Lenders Must Be Named in Foreclosures, New Jersey Court Rules

New Jersey’s Supreme Court ruled that the lender must be named in documents indicating a bank’s intention to foreclose on a mortgage before a residential property can be seized.

The case involves the foreclosure on an East Orange home owned by Maryse and Emilio Guillaume, who received a notice of intention to foreclose in May 2008. That notice included the name of the mortgage servicer, America’s Servicing Co., while omitting the name of the lender. Credit Suisse AG (CSGN) made the loan and assigned it to US Bank NA.

The state high court in Trenton ruled yesterday that the notice sent to the Guillaumes failed to comply with New Jersey’s Fair Foreclosure Act, which requires the name and address of the actual lender, as well as contact information for a loan servicer. Failure to do so creates “potential for significant prejudice” to homeowners, the court said.

“A misunderstanding about a lender’s identity could prompt a homeowner to make a critical error at a time when he or she is struggling to avert foreclosure,” the court said in the opinion.

The court ruled that while a trial court judge erred on that point in interpreting the Fair Foreclosure Act, the judge reached the correct conclusion in ordering a default judgment against the couple. The Guillaumes failed to demonstrate either “excusable neglect” or a “meritorious defense” to their foreclosure, according to the ruling.

‘Restores Order’

The decision “restores order” to New Jersey’s real estate market, said Mark Melodia, a lawyer for Minneapolis-based US Bancorp (USB), the parent of US Bank.

“This is a reaffirmation that our Chancery Court judges are best positioned to determine in a given case whether a technical defect in foreclosure paperwork requires the extraordinary step of dismissing the case -- which, like this one, may have been pending for years before the defect was identified -- or whether a less drastic remedy, such as sending a new notice, is the fairer way to proceed,” Melodia, of Reed Smith LLP, said in a statement.

An attorney for the Guillaumes, Rebecca Schore of Legal Services of New Jersey, said that while she was pleased with the ruling on the need to name the actual lender in a notice of intention to foreclose, she was disappointed that the court didn’t require dismissal of the complaint.

“We hope that the New Jersey legislature will take this opportunity to clarify the statute and require dismissal of a foreclosure complaint where the plaintiff fails to comply strictly with its requirements,” she said in an e-mail.

The Seton Hall University School of Law Center for Social Justice and the Center for Responsible Lending filed a supporting brief. The Mortgage Bankers Association of New Jersey and New Jersey Bankers Association also filed briefs.

The case is US Bank National Association v. Guillaume, 11-068176, New Jersey Supreme Court (Trenton).

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net; John Pickering at jpickering@bloomberg.net

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