Foreclosure Notice Found Deficient for Naming Only Loan Servicer, Not Lender
Mary Pat Gallagher
Report from the New Jersey Law Journal:
New Jersey Law Journal
April 04, 2011
Homeowners fighting foreclosure have a new weapon: a published trial court ruling that the notice required by law to be sent to mortgagors by certified mail must identify the lender and not just the loan servicing company.
Because the foreclosure notice sent to George and Mona Elghossain did not name the Bank of New York Mellon, which owns their debt, Middlesex County Chancery Division Judge Glenn Berman dismissed the suit without prejudice, rejecting the bank’s request to cure the defect by redoing the notice correctly.
Monday’s ruling, Bank of New York Mellon v. Elghossain, MID-F-13402-10, follows a series of decisions finding would-be foreclosers that did not have possession of the original mortgage note lacked standing and could not go ahead with the process.
Like the standing cases, the notice issue in Elghossain is the consequence of the widespread securitization of mortgages, with accompanying pooling and servicing agreements that have placed loan servicing companies rather than lenders at the forefront of foreclosure efforts.
The Elghossains refinanced their North Brunswick home with a $260,000 loan from New Millenium Bank on Aug. 2, 2004. George Elghossain, a real estate broker who defended the foreclosure without the help of a lawyer, says he preferred to deal with a local bank like New Millenium, which has only three locations, in North Brunswick, Somerset and Franklin Township.
The loan did not stay local for long. The same day it was made, the mortgage and note were assigned to Countrywide Document Custody Services, which 15 days later, on Aug. 17, 2004, assigned them to Countrywide Home Loans. On Dec. 7, 2006, they were assigned to The Bank of New York Trustee under the pooling and servicing agreement series 2004-24CB, the foreclosing plaintiff.
The Elghossains missed a payment in November 2009 and the loan went into default status one month later. Two identical notices of intent to foreclose, one addressed to each of them, were sent via certified mail on Dec. 18, 2009.
The 1995 N.J. Fair Foreclosure Act requires such notice and specifies that it state “the name and address of the lender and the telephone number of a representative of the lender whom the debtor may contact … .” It defines “lender” as “any person, corporation, or other entity which makes or holds a residential mortgage, and any person, corporation or other entity to which such residential mortgage is assigned.”
Berman found the notice to the Elghossains — mentioning only the servicer, BAC Home Loans, and not Bank of New York — violated the act, which he called “clear, unambiguous, and readily comprehensible, (especially to a sophisticated lender).”
Bank of New York argued that the notice was not deficient because it would not have prevented the borrowers from “being made fully aware of the situation” or from curing the default.
Berman, however, said substantial compliance with the law is not enough; that “strict compliance is required.” He would not allow Bank of New York to fix the mistake by serving a corrected notice. “Merely re-serving the [notice] would eviscerate the statute’s plain meaning and effectively reward plaintiff for its neglect, regardless of how benign it may appear,” he wrote.
Elghossain says Bank of New York has not refiled the foreclosure action but if and when it does, he has other defenses, including a standing defense based on the lack of the note.
He says he drew on his knowledge of the real estate industry and utilized the foreclosure prevention resources on the state court’s website, where he learned of the notice requirement. After learning about the standing and other securitization-related issues with his mortgage, he says, he lost interest in a loan modification which would have required him to sign an agreement admitting that Bank of New York has the right to foreclose.
The bank’s lawyers, Steven Krol and Christopher Ford, of Zucker Goldberg & Ackerman, did not return a call.
The decision was good news for Joshua Denbeaux, a lawyer who concentrates in defending homeowners in foreclosure cases. Denbeaux, of Denbeaux & Denbeaux in Westwood, says he has repeatedly raised the issue of naming the lender in the notice in various counties and almost invariably has lost. He says he’s happy to have a published opinion to back him up now and expects to be filing a lot of motions soon based on it.
Bank of New York was one of 24 lenders, each of which filed 200 or more New Jersey foreclosure actions in 2010, that were directed by the state judiciary, in the wake of the scandal over “robo-signing” and other assembly-line practices, to make submissions demonstrating that there were no irregularities in their foreclosure proceedings. It filed papers on Feb. 16.
The six largest mortgage lenders in New Jersey — Bank of America, JPMorgan Chase, CitiBank, Ally Financial, OneWest Bank and Wells Fargo — agreed with the judiciary to certain reforms and to a monitoring arrangement in a deal approved March 29 by Mercer County General Equity Judge Mary Jacobson.