whereby they borrowed $272,000 from HSBCMortgage Corporation (USA) torefinance the property locatedat449NewkirkAvenue,Hamilton,NJ(the“Property” A nonpurchase money mortgage was executed to Mortgage Electronic Registration System, Inc.(“MERS”), as nominee for HSBC Mortgage Corporation (USA) on March 10, 2006 for the Property. On April1, 2006, the mortgage was recorded. Plaintiff claims that the mortgage wasassigned by written assignment on July20, 2010 MER as nominee for HSBC Mortgage
Corporation (USA) to Plaintiff. Plaintiff states this assignment was recorded on August 10, 2010.Plaintiff claims that on April 1, 2010, Defendants defaulted on the loan by failing to make a payment and that Defendants have remained in default from that time to the present Plaintiffthereafterelectedto accelerate the amount due under the loan, pursuant to theacceleration clause in the mortgage agreement. Plaintiff states that Notices of Intent to Foreclose(“NOI”) were sent to Defendants on May 17, 2010, and that Defendants acknowledged receipt of the Notices on May 24, 2010.Plaintiff filed its complaint in foreclosure against Defendants on August 12, 2010.
Defendants filed a single contesting answer on October 27, 2010. Defendants’ answer included an affirmative defense based on the Fair Foreclosure Act, twenty-six other affirmative defenses, and five counterclaims. Defendants’ affirmative defenses are as follows: violation of the Fair
Foreclosure Act,11) failure to state a cause of action, 2) statute of limitations, 3) waiver and/orestoppel, 4) Plaintiff is not the real party in interest and lacks standing, and Plaintiff failed to joinall necessary parties, 5) unclean hands, fraud, illegality, collusion, an conspiracy, 6) anydamages to Plaintiff were caused by its owncomparative fault, 7) “Plaintiff has acted illegally an[sic] improperly at all relevant times and Plaintiff is therefore barred from any reliefwhatsoever”, 8) Plaintiff is the superceding or intervening cause of any injury,
9) unjust enrichment, 10) Plaintiff’s claims are barred by the doctrine of in pari delicto, 11) Plaintiff did not execute the mortgage and is not an assignee of the mortgage, 12) violation of the Fair Debt Collection Practices Act, 13) no contract existed in accordance with the terms set forth in the complaint, 14) violation of the Truth in Lending Act, 15) violation of the Real Estate Settlement
Procedures Act, 16) mortgage was procured by fraud, duress, and/or undue influence, 17)
This affirmative defense is listed first, but then the next section of the answer starts with the first affirmative
defense and continues to number 26.violation of the Racketeer Influence and Corrupt Organizations Act, 18) Plaintiff has failed to provide payoff and reinstatement figures in accord with the Fair Debt Collection Practices Act, 19) loan money was not properly disbursed by the lender, therefore there was insufficient consideration for thecontract, 20) implied waiver, 21) usury, 22) Plaintiff lacks standing, 23) failure to join all indispensable parties, 24) bad faith, 25) breach of fiduciary duty, 26) violation
of the Fair Foreclosure Act. Defendants’ counterclaims are as follows: 1) fraud, duress, and undue influence, 2) violation of the Truth in Lending Act, 3) violation of the Racketeer Influence and Corrupt Organizations Act, 4) violation of the Fair Debt Collection Practices Act, and 5)
violation of the Real Estate Settlement Practices Act. Plaintiff filed an answer to Defendants’ counterclaims on November 1, 2010.
The parties participated in New Jersey’s Residential Foreclosure Mediation Program.Mediation sessions took place on October 19, 2011,December 14, 2011, and February 15, 2012.The court conducted case management conferences following each mediation session and issued case management orders memorializing each conference. During the February 15, 20122
casemanagement conference, the court was informed by Ms. Hoffman, counsel for Plaintiff, that
Freddie Mac, the investor on this loan, would not consider Defendants for a loan modification
because they are pursuing litigation opposing the foreclosure. In its case management order, the
1. Counsel for plaintiff represented to the court that Freddie Mac is the investor on this loan and will not consider Ms. Durelli for a loan modification because she is also pursuing litigation opposing the foreclosure. Since there had been previous mediation sessions without such information being provided to the parties or the court, and since that position rendered the entire mediation process futile, the court directed Mr. Bender
[counsel for Plaintiff] to provide a confirmation or clarification of the position of Freddie Mac as to the availability of loan modifications in litigated cases.The case management order incorrectly lists the date of the foreclosure mediation and case management
conference as February 16, 2012 instead of February 15, 2012.
