Bad Foreclosure Notice? New Jersey Supreme Court Does Away With the Automatic “Do Over”

Remember when you played stickball and a car would come around the corner in the middle of a play?  What  happened  when the car made everyone stop?  That’s right, it was a “do over”.   The notice requirement of the Fair Foreclosure Act used to send many a lender back to square one, as a “do over” when they gave out bad information.  Under the Fair Foreclosure Act, a borrower is supposed to be given a notice prior to foreclosure that includes the name and address of the lender and the telephone number of a representative of the lender whom the debtor may contact if the debtor disagrees that a default occurred or contests the payment amount needed to cure the default.  As mortgages came to be repeatedly assigned in the effort to treat them like securities, many people do not even know just who their lender is when they to try and work out a default.  New Jersey  developed a body of law providing that if the notice was defective – missing the name of a lender or person to contact, let’s say – the foreclosure had to be dismissed and started all over again.  The Supreme Court has now ruled that dismissal is not automatic, a bad notice is not a basis to vacate a default and the trial courts must consider how the error affected the borrower when they craft a remedy for the mistake.  The Court’s opinion is here: US Bank v Guillaume .  Note that because the debtors here knew who the lender was and whom to contact because of a prior modification, dismissal was not mandatory, nor was the default vacated.  However, other remedies may be available depending on the circumstances.  Additionally, the opinion does not affect the ability to pursue a Fair Debt Collection Practices Act case for the defective notice; it  only determined a lender does not have to automatically start the foreclosure process all over again if there is another way to solve the problem.

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