July 6, 2010
In an extremely well-reasoned and detailed written opinion, New Jersey trial court Judge William C. Todd has issued a 53-page (yes, fifty-three page) Order dismissing a foreclosure action filed by Bank of New York as Trustee for Home Mortgage Investment Trust 2004-4 Mortgage-Backed Notes Series 2004-4, Docket No. F-7356-09, Atlantic County, New Jersey. The matter was decided on June 29, 2010 and the formal opinion was approved for publication this week after the matter was tried at the end of June, 2010.
The opinion sets forth an incredible analysis of a host of issues involving foreclosure in securitization contexts and highlights why a foreclosing plaintiff must comply with its obligations to prove standing in order to be able to pursue a foreclosure action. While we do not summarize the entire holding here, we do want to point out some of the significant findings.
The court found that there was no meaningful attempt by Bank of New York (hereafter “BONY”) to comply with applicable New Jersey procedural rules requiring a recitation of all assigments in the chain of title. BONY simple alleged that it had acquired possession of the note prior to the litigation being filed. However, the evidence at trial failed to establish this allegation, with the Court noting that there were missing documents incident to the securitization of the loan including the mortgage loan schedule that should have been attached to the mortgage loan purchase agreement. The Court also found that the “MERS assignment was potentially misleading”.
The Court found that there was a failure of proof as to BONY’s legal standing, warranting dismissal of the action and conditioning any refiling on a certification that the plaintiff is in possession of the original note at the time of filing. This is in line with the recent action of the Supreme Court of Florida which, as of February 11, 2010 by Administrative Order, requires all residential mortgage foreclosure complaints to be verified. It is no secret that Florida trial courts have and continue to dismiss foreclosure actions which do not comply with the verification requirement. It is hoped that the courts of New Jersey will adopt Judge Todd’s well-reasoned analysis and dismiss foreclosure complaints which do not comply with the New Jersey procedural rules requiring proof of legal standing to foreclose at inception and time of filing a Complaint for foreclosure.
Judge Todd also stated that additional discovery is to be produced when the foreclosure involves a securitization, lost note claims, or a holder in due course challenge (which may arise in the context of the purported assignment of a toxic loan to a securitized trust prior to the trustee of that trust instituting a foreclosure action, as well as any predatory loan claims against the original lender). Judge Todd recognized that there are dozens of legal issues and inquiries where a foreclosure involves a securitization, and that a borrower has both the right to know who owns the mortgage loan and whether a foreclosing party has the legal right to foreclose.
This incredibly significant decision will hopefully become the law in the state of New Jersey, and it is hoped that the Rules Committee for the New Jersey courts will soon adopt court rules requiring that all residential foreclosure complaints filed in New Jersey be accompanied by the filing of an appropriate Certification, and further requiring that all securitization discovery be produced in all foreclosure cases involving a securitized loan. We applaud and salute Judge Todd for his amazing effort to not only streamline foreclosure litigation in New Jersey, but also insuring that borrowers’ legal rights are protected as well.
Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com