2. The plaintiff also noted that there were financial barriers that made offering a loan modification to the defendant unlikely in this case. On February 17, 2012, counsel for Plaintiff sent correspondence to the court and Defendants addressing Freddie Mac’s “policy”related to modifying loans in contested cases. In this correspondence, counsel for Plaintiff stated that he investigated Freddie Mac’s policy. He confirmed that: Freddie Mac does have a guideline which indicates that modifications are not to be offered during active litigations. However, the guidelines also allow for a waiver of this position. Waivers are freely granted when a defendant qualifies for a loan modification
and the loan modification will settle the litigation. That is why Plaintiff reviewed Defendants for a loan modification in the first instance. It defies logic for Plaintiff to go through all the effort and expense of reviewing Defendants for a loan modification and
paying for multiple attorneys to attend multiple mediation sessions if there was truly a
blanket prohibition on offering loan modifications in the context of litigation. Apparently,
the individual that Ms. Hoffman was speaking with was not entirely familiar with the
loan modification procedures.
The true obstacle to offering the Defendants a loan modification is their reliance
on unemployment income. If Defendants can demonstrate sufficient income to qualify for
a loan modification without factoring in the unemployment payments, then they can be
offered a loan modification to settle this matter.
On May 10, 2012, the court conducted a case management conference at which time it
acknowledged that Plaintiff had received all necessary financial documents from Defendants for
the purposes of a loan modification. The court urged the parties to continue negotiating a
resolution of the case outside of the court’s mediation program and authorized Plaintiff to file a
motion for summary judgment. On May 18, 2012, Plaintiff filed the instant motion for summary
judgment and to dismiss Defendants’ counterclaims with prejudice. In support of its motion,
Plaintiff submitted the certification of Lorena Diaz, AVP, Operations Team Lead for Bank of
America, N.A. (“BANA”), successor by merger to Plaintiff, dated May 17, 2012, and the
certification of Donna M. Bates, Esq., counsel for Plaintiff.
Defendants filed opposition on June 11, 2012. In their opposition, Defendants argue that
Plaintiff lacks standing because Freddie Mac, not Plaintiff, is the owner of the Note and
Mortgage. Further, Defendants argue that Plaintiff has not mediated in good faith justifying
dismissal of the foreclosure complaint.
On June 27, 2012, Plaintiff filed a reply. In its reply, Plaintiff argues that Defendants’
opposition is procedurally deficient because Defendants failed to dispute Plaintiff’s statement of
undisputed material facts. Plaintiff also argues that Defendants’ opposition is substantively
deficient, because it fails to rebut Plaintiff’s prima facie right to foreclose or address Plaintiff’s
arguments related to dismissal of their counterclaims. Plaintiff also addresses the substance of
Defendants’ opposition. Plaintiff argues that it has standing despite the fact that Freddie Mac is
the investor on the loan. In support of its reply, Plaintiff attached a certification from Ryan
Dansby, an employee of BANA, and supporting documents from the Freddie Mac Single Family
Servicer Guide. Plaintiff also included a second certification from Donna M. Bates, Esq., counsel
to Plaintiff, to which it attached copies of correspondence sent to the court on February 17, 2012
and the court’s May 10, 2012 case management order.
Oral argument on Plaintiff’s motion for summary judgment was heard on July 11, 2012.
The court reserved decision on the motion pending release of this opinion.
I. Summary Judgment Standard
Plaintiff has moved for summary judgment, to strike Defendants’ Answer, to dismiss
Defendants’ counterclaims, to enter default, and to transfer the Case to the Office of Foreclosure.
A party is entitled to summary judgment where there is no genuine issue as to any material fact
and the moving party is entitled to a judgment as a matter of law. R. 4:46-2(c). The
determination as to “whether there exists a genuine issue with respect to a material fact requires the Motion Judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to a non-moving par. . . are sufficient to permit a rational
fact finder to resolve the alleged disputed issue in favor of the non-moving party.” Brill v. The
Guardian Life Insurance Company of America, 142 N.J. 520, 523 (1995).Under New Jersey law, where there is proof of execution, recording, and non-payment of
the note and mortgage, a mortgagee has established a prima facie right to foreclose. Thorpe v.
