know.

NJ- First in the Nation

Posted by kevin on February 18, 2016 under Foreclosure Blog | Be the First to Comment

Took a break for awhile. Spending lots of time doing modifications and checking into causes of action under Regulation X. Also, just wrapping up a Chapter 13 (5 payments to go). Saved the house, stripped the second mortgage, and got hefty sanctions against the servicer. Now, back to foreclosures.

I lived in NJ for my entire life with the exception of college and law school. So, I have been the recipient of all those barbs about New Jersey for a long time. Enough to give you a complex. So, a couple of months ago, when I saw in a local newspaper that NJ is #1 at something, it gets my attention. Only problem is that it said that NJ had the highest rate of foreclosure cases in the US. 1 out of 171 housing units is subject to a foreclosure filing. That is more than double the national average.

Looking more at the numbers, activity is up 27% over the prior year, but new foreclosures are actually down. That means that the vast majority of the cases are winding their way through the court system.

In the past three days, I have received calls from people who are at various stages of foreclosure. All need help. One just received a Notice of Intent to Foreclose. That is at the beginning of the process. Others are facing sheriff sale in less than 10 days. Those people are at the end of the process.

The facts are that the courts in NJ have trended in favor of lenders in foreclosure matters. The Feb 1 published decision in Curcio is just another indication that borrowers have an uphill battle. The trend is most pronounced at the end of the process. Once a default is entered, it is getting increasingly more difficult to convince a judge to set aside the default and allow the borrower to go forward with his or her case. Forget about situations where default judgment is entered. Your chances of overturning a default judgment or slim- less than 5%.

So, a little advice. If you are behind on your mortgage and get a Notice of Intent to Foreclose, get in to see an attorney. You may have a case that will resonate in the foreclosure court. Or you may have a situation where a Chapter 13 bankruptcy will work. A modification should always be considered, but if you follow the mod path without addressing the foreclosure, you are setting yourself up for a potential fall.

When you are dealing with an attorney, make sure that he or she is looking at an integrated approach which will utilize all your options to get a result that will work for you.

He Who Hesitates Is Lost

Posted by kevin on March 5, 2013 under Foreclosure Blog | Comments are off for this article

If you receive a notice of intent to foreclose, and do not run to a lawyer, you are a fool. If you get served with a foreclosure complaint but do nothing because you are working with the servicer to get a modification, you are a fool. If you get papers from your adversary saying that they are submitting their final judgment package to the Foreclosure Unit and do nothing, you are a fool. And if you wait until you get notice of a sheriff’s sale before you run to a lawyer (and expect him to pull a rabbit out of his hat for limited fees), you are a fool who will soon be without a house.

The message has been that the majority of chancery judges do not like contested foreclosure cases. The average case does not get to trial for two years. The Administrative Office of the Courts wants foreclosure cases to go to trial within 12 months of the date of the filing of the complaint. If the defendant is not served right away, that could mean that you are going to trial in 6-8 months. Now, some judges are routinely limiting discovery and setting trial dates that are 8 months from trial.

So, do yourself a favor. If you are behind on your mortgage, contact your servicer to see if you can work something out. If not, and you receive a notice of intent to foreclose, at least interview a few attorneys with background in foreclosure defense. Better yet, hire one of those attorneys. If you get served with a complaint, hire counsel immediately and file your answer in a timely manner.

Nowadays, foreclosure cases can be filed electronically through JEFIS. So, that means that the papers can get into the system that much faster. Servicers are regulating the number of foreclosure cases that are filed at any given time so as to not overstress their staffs and, more importantly, not to overstress the Clerk’s office in Trenton. In other words, the process is being speeded up.

If you do not file your answer on time, and the plaintiff enters a default, then you must file a motion to set aside the default in order to file an answer. That means that you have to go before a judge who may not like contested cases. In the old days the policy was that people should have their day in court. Today, I am not so sure if that policy wins the day.

So, remember the old adage, “He who hesitates is lost.”

In future blogs, I will give you examples of recent cases where borrowers took it on the chin for sitting on their hands.

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.