In a recent decision, the Appellate Division of the New Jersey Superior Court dismissed a foreclosure complaint without prejudice (which means they can bring the suit again) for failure to identify the lender’s name in the notice of intention to foreclose. Bank of New York v. Laks, 2011 WL 3424983 (N.J. Super. A.D.).
In that case, the Court was faced with two questions:
(1) Was the homeowner entitled to vacate a judgment of foreclosure because the bank failed to identify the “lender” in the written notice of intention to foreclose (as required by N.J.S.A. 2A:50-56(c)(11), a provision of the Fair Foreclosure Act)?
(2) What is the appropriate remedy for that violation of the Act’s notice of intention provision?
The answers to these two questions were simple. The Court held that the homeowner was entitled to vacate the judgment of foreclosure, and the appropriate remedy for such a violation of the Fair Foreclosure Act was a dismissal without prejudice.
The facts of the case were straightforward. In August 2004, in order to secure a promissory note, Laks executed a mortgage on her home in favor of the Mortgage Electronic Registration System, Inc. (MERS). Laks missed her May 2008 payment on the note and every monthly payment. Thereafter, Countrywide Home Loans, plaintiffs loan service provider, sent Laks a notice of intention to foreclosure. The notice stated that Countrywide was acting on behalf of the owner of Laks promissory note. However, the notice failed to identify the owner of the note. The notice also warned that if Laks failed to pay the balance to Countrywide within 30 days, Laks’s noteholder, who was not identified, would commence foreclosure proceedings against her. The notice also provided a contact number and address for Countrywide which Laks could use in case of any dispute related to her default. But, the notice failed to identify that plaintiff was the owner of Laks’s promissory note. Also, neither plaintiff’s address nor telephone number was never given to Laks. Furthermore, MERS had assigned Laks’ mortgage to the plaintiff, three days before the foreclosure complaint was filed.
When plaintiff instituted a foreclosure proceeding, Laks contested it. Laks argued that the notice of intention to foreclose was defective because it did not state plaintiff’s name and address, as required under N.J.S.A. 2A:50-56(c)(11). Plaintiff responded by submitting a true copy of the note which was endorsed by the originating lender, BSM Financial. The lower court held against Laks. It held that the notice of intention was adequate. Laks moved to vacate the judgment and in response, the plaintiff produced another copy of the note that had two additional endorsements, none of which referred to the plaintiff. Nonetheless, the court found the notice to be adequate and denied Laks motion to vacate the judgment.
However, the Appellate Division disagreed with the lower court. It looked at the statutory definition of the term “lender” which is defined 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.” N.J.S.A. 2A:50-55. The Appellate Division held that the Legislature had defined the meaning of the term “lender” and that meaning excluded loan servicers like Countrywide. If the Legislature did not intend to deem the identity of the lender to be important, it could have excluded those words. There was no ambiguity in the language of the Act and therefore, the notices of intention that failed to identify the lender have the “potential to undermine the Legislature’s purpose.” Id at 5.
This was not a mere technical exercise. There is a practical reason for the Legislature’s focus on this requirement. One of the main purposes of such a notice is to provide the defaulting debtor with an opportunity to cure the default. How can the debtor do that if they don’t know who the creditor is?
Unfortunately, the Legislature did not address the remedy for such a violation, and the other courts are split on this issue. Nevertheless, the Appellate Division held that the appropriate remedy for such a violation was a dismissal without prejudice. Hence, the case can be filed again once the proper notices are sent.
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