On February 17, 2011 the Appellate Division of the New Jersey Superior Court set aside the sheriff’s sale of a home on the grounds that Federal law prohibits a foreclosure sale from proceeding when the homeowner is being evaluated for a loan modification. Nationstar Mortgage, LLC v. Jones, 2011 WL 535861 (N.J.Super. 2011).
The bank, Nationstar Mortgage, LLC, (“Nationstar”) tried to foreclose on the home of George and Edith Jones (the “Joneses”) following their default on a mortgage valued at $348,386.50. The trial court entered a final judgment of foreclosure in favor of Nationstar and the property was purchased by New Jersey Home Construction, Inc. (“NJHC”) at a sheriff’s sale.
One week after the sale, Nationstar sued to set aside the sale on the grounds that the sale proceeded “by mistake.” Specifically, Nationstar argued that the Jones’ were under evaluation for a loan modification pursuant to a federal assistance program under the Emergency Economic Stabilization Act, 12 U.S.C.A. §5201. Per Nationstar, federal directives require sheriff’s sales be adjourned pending evaluation of homeowners for loan modifications. Nationstar admitted that an inadvertent internal miscommunication caused the sale not to be adjourned as required. Nationstar’s application to set aside the sale was further supported by evidence that the home sold for a price “unconscionably less” than its market value. The trial court refused to set aside the sale, reasoning that such a sale could not be set aside based on Nationstar’s unilateral mistake.
Via motion, Nationstar asked the trial court to reconsider its decision. The trial court reversed its earlier decision after argument on the motion and set aside the sheriff’s sale, holding that Nationstar’s objection to the sale was timely as it was filed before the deed was transferred to NJHC. The trial court additionally found that the purchase price paid by NJHC was “most probably inadequate.” Finally, the trial court held that equity required consideration of the loan modification for which the Joneses were still being evaluated. NJHC appealed the decision of the trial court to the Appellate Division arguing that there were no grounds upon which to set aside the sale; that the sale price was not so disproportionate to the home’s value that the sale should be set aside on those grounds; and that NJHC should not be punished for Nationstar’s negligence in proceeding with the sale.
The Appellate Division affirmed the decision of the trial court and set aside the sheriff’s sale. The Court determined that there was sufficient evidence to support the trial court’s finding that the purchase price was inadequate for the property. The Appellate Division also held that the trial court properly determined that the sale should not have proceeded given the federal directive that such sales be adjourned when the homeowner is under evaluation for a loan modification under a federal assistance program. Finally, the Court noted that Nationstar’s failure to adjourn the sale was not due to any negligence on the part of the Joneses. Therefore, the negligence of Nationstar did not preclude the court from considering the interest of the Joneses in making its decision.
Download Nationstar Mortgage, LLC v. Jones, 2011 WL 535861 (N.J.Super. 2011)
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