Floremoore Corp., 20 N.J. Super. 34 (App. Div. 1952). In the event of a default, a mortgagee
may also elect to demand the entire mortgage debt, if an acceleration clause exists. Cox. v. Kille,
50 N.J. Eq. 176 (Ch. Div. 1892). An answer that denies the allegations in the complaint or raises
separate defenses, contesting the validity or priority of the mortgage or the lien being foreclosed,
or creating an issue with respect to the plaintiff’s right to foreclose it, would rebut a plaintiff’s
prima facie right to foreclose. R. 4:64-1(c)(2); see Metlife v. Washington Avenue Associates,
159 N.J. 484 (1999). Any other defense would have no connection to the limited subject matter
of the foreclosure action and, as such, would not arise out of the same transaction as the
foreclosure action. See Falcone v. Middlesex Cty. Med. Soc., 47 N.J. 92 (1966). However, an
affirmative defense must be supported with specific facts. R. 4:5-4. If all the contesting pleadings
have been stricken or otherwise deemed noncontesting, an action to foreclose a mortgage is
deemed to be uncontested. R. 4:64-1(c)(3).
A party opposing a summary judgment cannot simply rely on his denials, accusations, or
upon the fact that discovery has yet to be taken. The mortgagor has a duty to present facts that
controvert the mortgagee’s prima facie case, and such evidence presented in opposition must be
substantial. See Spiotta v. William H. Wilson, Inc., 72 N.J. Super. 572, 581 (App. Div. 1962),
certif. denied, 37 N.J. 22 (62); Brill, supra, 2 N.J. at 530. In Brae Asset Fund, L.P. v.Newman, 327 N.J. Super. , 4 (App. Div. ) the Appellate Division stated that “it is wellsettled that ‘bare conclusions in the pleadings without factual support in tendered affidavits, will
not defeat a meritorious application for summary judgment.” Ibid. (quoting United States Pipe &Foundry Co. v. American Arbitration Ass’n, 67 N.J. Super. 34, 3-400 (App. Div. 61)).
Here, it is undisputed that Defendants executed the Note and Mortgage subject to foreclosure in this action. Plaintiff states that Defendants defaulted on April 1, . Defendants
do not dispute that they defaulted on the subject Note and Mortgage. Plaintiff has thus established a prima facie right to foreclose.Defendants raise twenty-seven affirmative defenses in their answer, but the majority of these defenses are not supported by specific facts in their answer or in their opposition to this
motion. Although Defendants have plead twenty-seven affirmative defenses, they have only opposed Plaintiff’s motion on the basis of Plaintiff’s lack of standing, which corresponds to
affirmative defenses #4, , and 22. Because Defendants failed to argue any of their counterclaims or affirmative defenses other than standing, they have waived their counterclaims and affirmative defenses. II. Claims Related to Plaintiff’s Standing (Affirmative Defenses 4, , and 22) Defendants raise claims regarding Plaintiff’s standing in affirmative defenses number 4, , and 22. In their fourth affirmative defense, Defendants argue that Plaintiff is not the real party in interest and lacks the standing to sue. In their eleventh affirmative defense, Defendants argue that “the mortgagee named in Plaintiff’s purported mortgage instrument is not Plaintiff and upon information and belief Plaintiff is not the assignee of the mortgages.” In their twentysecond affirmative defense, Defendants argue that the current Plaintiff is not the proper Plaintiff
in the foreclosure action and lacks standing to proceed. In their opposition, Defendants argue that Plaintiff is not the owner of the Note and thus lacks standing to proceed.
Plaintiff argues that it has standing to bring this foreclosure action because it has held the note since April 24, 06. Moreover, Plaintiff states that it was assigned the mortgage on July
, , prior to the filing of the complaint. Finally, Plaintiff argues that it has authority to bring the instant foreclosure action from Freddie Mac, the investor on this loan.
A. Failure to Recite Chain of Title As Required by R. 4:64-1() In their opposition, Defendants argue that Plaintiff failed to properly recite the chain of
title as required by R. 4:64-1(). Specifically, Defendants argue that Plaintiff fails to include an assignment to Freddie Mac or any other acknowledgment of Freddie Mac’s involvement in the
loan in the chain of title. Rule 4:64-1() requires that “if the plaintiff is not the original mortgagee or original nominee mortgagee, the names of the original mortgagee and a recital of
all assignments in the chain of title” be provided in the complaint.Plaintiff’s complaint states that the Note was executed to HSBC Mortgage Corporation
(USA) and that the Mortgage was executed to MERS as nominee for HSBC Mortgage Corporation (USA) on March , 06. The complaint states that the mortgage was subsequently
assigned by MERS as nominee for HSBC Mortgage Corporation (USA) to Plaintiff on July The complaint states that the assignment is “to be recorded.” The complaint was filed on
August , . Plaintiff attached a copy of the recorded Assignment as Exh. F to the certification of Lorena Diaz, AVP, Operations Team Lead for Bank of America, N.A., successor
by merger to BAC Home Loans Servicing, L.P., f/k/a Countrywide Home Loans Servicing, L.P. Ms. Diaz states that the Assignment was recorded on August , . This assertion is
supported by the copy of the Assignment attached to her certification. Also attached to Ms.
