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Excerpt from "Courts"
NJ Appellate Court Bars Foreclosure Action. On August 9, a New Jersey appellate court reversed a trial court decision, holding that non-possession of the Note and the lack of a right to enforce it at the time the original foreclosure complaint was filed constituted a fatal defect in standing that could not be cured by the bank's subsequent amendment of the complaint after the it took possession of the Note. The court, accordingly, vacated the sheriff's sale of the property. Deutsche Bank National Trust Company v. Mitchell et. al., No. A-4925-09T3 (N.J. Super. Ct. App. Div. Aug. 9, 2011). Defendant homeowner fell victim to a buy-leaseback mortgage rescue scam at the hands of a third party and, upon defaulting, faced a foreclosure action by Plaintiff Deutsche Bank, which had subsequently acquired an interest in the property. Defendant responded by arguing that the bank did not have possession of the Note upon commencing the foreclosure action and, alternatively, that it was not a holder in due course because the underlying fraud tainted the chain of title. The trial court had held that the bank's amendment of the complaint after coming into possession of the Note cured any initial defect with respect to standing and that it was a holder in due course because it was not privy to the fraudulent mortgage rescue scam. The appellate court, reversing the lower court as to the first point, found that because the threshold question of standing was dispositive, there was no need to reach the secondary dispute as to whether the bank was privy to the underlying fraud so as to negate its status as a holder in due course.
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