Borrowers Cannot Vacate Final Judgment Of Foreclosure Because They “Read Something Wrong”

Foreclosure (PD)
This might have seemed obvious, but the Appellate Division nonetheless recently confirmed that a borrower's claim that it "read something wrong" could not establish "excusable neglect" sufficient to vacate a final judgment of foreclosure.

In New Jersey Housing and Mortgage Finance Agency v. Wolinski, borrowers defaulted on their mortgage and their lender filed a foreclosure complaint. The first complaint named borrowers and "John Doe and Jane Doe 1-10 (Names Being Fictitious) Tenants/Occupants." This complaint was voluntarily dismissed against all parties, real and fictitious. The second complaint, filed approximately six months later, also named borrowers and "John Doe and Jane Doe 1-10 (Names Being Fictitious) Tenants/Occupants." This complaint was also voluntary dismissed, but only as to the fictitious defendants.

Borrowers never answered the complaint and the lender filed a request to enter default, and then obtained final judgment by default. The lender scheduled a sheriff's sale but the borrowers filed for bankruptcy protection. The lender moved to lift the bankruptcy stay. After this motion was granted, the borrowers moved to vacate final judgment. They argued: (1) that they misread the dismissal of the second foreclosure complaint to be, like the dismissal of the first one, a dismissal of all defendants, not just the fictitious ones; and (2) that the trial court abused its discretion when it allegedly miscalculated the amount due in the final judgment. The Appellate Division rejected both of these arguments.

 

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Fair Foreclosure Act Does Not Apply When Borrowers No Longer Reside at Secured Premises At the Time of Default

by:  Matthew J. Schiller

New Jersey’s legislature enacted the Fair Foreclosure Act in order to afford homeowners “every opportunity to pay their home mortgages, and thus keep their homes.”  Amongst its safeguards, the Fair Foreclosure Act gives residential mortgagors statutory rights to cure defaults and requires mortgagees to notify mortgagors of their rights before filing a foreclosure action and another detailed notice before seeking entry of judgment. 

In Aurora Loan Services, LLC v. Einhorn, the Appellate Division concluded that the protections and requirements of the Fair Foreclosure Act do not apply if the mortgagors do not reside at the mortgaged property at the time of default – even if they did at the time of origination of the loan.    The Appellate Division interpreted the statutory definition of “residential mortgage” to have two requirements in order for the Fair Foreclosure Act to apply: (1) the mortgage must secure residential property that is occupied, or is to be occupied, at the time the Fair Foreclosure Act is to be applied; and (2) when the mortgage loan originated, the secured property must have consisted of four or fewer units, and one of those units must have been, or planned to have been, occupied by the debtor or a member of his or her immediate family. 

Accordingly, the Appellate Division concluded that if the debtor or its family do not occupy, or plan to occupy, the property when the loan originated, the Fair Foreclosure Act does not apply – even if the debtor resides at the property at the time of default.  Likewise, even if the debtor and/or its family occupied or planned to occupy the property when the loan originated, the Act will cease to apply if the debtor and its family vacate the property and convert it into a rental or investment property.    Therefore, if a debtor resides in another location at the time of default and provides no evidence of its intent to return to the mortgaged premises, the Fair Foreclosure Act, and the obligations imposed thereby on a mortgagee do not apply.   

When Is Time Really Of The Essence For Purposes Of Attacking A Final Judgment Or Order?

by:  Steven P. Gouin

In a recent decision, Orner v. Liu, the Appellate Division supplied some clarity on the issue of how long a party has to move for relief from a final judgment or order.  Unlike motions for relief from default judgments, which are routinely granted, motions under R. 4:50 are governed by a higher standard of proof, are appropriate in only six specific situations, and must be made “within a reasonable time” after entry of the final judgment or order.  What has caused some confusion is the requirement, found in Rule 4:50-2, that motions based on three of the six situations — mistake, newly discovered evidence, and fraud — must be brought “within a reasonable time . . . not more than one year after the judgment, order, or proceeding was entered or taken.”  Does this mean that one year is presumptively reasonable in these situations?  According to the Appellate Division in Orner, the answer to this question is no. While motions like these are always fact sensitive, Orner will be instructive going forward because there are only a handful of reported decisions construing the limits of reasonableness under Rule 4:50.

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