On February 27, 2012 the New Jersey Supreme Court issued a decision in the case US Bank National Association v. Guillaume, in which the court had to interpret the notice requirements of the state's Fair Foreclosure Act. Some homeowners brought suit against U.S. Bank, claiming they did not receive requisite notice under the law prior to the lender filing foreclosure, but the court disagreed with the homeowners.
New Jersey's Fair Foreclosure Act
Legislators intended New Jersey's Fair Foreclosure Act to be a way to help prevent foreclosures in the state by giving homeowners the opportunity to cure mortgage defaults prior to lenders foreclosing. The Act gives homeowners certain rights, one of which is the right to have notification, through a form called the Notice of Intent to Foreclose, that the lender intends to foreclose prior to when the lender files foreclosure documents.
The Act requires that the Notice of Intent to Foreclose include the lender's name and contact information.
Mortgage Servicer Insufficient
The homeowners in Guillaume argued that the Notice of Intent to Foreclose was insufficient because it did not name the original lender. Instead, it had the name of the loan servicer, as was the case with so many loans, because the loan had been bundled and sold as an investment. The homeowners asked the court to vacate the default foreclosure judgment in their case.
The lenders argued that naming the loan servicer was sufficient, since the lender had assigned its rights to the servicer.
The court agreed with the lender, upholding the lower court's decision. The court acknowledged that non-compliance with the Act's notice requirements had the "potential for significant prejudice" to homeowners and could cause unnecessary delays and confusion when time is critical in trying to avoid foreclosure. However, the court also reasoned that the homeowners did not present any defense to their foreclosure and that the trial court had ruled appropriately.
Impact of the Decision
Those working in the housing industry expect the outcome of this case will have deep impact on foreclosures in New Jersey. Lenders had been holding off foreclosure actions, waiting the court's decision in the matter. Many believe now that the court has issued its opinion, the pace of foreclosures will increase.
In light of the anticipated escalation in foreclosures in New Jersey as a result of this decision, those struggling to pay their mortgages would do well to consult with an experienced foreclosure defense attorney and discuss their options.