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Aurora Loan Services, LLC v. Toledo,

A-0804-10T3 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; LOANS —A foreclosing lender’s affidavit in support of a judgment in a mortgage foreclosure action must be based on a personal review of its business records or those of its loan servicer.

A homeowner executed two promissory notes payable to a bank and both of the notes were secured by mortgages on a house. A loan servicer began servicing the loan. After the homeowner defaulted, the loan servicer obtained an assignment of one of the notes. It was signed by the vice president for a corporation that was a nominee for the bank. The loan servicer eventually commenced a mortgage foreclosure action against the homeowner.

The loan servicer sought summary judgment alleging there was no contested issue of fact material to its right to foreclose. To support its motion, it attached affidavits by one of its vice-presidents together with exhibits. The lower court granted the summary judgment motion.

The homeowner appealed. In order to enforce a negotiable instrument, the claimant either must be a holder of the instrument, a non-holder in possession of the instrument who has the rights of a holder, or be a person not in possession of the instrument who is still entitled to enforce the instrument under very limited circumstances. The loan servicer was not a holder of the promissory note, nor was it in possession of the note. Therefore it had to show that it was a non-holder in possession of the instrument who had the rights of a holder.

The New Jersey Supreme Court recently adopted a court rule stating that an affidavit in support of a judgment in a mortgage foreclosure action must be “based on a personal review of business records of the plaintiff or the plaintiff’s mortgage loan servicer.” In this case, the loan servicer’s proffered affidavit did not comply with that rule. Furthermore, the document was signed by a person who identified herself as a vice-president of a corporation, as nominee for the bank, and was notarized in Nebraska. The loan servicer’s motion did not include a certification supporting her authority to execute the assignment nor did it describe the circumstances of the assignment. In the absence of such evidence, the Appellate Division did not accept the purported assignment of the mortgages and notes as a self-authenticating document that could support the summary judgment in the loan servicer’s favor. Moreover, a question arose as to whether the bank’s designation of the corporation as its nominee remained in effect after the bank filed its own bankruptcy petition, absent ratification of that designation by the bankruptcy trustee. Thus, the Court reversed the order granting summary judgment and remanded the matter to the lower court.

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