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Anthony L. Velasquez, Esq. has written a variety of legal articles on issues including leasing, foreclosures, real estate law, construction law, consumer protection, bidding, title disputes, and other areas of law.  From time to time, various articles will be re-published below.  For past articles or for any other questions please contact the Law Offices of Anthony L. Velasquez, Esq., 1939 Goldleaf Lane, Red Bank, NJ 07701 (201)-627-8694

Foreclosure action?  Pay specific attention to the details!
By Anthony L. Velasquez, Esq.  July, 2012  

A recent landmark mortgage foreclosure case decided by the NJ Supreme Court has once again stressed the point that specific attention be paid to procedural details.  Yet while the Court in U.S. Bank v. Guillaume, 209 N.J. 449 (2012), found that a violation of the required procedures had occurred, it crafted a remedy that was something less than the extreme measure of dismissing the case in its entirety and sending the lender back to square one.  Instead, it allowed the lender to cure the deficiency through corrective action.  

The case focused upon the “30 Day Notice” requirement contained within New Jersey’s Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 et seq., which sets forth that a plaintiff must notify the homeowner of its intent to commence a foreclosure lawsuit at least 30 days prior, along with providing the name of the bank, the amount needed to reinstate the loan and other information designed to assist the defaulting borrower in saving his or her home.  In U.S. Bank v. Guillaume, the 30 Day Notice letter included the name of the loan servicer (America’s Servicing Company), but not the name of the owner of the loan (U.S. Bank).  The homeowner Guillaume contacted the loan servicer on several occasions in an attempt to resolve the matter, but no resolution was reached.  Default was entered, and ultimately final judgment was entered directing that the property be sold at Sheriff’s Sale.   

The homeowner Guillaume then sought to vacate the final judgment and have the foreclosure action dismissed in its entirety because of the procedural defect committed through the omission of the loan owner’s name from the 30 Day Notice.  Guillaume claimed he was misled and confused by U.S. Bank’s communications with him regarding potential loan modification while also prosecuting the foreclosure action.  Both the trial court and the appellate court held that the lender had “substantially complied” with the requirements of the FFA; but the NJ Supreme Court reversed and held that a foreclosing lender must provide a 30 Day Notice that includes “the name and address of the actual lender, in addition to the contact information for any loan servicer” in order to satisfy the specific requirements of the statute.  Thus, U.S. Bank had violated the FFA.  

Historically, this type of conclusion resulted in a complete dismissal of the foreclosure action and would require that the lender provide a new 30 Day Notice letter and then file a new complaint (new lawsuit).  This would result in an extreme loss of time, usually 1-2 years based upon the current backlogs at the courts in processing foreclosures in New Jersey, in addition to the substantial monetary loss incurred through attorney fees and costs of suit.  But the NJ Supreme Court did not order this remedy; instead it allowed U.S. Bank to “cure” the defect by filing a corrective 30 Day Notice.  It could then continue in its present lawsuit (which had nearly concluded).  The High Court stated, “In determining an appropriate remedy for a violation of [the 30 Day Notice requirement], trial courts should consider the express purpose of the provision: to provide notice that makes the debtor aware of the situation, and to enable the homeowner to attempt to cure the default… Accordingly, a trial court fashioning an equitable remedy for a violation of [the 30 Day Notice requirement] should consider the impact of the defect in the notice of intention upon the homeowner’s information about the status of the loan, and on his or her opportunity to cure the default.”   

In sum, this case indicates that all of the technical, detailed and specific requirements set forth in the FFA should be satisfied by foreclosing lenders; the hope of a defect subsequently being found to be “substantially compliant” is severely diminished, if at all existent within the law.  But at the same time, lenders have been provided a gateway through which to take corrective action to cure defects during the pendency of an existing foreclosure action, as long as the weight of the equities remains in their favor.  It is highly advised that you seek knowledgeable and experienced legal counsel to assist you in your matters related to foreclosure actions within New Jersey.  You are invited to contact the Law Offices of Anthony L. Velasquez, Esq., at (609) 273-2630 for all of your foreclosure matters, along with legal matters related to real estate, land use, tax liens, property law, title disputes, financing and closings. 

The following citations, case summaries and links relate to successful Appellate and NJ Supreme Court cases previously argued by Anthony L. Velasquez, Esq., concerning New Jersey Tax Foreclosure Law and the right to intervene and profit as third party investors.  Please contact the Law Offices of Anthony L. Velasquez, Esq., for any tax lien investor questions and/ or the aggressive representation of redemption issues.

