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Zucker v. Rottenberg

2010 WL 3339124 (U.S. Dist. Ct. D. N.J. 2010) (Unpublished)

FORECLOSURE — New Jersey’s Fair Foreclosure Act grants a 45 day extension to a debtor who certifies that there is a reasonable likelihood that he or she will be able to make the necessary payment to cure the default within 45 days, but a letter merely stating the debtor’s belief that such payment would be possible does not rise to the level of the required certification.

A $750,000 loan was made to finance the building of a residential development by serving as the purchase money deposit for the development. The loan was secured by a mortgage on the borrower’s home. The agreement contemplated a profit of $262,500 and construction was to be completed in twenty-two months. After the first twenty-two months, interest was to accrue at ten percent per year. The following year, the lender invested an additional $515,000 with the borrower and the borrower’s corporation executed a mortgage note for that amount. The borrower agreed to personally guarantee that amount, with reference to the initial mortgage. The contract explicitly provided that New Jersey law would govern the transaction, and that any and all disputes were to be submitted to rabbinic arbitration.

The borrower failed in his development, and only repaid the lender $283,000. The lender filed for relief before a rabbinic court. That court ruled in favor of the lender, finding that a principal balance of $417,000 remained due, plus interest of $412,493.

Shortly after the ruling, the lender sought to foreclose on the borrower’s home. He first sent, by certified mail, return receipt requested, a 30 day notice of intention to foreclose on a residential mortgage as required by New Jersey’s Fair Foreclosure Act. The notice described the past due amount and referenced the rabbinic court decision. He then filed a foreclosure complaint. An entry of default was entered against the borrower and his corporation. In accordance the Act’s dictates, the lender mailed a 14-day Notice of Entry of Judgment. In response, the borrower sent a letter within the notice period, reciting his belief that the required payment could be made within 45 days. Viewing this notice as insufficient under the Act to constitute a cure of the default, the lender continued to prosecute the lawsuit by moving for a default judgment.

The lower court issued the judgment, holding the Act applied because, although the loan was for a commercial property, it was secured by a residential property at which the borrower lived. The Court then held that the borrower’s response to the notice of entry of judgment was insufficient under the Act, because the Act requires that a debtor’s letter include a certification that there is a reasonable likelihood that the debtor would be able to make the necessary payment to cure the default within 45 days. Here, the borrower’s letter was not a “certification,” and the borrower did not say he would be able to cure the default, but rather stated only his belief. Lastly, the Court ruled that it was bound by the rabbinic court’s assessment of the amount due under the mortgage agreement because of the agreement entered into between the parties that the rabbinic court’s decision was to be final, binding, and enforceable.

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