New Jersey Reaches Settlement With Six Large Residential Lenders Over Foreclosure Proceedings

by:  Michael L. Rich

The State of New Jersey and six of the country’s biggest residential mortgage lenders reached a settlement agreement announced on March 18, 2011 concerning foreclosure practices.  The financial institutions and their home loan servicing divisions are Bank of America, CitiBank, GMAC, JP Morgan Chase, One-West Bank and Wells Fargo Bank.

The settlement comes four months after New Jersey Supreme Court Chief Justice Stuart Rabner issued a three-part Order to address rogue foreclosure filings and procedures, including apparent instances of “robo-signing” of certifications in support of foreclosure filings.  In the December 2010 Order, Justice Rabner cited a staggering increase in residential foreclosure cases and concerns that had been raised that foreclosures were being “rubber stamped” based on inadequate or incorrect paperwork.  The six financial institutions were ordered to show cause why their residential foreclosure filings should not be halted pending further review.  In response, the banks maintained that they had already begun making changes and were being unfairly targeted by the State.

In announcing the settlement, Edward Dauber, the state-designated attorney, said there was no reason for an immediate halt to foreclosures by these lenders.  Rather, under the settlement, a court appointee would review whether the banks properly foreclosed on tens of thousands of New Jersey homes and whether mortgage lenders have changed how they handle repossessing the properties.  The centerpiece of the agreement is the appointment of retired Superior Court Judge Richard Williams to determine whether the banks have in place a process to ensure that their foreclosure filings and proceedings are based on personal knowledge and accurate business records about the loans they are servicing.  The settlement calls for approval of Superior Court Judge Mary Jacobson in Mercer County, who is overseeing the case.  A hearing is now scheduled for March 29, 2011. 

By April 1, 2011, each of the six banks involved in the settlement must indicate how it satisfies a number of factors in the foreclosure process.  The banks will be required to submit affidavits and certifications of their record-keeping, how they reviewed documents, their training programs and quality assurance procedures.  The banks are also required to file a list of all residential mortgage foreclosure matters that were pending in the court when Justice Rabner issued the December 20, 2010 Order, and indicate whether they are contested or uncontested.

Pursuant to the settlement, if retired Judge Williams finds a bank has not properly implemented these protocols, and Judge Jacobson accepts his determination, all residential foreclosures for that bank will be suspended until Judge Williams is satisfied that new procedures have been put in place and are operational.  In addition, Judge Williams can, within the next 12 months, review a sample of pending or new foreclosures from each of the subject banks to decide if the bank is still following protocols outlined in the settlement.

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