Diaz’s certification is a copy of the Note. The Note has three undated endorsements. Presumably, the Note was indorsed as follows, first from HSBC Mortgage Corporation to Countrywide Bank,
N.A., then from Countrywide Bank, N.A., to Countrywide Home Loans, Inc., and finally from Countrywide Home Loans, Inc., to blank.Both the Note and Mortgage contain the phrase “Single Family-Fannie Mae/Freddie Mac
Uniform Instrument” at the bottom of their respective first pages. There is no other reference to Freddie Mac in the Note or Mortgage or in the complaint. Plaintiff’s complaint fails to discuss
the relationship between Freddie Mac, HSBC, and Bank of America. The complaint does not even mention that Plaintiff took possession of the subject note and mortgage on April 24, 06.
However, R. 4:64-1() does not require a recital of all of the indorsements or transfers of the note. Instead, R. 4:64-1() requires a recital of all assignments of the mortgage. There is
no evidence that the Mortgage was assigned to any entity prior to the assignment made to Plaintiff on July , , which was recorded on August , . Thus, Plaintiff’s complaint is
not deficient for failure to properly recount the chain of title.
B. Standing Related to Plaintiff’s Status as a Holder and the Assignment to Plaintiff Defendants argue that Freddie Mac, not Plaintiff, is the owner of the loan and thus that
Plaintiff lacks standing to bring the instant foreclosure action. Plaintiff argues that it has standing to bring the instant foreclosure action based both on its status as a holder of the note and a
validly executed assignment. Further, Plaintiff argues that it has been authorized to institute the
present foreclosure action by Freddie Mac. Standing requires a “sufficient stake and real adverseness with respect to the subject matter of the litigation [and a] substantial likelihood of some harm visited upon the plaintiff in
the event of an unfavorable decision.” Jen Elec., Inc. v. County of Essex, 7 N.J. 627, 645
(0). It is a general rule of equity that real parties in interest must be joined as parties and an assignee of a debt is a real party in interest. Zurcher v. Modern Plastic Machinery Corp., 24 N.J.
Super. , 3 (App. Div. 52). For a foreclosure Plaintiff to have standing to sue, it must demonstrate that it had ownership or control over the note at the time the complaint was filed.
See Deutsche Bank Nat’l Trust Co. v. Mitchell, 422 N.J. Super. 4, 222 (App. Div. ); Wells Fargo Bank, N.A. v. Ford, 41 N.J. Super. 52, 57, (App. Div. ); Bank of N.Y. v.
Raftogianis, 41 N.J. Super. 323, 327-2 (Ch. Div. ). A person seeking to enforce a note, either as a holder or a nonholder in possession with
the rights of a holder under N.J.S.A. A:3-1, must have possession of the note. Raftogianis, supra, 41 N.J. Super. at 331-32. In order to establish standing as a holder or a nonholder in
possession with the rights of a holder, the Plaintiff must show that it had physical possession of
the instrument at the time it filed its complaint. Alternately, Plaintiff could establish that it has standing through proof of a valid assignment. The Appellate Division, in Mitchell, held that a Plaintiff can establish standing as an
assignee under N.J.S.A. 46:- “if it . . . presented an authenticated assignment indicating that it was assigned the note before it filed the original complaint.” Mitchell, supra, 422 N.J. Super. at
225. N.J.S.A. 46:- provides that: All mortgages on real estate in this State, and all covenants and stipulations therein
contained, shall be assignable at law by writing, whether sealed or not, and any such assignment shall pass and convey the estate of the assignor in the mortgaged premises,
and the assignee may sue thereon in his own name, but, in any such action by the assignee, there shall be allowed all just set-offs and other defenses against the assignor
that would have been allowed in any action brought by the assignor and existing before notice of such assignment.
The language of the statute in conjunction with the Appellate Division’s holding in Mitchell makes it clear that a plaintiff may prove that it has standing through the presentation of a
properly authenticated assignment effectuated prior to the filing of the complaint. In order to obtain summary judgment striking an answer as non-contesting, the
certification submitted by plaintiff must be competent, which means based on personal knowledge. Wells Fargo Bank, N.A. v. Ford, supra, 41 N.J. Super. at 5. The certification
must explain the source of the personal knowledge and must authenticate all attached documents.
