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US Bank National Association v. Guillaume

A-0376-10T3 (N.J. Super. App. Div. 2011) (Unpublished)

FORECLOSURE; FAIR FORECLOSURE ACT — It is not inappropriate under the Fair Foreclosure Act for a loan servicer to be named as the appropriate party for a homeowner to contact if the homeowner is seeking to cure a mortgage default.

Homeowners contacted a housing counselor after falling behind on mortgage payments. The homeowners then defaulted. The mortgage loan servicer sent the homeowners a notice of intent to foreclose, urging them to seek the advice of counsel. The homeowners did not do so, but continued to attempt a loan modification without success. The bank filed a foreclosure action, personally serving the homeowners. The homeowners did not respond, and the lower court entered a default judgment.

The homeowners moved to vacate the default judgment, contending that they were entitled to rescind the loan. The lower court stayed the sale, conducted oral argument on two separate days, and then denied the application in its entirety. The lower court then stayed the sheriff’s sale pending appeal.

On appeal, the homeowners argued that the default judgment should have been vacated because they demonstrated a meritorious defense, showed excusable neglect, and showed exceptional circumstances. They claimed the lower court failed to apply the rules of court properly, thereby depriving them of their constitutional rights.

The Appellate Division found that the homeowners’ decision to rely only on renegotiating with the bank was akin to sticking their head in the sand; their failure to file an answer was not excused by the negotiation attempts. The homeowners claimed that they had a meritorious defense because the bank had violated the Fair Foreclosure Act (FFA). Their theory was that although the notice of intent to foreclose listed the bank as the holder of the note, it did not list the bank’s address, but listed the address and telephone number of the loan servicer instead. Additionally, the homeowners claimed that the bank had violated the federal Truth-in-Lending Act by overcharging for recording fees, thereby entitling them to rescind the loan.

The Court found that the bank had satisfied the FFA because the loan servicer was the appropriate party for the homeowner to contact to cure the default. The homeowners had been making their monthly payments to the loan servicer and were fully aware of the situation as they attempted to modify their loan. Further, the homeowners were not entitled to the remedy of rescission of the loan because they were unable to tender the balance due on the mortgage as required by federal law.

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