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Nationstar Mortgage, L.L.C. v. Jones

A-1128-09T3 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; MORTGAGES — A sheriff’s sale may be set aside and a lower court may order a resale of the property based on the considerations of equity and justice including the interests of the property owner and the negligence of the parties.

A lender filed an action to foreclose on a residential mortgage. The amount owed was $348,386.50. The lower court entered a final judgment of foreclosure and a writ of execution was issued. An investor was the successful bidder at the sheriff’s sale for $132,300. The lender then requested emergent relief from the court to set aside the sale. Its attorney certified that the sale had proceeded by mistake in that the homeowners were under consideration for participation in the Home Affordable Modification Program (HAMP), a federal assistance program to prevent foreclosures through loan modifications. The HAMP program requires that foreclosure sales be adjourned pending any evaluation. The attorney further certified that because of a miscommunication between the lender and its foreclosure counsel, inadvertently the sale was not adjourned. The attorney also stated there was a clerical error between the lender’s foreclosure counsel and its bid service contractor who attended the sale in that the property originally had been appraised at $385,000 and its assessed value was $380,000. The attorney alleged that because of a clerical error, it only bid up to $131,000 instead of $431,000.

The investor opposed the motion, relying on the listing of the property for sale at $249,000, and the homeowners’ realtor’s representation to the investor that the homeowners might accept $200,000 as a short sale. The investor argued the property was not worth $385,000 at the time of the sheriff’s sale. In a reply certification, the lender proved the homeowners had filed for a loan modification, and that a current appraisal of the property valued it at $325,000. The lower court originally denied the motion, stating that the sale could not be set aside by reason of the lender’s unilateral mistakes, and that there were insufficient equitable grounds to set aside the sale.

However, upon a motion for reconsideration, the lower court decided to set the sale aside. It found the homeowners’ objection to the sale was timely because it had been filed prior to delivery of the deed, and the investor had not fully paid the purchase price. The court additionally found the purchase price was most probably inadequate, as the property had been assessed at $380,900 only a few months before the sheriff’s sale, and the property should not have diminished in value by nearly $250,000 in that span of time. The court also acknowledged the possibility of the homeowners availing themselves of a loan modification through the HAMP.

The investor appealed, but the Appellate Division affirmed and then remanded the matter for further proceedings. The Court said that a sheriff’s sale may be set aside and a lower court may order a resale of the property based on considerations of equity and justice. It found the lower court did not err by comparing the bid price with the assessed value for tax purposes as the investor did not contest the result or provide an opinion as to the property’s appraised value. In doing so, it rejected the investor’s argument that the sale price, as listed, and the possible “short sale” price were better measures of value. The Court also held the lower court properly considered that the homeowners were seeking to participate in the HAMP, and because of that the foreclosure sale should not have gone forward. Finally, the failure to adjourn the sale was not due to any negligence on the part of the homeowners, but rather on the part of the lender. The Court said the lower court was not precluded from considering the homeowners’ interest in the matter and in granting them relief because of the negligence of another party in seeking an adjournment of the sheriff’s sale.

The Court remanded the matter for the lower court to require the lender to pay the investor’s reasonable costs and expenses, including attorneys’ fees, for bidding upon the property and participating in the litigation. The Court believed this to be a fair condition to granting the lender’s motion to set aside the sheriff’s sale.

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