As part of the authentication, the person providing the certification must indicate the source of his or her knowledge that the attached documents are “true copies.” Id. at 600. If a foreclosure
plaintiff produces an endorsed copy of a note, “the date of that indorsement would be a critical
factual issue in determining” issues such as whether the plaintiff had standing to bring the foreclosure action on the date the complaint was filed, and whether plaintiff is a holder in due
course under the Uniform Commercial Code. Id. at 601.
The Appellate Division in Ford found the certification of Mr. Baxley inadequate to support Plaintiff’s motion for summary judgment because it neither alleged that he had personal
knowledge nor provided any explanation of the source of his personal knowledge to support Plaintiff’s assertion that it was the holder and owner of the note. Id. at 5-600. Mr. Baxley
identified himself only as “Supervisor of Fidelity National as an attorney in fact for HomEq Servicing Corporation as attorney in fact for Wells Fargo,” without explaining his job
responsibilities. Id. at 54. Mr. Baxley’s certification also failed to state the source of his knowledge that the attached mortgage and note were “true copies.” Id. at 600. Finally, Plaintiff
did not properly authenticate the purported assignment of the mortgage because the documents
regarding the assignment were merely attached to the reply brief, not referenced in Mr. Baxley’s certification. Ibid. In Deutsche Bank Nat’l Trust Co. v. Mitchell, supra, 422 N.J. Super. at 226,
the Appellate Division held that a certification of proof of amount due submitted by a specialist of JP Morgan Chase Bank, N.A., servicer for Deutsche Bank, stating, that “[p]laintiff is still the
holder and owner of the aforesaid obligation and Mortgage.” was insufficient because the “certification [did] not make any mention of the assignment of the mortgage or how the signor
knows that Deutsche Bank became the holder of the note.” Here, unlike in Ford and Mitchell, Ms. Diaz’s certification is adequate. Ms. Diaz’s
certification states that she is an “AVP, Operations Team Lead for Bank of America, N.A., successor by merger to BAC Home Loans Servicing, L.P., f/k/a Countrywide Home Loans
Servicing, L.P.,” Diaz Cert. at 1. This statement demonstrates that she has access to the business records of Plaintiff and personal knowledge of its business practices, sufficient to
provide the court with competent evidence regarding Plaintiff’s standing. Ms. Diaz states that true and correct copies of pertinent documents are attached to her certification: the Note (Exh.
A), Mortgage (Exh. B), HUD-1 Settlement Statement (Exh. C), Truth-in-Lending Disclosure Statement (Exh. D), Notices of Right to Cancel (Exh. E), Assignment (Exh. F), Notices of Intent
(Exh. G), Defendants’ payment history (Exh. H), and screen print of a computer business record evidencing the April 24, 06 possession date (Exh. I). 1. Standing on the Basis of Plaintiff’s Status as a Holder
It is undisputed that the Note is endorsed in blank. Consequently, it is a bearer instrument
and Plaintiff must establish that it is a holder to have standing to proceed in this action. Ms.
Diaz’s certification states that Plaintiff became the holder of the note on April 24, 06, which
date is well prior to the filing of the complaint. This fact is a critical one in establishing standing
for Plaintiff to bring this foreclosure action. Deutsche Bank v. Mitchell, supra, 422 N.J. Super. at
222 (citing Bank of New York v. Raftogianis, supra, 41 N.J. Super. at 327-32). Plaintiff
supports this assertion with a screen print of a computer business record. Plaintiff provides a
sworn certification from Ms. Diaz averring that this screen print demonstrates that Plaintiff took
possession of the Note on April 24, 06. However, Plaintiff offers no explanation for the fields
on the screen print. The screen print lists a “CL Purch Dt” of April 24, 06. Presumably, “CL
Purch Dt” means “client purchase date” and reflects the date upon which Plaintiff took
possession of the note. The screen print and Ms. Diaz’s sworn statement provide sufficient
evidence to authenticate Plaintiff’s assertion that it has held the Note since April 24, 06. The
same evidence also supports Plaintiff’s standing to file and prosecute this foreclosure action.
2. Standing on the Basis of an Assignment
Where the court does not find standing on the basis that Plaintiff is the holder of the note,
it often looks to the assignment as an alternate basis for standing, as suggested by the Appellate
Division’s holding in Mitchell, supra, 422 N.J. Super. at 225, that a foreclosure plaintiff may try
to establish standing as an assignee if it possesses an authenticated assignment demonstrating
that it was assigned the mortgage before it filed the original complaint. Here, the record contains
an assignment from MERS, as nominee for HSBC Mortgage Corporation (USA) to BAC Home
Loans Servicing, LP, f/k/a Countrywide Home Loans Servicing, L.P., which was executed on
July , . This assignment was recorded on August , . The assignment is attached to
Ms. Diaz’s certification and she represents that it is a “true copy.” Plaintiff’s complaint was filed
on August , . This assignment is also sufficient to establish Plaintiff’s standing to bring
this foreclosure action.
