Failure To Properly Identify The Lender Requires That A Foreclosure Action Be Dismissed

The Appellate Division has recently clarified a disputed area of law – and added protections for homeowners facing foreclosure.  The New Jersey Fair Foreclosure Act requires that prior to filing a foreclosure case, the homeowner must be sent a notice outlining, among other things, the amount due to bring the mortgage current and identity who holds the mortgage.  While seemingly trivial, this is very important – I have been consulted twice by people facing foreclosure who were trying to work out deals with companies that no longer owned their mortgage.  People often pay a “mortgage servicer” that processes there payments and sends to a central clearinghouse but the bank that actually owns the debt may have changed, and often is unknown to the homeowner.  In the last financing boom mortgages were bundled and investors (banks) were sold “shares” in mortgage packages just like stocks.  And just like Ford does not know the identity of every stockholder that owns a piece of the company, banks traded in and out of mortgage portfolios so often they are not always completely sure of what loans they own.  To make sure a homeowner has been given every opportunity to straighten out a delinquency,  the Appellate Division has required lower (trial) courts to dismiss cases where the mortgage holder was not identified to the homeowner prior to the foreclosure action being filed. Bank of NY vs Laks

Not only will the foreclosure complaint be dismissed, but it is likely that the homeowner will have a Fair Debt Collection Practices Act claim against the servicer or lawyer that sent the improper notice to help them pay the delinquency.  The federal courts located in the New Jersey District have been very consistent in holding a violation of state foreclosure law is a violation of the FDCPA.  One of the first cases was the decision I obtained in Barrows vs Chase, which held lawyers may be liable under Fair Debt for trying to collect sums beyond what is allowed by the Court Rules.

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