New Jersey Courts Require Homeowners to Act Promptly in Defense of Foreclosure

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Summary
The New Jersey Appellate Division found that homeowners' excessive delay in raising their standing arguments precluded potential defenses and affirmed that a foreclosure judgment received by a party lacking standing is not necessarily void.

On November 14, 2012, the New Jersey Appellate Division affirmed an order denying the defendants/homeowners' motion to vacate a final judgment of foreclosure entered on March 17, 2009 and their application to further restrain a sheriff's sale. Nearly three and half years after being served with the foreclosure complaint and over two years after plaintiff obtained a final foreclosure judgment, the defendants/homeowners filed an order to show cause seeking to stay the pending sheriff's sale and to vacate the 2009 final judgment as void and for other reasons justifying relief from the judgment pursuant to New Jersey Court Rule 4:50-1 (d) and (f). The defendants/homeowners argued that the plaintiff lacked standing to file the foreclosure complaint because it did not take an assignment of mortgage until after the complaint was filed.

The Appellate Division found that the defendants/homeowners did not establish that their motion was filed within a reasonable time after the entry of judgment, as required by Rule 4:50-1(d) and (f). The Appellate Division also held that the defendants/homeowners failed to provide any competent evidence to support their contention that the servicer of their loan made representations that no foreclosure action would proceed while they were working toward a loan modification. In addition, the Appellate Division found that equitable considerations, such as the many years of delays which benefited the defendant, may justify a court's rejection of a foreclosure defendant's belated attempt to raise a lack of standing defense.

The Appellate Division also held that based on the Supreme Court's decisions in US Bank National Ass'n v. Guillaume, 209 N.J. 449, 467 (2012) and the Appellate Division's decision in Deutsche Bank Trust Co. Americas v. Angeles, N.J. Super (App. Div. 2012), "even if plaintiff did not have the note or a valid assignment when it filed the complaint, but obtained either or both before the entry of judgment, dismissal of the complaint would not have been an appropriate remedy here because of defendants' unexcused, years-long delay in asserting that defense." The Appellate Division noted that standing is not a jurisdictional issue in the state court system and, therefore, a foreclosure judgment obtained by a party that lacked standing is not "void" within the meaning of R. 4:50-1 (d). The Appellate Division also found that the defendants/homeowners were unable to provide any evidence of a meritorious defense to the foreclosure.

This decision provides lenders and servicers with another potential defense to those homeowners who lie in wait and attempt to assert potential foreclosure defenses months or years after a final judgment has been entered and after they have remained in possession of the property. As the Appellate Division correctly recognized in its decision, equity is a two-way street that should be applied to foreclosure plaintiffs as well as defendants.