3. Plaintiff’s Authority to Foreclose
Defendants argue that because Freddie Mac owns the Note, Plaintiff lacks standing to
foreclose. Plaintiff argues that it has standing to foreclose, notwithstanding Freddie Mac’s status
as investor for Defendants’ loan.
In its reply brief responding to Defendants’ arguments, Plaintiff attached the certification
of Ryan Dansby. Mr. Dansby states he is “employed by Bank of America.” Dansby Cert. at ¶ 1.
Mr. Dansby states that “Federal Home Loan Mortgage Corporation (“Freddie Mac”) is the
investor on Defendants’ loan. BANA is the servicer of Defendants’ loan.” Dansby Cert. at ¶ 3.
Mr. Dansby states that he has attached “true and correct copies” of sections 66. and 66.24 of
the Freddie Mac Single Family Servicer Guide. Mr. Dansby states that section 66. authorizes,
and moreover requires BANA, in its role as the servicer, to institute foreclosure actions in
BANA’s name. Mr. Dansby states that section 66.24 requires BANA to monitor the progress of
the foreclosure action.
Mr. Dansby does not state his title in his certification. He merely states that he is
“familiar with business records maintained by BANA for the purpose of servicing mortgage
loans,” that the business records “include data compilations, electronically imaged documents,
and others,” and that he has “personally examined these business records.” Dansby Cert. at ¶ 2.
Mr. Dansby has failed to adequately state the basis for his knowledge or specify what
information he reviewed in order to make his certification. Thus, his certification does not meet
the standards set forth in Ford and Mitchell, which require him to affirmatively demonstrate that
he has sufficient personal knowledge to authenticate the attached documents or make assertions
on behalf of the Plaintiff. However, the Freddie Mac Single Family Servicer Guide is a publicly
accessible document, 3 of which the court can take judicial notice. See Biunno, Current N.J.
Rules of Evidence, comment 7 on N.J.R.E. 1 ().
Section 66. states that “the Servicer must instruct the foreclosure counsel or trustee to
process the foreclosure in the Servicer’s name.” Where the mortgage is registered with MERS,
the Servicer is required to “prepare and execute . . . an assignment of the Security Instrument
from MERS to the Servicer and instruct the foreclosure counsel or trustee to foreclose in the
Servicer’s name and take title in Freddie Mac’s name according to the requirements of Section
Section 66.24 requires the Servicer to:
1. Identify any viable alternatives to foreclosure
2. Monitor the progress of the foreclosure
3. Facilitate prompt and efficient completion of the foreclosure proceedings and
acquisition of clear and marketable title, including conducting the foreclosure in a way
that will expedite an eviction of the tenant or Borrower
While Mr. Dansby’s certification alone is insufficient to authenticate the sections of the Freddie
Mac Single Family Servicer Guide or support Plaintiff’s assertions regarding its authority to
bring this foreclosure action, Plaintiff’s statement that it is authorized and required to commence
this foreclosure action in its name is supported by the relevant sections of the Freddie Mac Single
Family Servicer Guide. Further, Plaintiff has demonstrated that it has standing to bring the
instant foreclosure based on its status as a holder and the July , assignment.
Defendants’ challenge to this conclusion was not supported by any case law citation whatsoever,
and flies in the face of well-accepted U.C.C. law applicable to the holders of notes. See, e.g.,
See Freddie Mac Seller/Servicer Guide and Forms, http://www.freddiemac.com/sell/guide/ (follow “All Regs”
Section 66.54 addresses vesting title after a foreclosure sale. It states, in relevant part:
After the foreclosure sale the Servicer must ensure that the title to the property is vested to the appropriate
The Servicer must ensure that its foreclosure counsel or trustee conducts the foreclosure in the Servicer’s
name and that title to the property is vested in Freddie Mac’s name (if the property is not purchased by a
third party). This must be done in a manner that does not result in an obligation to pay transfer taxes.
Freddie Mac will not reimburse the Servicer for any transfer taxes.
Bank of New York v. Raftogianis, supra, 41 N.J. Super. at 330-332, 351-356. Notably,
Defendants did not demonstrate any irregularity in these procedures based on Freddie Mac’s
contractual agreement that its servicers bring foreclosure actions in the name of the servicer.