Simon v. Cronecker189 N.J. 304 (2007).  In this landmark case, the NJ Supreme Court confirmed the legitimacy and legality of third party buyers to intervene, acquire redeemable interests in land and then redeem the foreclosing tax lien, despite their lucrative profits provided that the purchase price paid to the owner yields a true, meaningful and tangible benefit above nominal consideration.  Here, the sale of a multi-lot, waterfront property in Sea Isle City valued at $1.2 million was found to satisfy the Court’s test despite a $250,000 (21%) purchase price with a net gain of $63,000 (5.25%) to the owner.  The Court established and set forth the procedural requirements for all intervention motions to follow.  While this buyer had not technically satisfied the requirements, the case established the unequivocal rights of third party investors to pursue foreclosure properties without legitimate objection from the tax lien holders as long as the intervention procedures are satisfied.

Simon v. Rando, 189 N.J. 334 (2007).  This case expanded upon the landmark decision in Cronecker and applied the analysis with equal weight to real estate investors who acquire mortgages and/ or prior tax liens.

Kanter v. Szczepanik, A-2755-06 (NJ App. Div. decided 4/4/08).  In this case, the Appellate Court reversed and remanded the Trial Court’s denial of Cherrystone’s right to intervene, buy and develop the subject property.  The tax lien holder argued that the property was worth nearly 4 times as much as Cherrystone’s purchase price.  The Appellate Court again adopted the Cronecker analysis.  Furthermore, The Appellate Court confirmed the unequivocal right of a contract buyer to have standing to intervene in tax foreclosure cases provided that the Cronecker analysis is satisfied.

Robinhood Properties, LLC v. NJ TLC and Arianna Financial Corp., LLC, A-3311-08 (NJ App. Div., decided 1/25/11).  In this case, Robinhood properly intervened and acquired a 1/3 ownership interest in a lucrative multi-unit apartment complex for 10% of the property value.  It then paid 100% of the taxes due and owing, and sought contribution from the other 2/3 owners.  The Trial Court granted such contribution and the Appellate Court affirmed.

Arianna Financial Co. v. LopezA-1448-07 (NJ App. Div., decided 9/25/08).  This case involved the sale of vacant but lucrative property in Clifton, NJ.  Cherrystone obtained a contract to buy the property for $100,000 although the Court appointed appraiser valued the land at $300,000.  After satisfying the foreclosing tax lien, the owner would reap approximately $79,000 from the sale (instead of losing all equity to foreclosure judgment).  The tax lien holder opposed the sale and sought to foreclose.  The Trial Court denied Cherrystone’s motion to intervene and buy the property for $100,000, but the Appellate Division reversed and adopted Cherrystone’s arguments that (a) service was improper, and (b) the intervention motion should be granted to allow the sale of $100,000 to go forward to Cherrystone.

M. Credit, Inc. v. Sexton A-4337-06 (NJ App. Div., decided 6/19/08).  In this case, the client Cherrystone Bay, LLC, obtained a contract with the property owner to buy a single family home for $130,000.  The foreclosing tax lien had an outstanding balance of $65,000, leaving a balance of $65,000 for the owner after satisfaction.  The property value was disputed to be between $225,000 (minimum) and $315,000 (maximum).  The Appellate Court upheld the Order granting Cherrystone’s request to intervene and permitted Cherrystone to buy the property for $130,000.

American Tax Funding v. Golazewski, A-668-07 (NJ App. Div., decided 8/29/08).  In this case, the Appellate Court upheld the right of the investor Cherrystone to purchase an assignment of a tax lien and an assignment of a mortgage and then, upon the vesting of these redeemable interests for what the Court found to be above “nominal consideration” as that term was defined by the NJ Supreme Court in Simon v. Cronecker189 N.J. 304 (2007).

Wachovia Bank, N.A. v. Groff-Kelso, A-2493-06 (NJ App. Div., decided 7/8/08).  In this case, the Appellate Court reversed and remanded the Trial Court’s wrongful denial of Cherrystone’s motion to intervene and buy a residential property for 40% of its market value.  Cherrystone had again satisfied the Cronecker analysis and properly intervened so as to permit it to profit from this transaction.

DelVecchio Pension Trust  v. Banks, A-1039-06 (NJ App. Div., decided 3/10/08).  In this case, the Appellate Court reversed and thereby confirmed the right of the buyer to purchase the subject property for approximately 1/3 of the property value.  It found “substantial compliance” with the Cronecker requirements.

American Tax Funding, LLC v. Davis, A-5717-07 (NJ App. Div., decided 5/27/09).  In this case, the client LittleNeck, LLC, obtained a contract to buy a single family property for $130,000 from the owner/ seller.  This would allow the seller to avoid foreclosure and receive a net equity gain of at least $56,000 instead of losing the property (and all equity) to foreclosure judgment.  The tax lien holder and the buyer disputed the actual property value ($250,000 minimum value and $330,000 maximum value), but the Appellate Court upheld the Order granting LittleNeck’s request to intervene and permitted Little Neck to buy the property for $130,000.

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