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.   

Ignorance Is Not Bliss When It Comes To Easements

by:    Peter J. Gallagher

If I ever told my wife that I couldn’t mow the lawn because the town might fine us $1,000 if I did, I am fairly certain she would tell me to spend less time in the sun because it was obviously frying my brain.  However, some homeowners in Maryland were recently threatened with just such a fine because a portion of their backyard was subject to a conservation easement that required that it be allowed to grow as an undisturbed forest, forever.  A recent article in the Washington Post ("Montgomery Homeowner Learns Yard Is A No-Mow Zone"), which was also discussed at the Land Use Prof Blog ("Landowners Ignorant About Encumbrances On Their Land"), highlighted their predicament as an example of the problems that can arise when homeowners are not fully aware of the impact conservation easements can have on their property.

     The article describes an easement that was created by the prior owner of a large lot, who obtained approval to subdivide the lot into five smaller lots and included an express easement allowing an area running along the back of all of the new lots to grow undisturbed.  The new lots were sold and developed by a builder.  The homeowners claim the builders never told them about the easement.  The builders claim that the homeowners were fully aware of the easement.  Regardless, five years after moving into the property, the families were notified that they could face fines of $1,000 or more for mowing the protected area and other infractions.  One family was also ordered to remove anything they had built or placed on the easement, including a raised garden bed, a portable basketball hoop, a canoe, and about 100 square feet of asphalt driveway.

    The Washington Post is critical of real estate agents for not ensuring that buyers are aware of the easements on their property.  However, it also highlights the importance of retaining competent counsel to review the history of the property and ensure that buyers are well informed when entering into the purchase.  Anyone who has ever purchased a home knows that the amount of paperwork that must be signed at the closing is daunting, but as this story makes clear, reading and understanding each of these documents, or having counsel to ensure that you at least read and understand all of the important parts, is crucial to protect your rights and interest.