III. Notice of Intent
In its moving brief, Plaintiff acknowledges that Defendants plead an affirmative defense
based on the Fair Foreclosure Act (“FFA”). However, Plaintiff contends that Defendants have
merely asserted a legal conclusion that the Notice of Intent to Foreclose (“NOI”) did not satisfy
the FFA without specifying how the NOI sent to Defendants failed to comply. Defendants do not
address this issue in their opposition. At oral argument, Defense counsel asserted that the failure
of the NOI to list Freddie Mac as the lender rendered the Notice of Intent deficient under the
FFA. Counsel for Plaintiff asserts that Plaintiff sent NOIs to the Defendants that are fully
complaint with the FFA. Moreover, counsel for Plaintiff argued that this case is distinguishable
from Bank of New York v. Laks, 422 N.J. Super. 1 (App. Div. ), and US Bank N.A. v.
Guillaume, N.J. 44 (), because in those cases the NOI was sent by an entity other than
the plaintiff in the foreclosure action.
The Fair Foreclosure Act requires that a Notice of Intent to Foreclose be sent by the
lender before the foreclosure complaint is submitted, N.J.S.A. 2A:50-56(a), in writing, N.J.S.A.
2A:50-56(b), and with certain information5
“calculated to make the debtor aware of the
situation.” N.J.S.A. 2A:50-56(c). The FFA requires “the name and address of the lender and the
The notice must also contain a description of the particular obligation, the nature of the default claimed, the right
of the mortgagor to cure the default, what must specifically be done to cure the default, the date by which the default
must be cured, the consequences of not curing the default, that the mortgagor may still cure after the foreclosure
complaint is filed but will be liable for the mortgagee’s attorneys’ fees, and the right of the mortgagor to transfer the
real estate. The FFA also requires that the notice advise the mortgagor to seek legal counsel, and to suggest
contacting the NJ Bar Association, Lawyer Referral Service, or the Legal Services Office. In addition, the FFA
requires the name and address of the mortgagee and a telephone number of the mortgagee’s representative whom the
debtor may contact if the mortgagor disagrees with the assertion that the loan is in default. N.J.S.A. 2A:50-56(c)(1)-
telephone number of a representative of the lender whom the debtor may contact if the debtor
disagrees with the lender’s assertion that a default has occurred or the correctness of the
mortgage lender’s calculation of the amount required to cure the default.” N.J.S.A. 2A:50-
56(c)(). The FFA defines a lender as “any person, corporation, or other entity which makes or
holds a residential mortgage, and any person, corporation or other entity to which such
residential mortgage is assigned.” N.J.S.A. 2A:50-55.
In Bank of New York v. Laks, supra, 422 N.J. Super. at 3, the Appellate Division held
that “[a] notice of intention is deficient under N.J.S.A. 2A:50-56(c)() if it does not provide the
name and address of the lender.” In Laks, the loan servicer, Countrywide Home Loans, sent
defendants a NOI on behalf of the lender. Id. at 4. At the time the NOI was sent, the plaintiff,
Bank of New York, “held the note indorsed in blank and the mortgage through MERS.” Id. at
7-0. The court explained that “[a] debtor who receives a notice of intention that does not refer
to the lender and subsequently receives a foreclosure complaint filed by the lender will be
justifiably confused.” Id. at 0. In Laks, the Appellate Division found that a deficient NOI
provided grounds to dismiss the foreclosure complaint without prejudice. Ibid. In US Bank N.A.
v. Guillaume, supra, N.J. at 457, the New Jersey Supreme Court considered the appropriate
remedy for a violation of an NOI sent by the servicer, America’s Servicing Company, on behalf
of the lender. The New Jersey Supreme Court affirmed the Appellate Division’s holding in Laks
that “N.J.S.A. 2A:50-56(c)() requires that foreclosure plaintiffs list on the notice of intention
the name and address of the actual lender, in addition to contact information for any loan servicer
involved in the mortgage.” Id. at 45. However, the Court also explicitly overruled the Appellate
Division’s holding in Laks “that the only remedy available to a trial court for a violation of
N.J.S.A. 2A:50-56(c)() is dismissal without prejudice.” Ibid. The New Jersey Supreme Court
held “that a court adjudicating a foreclosure action in which N.J.S.A. 2A:50-56(c)() is violated
may dismiss the action without prejudice, permit a cure or impose such other remedy as may be
appropriate to the specific case . . .” Ibid.
