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G.E. Capital Mortgage Services, Inc., v. Rumell

A-5135-97T2 (N.J. Super. App. Div. 1999) (Unpublished)

MORTGAGES; DEFAULT—A lender has no obligation to negotiate a “workout” agreement with a defaulting borrower, but can’t lead the borrower to reasonably think a “workout” was possible, thereby causing the buyer to forego other refinancing alternatives.

Through financial circumstances apparently not of a property owner’s own doing, the property owner defaulted on a mortgage payment and was then unsuccessful in obtaining the mortgage holder’s consent to a “workout” proposal. Ultimately, a foreclosure action was commenced. In that action, the property owner alleged that the mortgagee’s conduct with respect to the property owner’s effort to negotiate a reasonable “workout” consisted of false representations and constituted bad faith and unclean hands. The lower court denied relief to the property owner. In the words of the lower court “[t]he bottom line on that issue is that a [mortgagee] does not have an obligation to workout a deal with [a mortgagor]. Generally [mortgagees] do, if it can be worked out, but sometimes they become convinced that this is not going to work and they don’t and I’m not going to second guess them.” The Appellate Division upheld the lower court and added that had the mortgagor presented “any factual basis [that the conduct of the mortgagee] in, seemingly, leading [the mortgagor] to think that a workout was possible prevented [the mortgagor] from otherwise obtaining a refinancing,” the Court might have had second thoughts.


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