It is undisputed that the property in issue, 44 Newkirk Ave, Hamilton, New Jersey, is a
residential property inhabited by Defendants. Thus, the Fair Foreclosure Act applies. The NOIs
were sent to Defendants from BAC Home Loan Servicing, LP, on May , . The NOIs set
forth a description of the loan in default, clearly informed the recipient that the debtor is in
default, specified the amount of money needed to be paid by the debtor in order to cure the
default, and the date by which the default must be cured in order to avoid foreclosure. The
Notices listed BAC Home Loan Servicing, LP, as the party to whom the payments must be made
in order to cure the default and provided an address for the payments. The Notices also described
the debtor’s post-foreclosure right to cure the default. In addition, the Notices recommended that
the debtor seek the advice of an attorney of her choosing, and to contact Legal Services if the
debtor is unable to afford an attorney. Finally, the Notices informed the recipients that they could
contact BAC Home Loan Servicing, LP, to discuss the Notices or obtain loan counseling. As
previously noted, BAC Home Loan Servicing, LP has established that it has held the Note since
April 24, 06. Thus, in its role as a holder, it qualifies as a lender under the definition set forth
in the FFA. See N.J.S.A. 2A:50-55. Because BAC Home Loan Servicing, LP, qualifies as a
lender at the time the NOIs were sent to Defendants, the NOIs are fully compliant with the
requirements of the FFA.
IV. Bad Faith Conduct at Mediation
Defendants argue that the complaint should be dismissed due to Plaintiff’s bad faith
conduct at mediation. Defendants note that on February , , counsel for Plaintiff appeared
at mediation, stated that it lacked settlement authority, and represented to the court that the Note
was owned by Freddie Mac and that Freddie Mac does not approve loan modifications for parties
that are actively litigating the foreclosure action. Defendants contend that because Plaintiff
participated in “numerous” mediation sessions without the authority to modify the loan on behalf
of Freddie Mac, Plaintiff acted in bad faith. Defendants contend that due to Plaintiff’s
“misconduct” they were denied a meaningful opportunity to participate in the Foreclosure
Defendants state that they have incurred legal expenses for appearances at mediation.
Defendants contend that these expenses were unnecessary because Plaintiff has admitted that
loans in litigation cannot be modified and that Defendants’ “income was unacceptable.” Def.
Opp. Br. at unnumbered p. 4-5. Defendants argue that Plaintiff’s review of Defendants’ financial
income was “pointless and done for the sole purpose of presenting a charade to the Court that it
is mediating in good faith.” Id. at unnumbered p. 5. Defendants argue that Plaintiff should not be
able to foreclose upon a loan that it is unable to modify. Defendants argue that due to Plaintiff’s
failure to mediate in good faith, they have incurred additional interest, fees, and penalties related
to the loan. Further, Defendants argue that Plaintiff’s representations that it was considering a
modification precluded Defendants from considering other options such as a short sale.
Defendants argue that due to Plaintiff’s bad faith conduct, the court should deny summary
judgment to Plaintiff and dismiss the complaint.
Plaintiff argues that the issue of its authority to modify Defendants’ loan was remedied
through its February , letter to the court and the court’s May , case management
order. Further, Plaintiff argues that Defendants’ dissatisfaction with the mediation program does
not provide a legal defense to the foreclosure action.
New Jersey has a strong public policy in favor of ensuring that homeowners have “‘every
opportunity to pay their home mortgages, and thus keep their homes[,]’ while also benefiting
lenders when ‘residential mortgage debtors cure their defaults and return defaulted residential
mortgage loans to performing status.’” U.S. Bank Nat. Ass’n v. Williams, 4 N.J. Super. 35,
366-367 (App. Div. ). New Jersey’s Foreclosure Mediation Program “is a joint effort
instituted by the New Jersey Judiciary, the Office of the Attorney General, the Public Advocate,
the Department of Banking and Insurance, the New Jersey Housing and Mortgage Finance
Agency, and Legal Services of New Jersey, designed to aid the increasing number of owners
facing foreclosure.” Id. at 36 (citing Press Release, Office of the Attorney General, Statewide
Mortgage Foreclosure Mediation Program Launched (Jan. , 0), available at
http://www.nj.gov/oag/newsreleases0/pr00a.html). Pursuant to “[a] November , 0
Supreme Court emergency order, effective January 5, 0, . . . . Courts were directed to
encourage mediation in all foreclosure cases and, specifically, must utilize the FMP whenever a
homeowner files opposition in a foreclosure proceeding.” Id. at 36 (citing Press Release, New
Jersey Judiciary, Judiciary Announces Foreclosure Mediation Program to Assist Homeowners at
Risk of Losing Their Homes (Oct. , 0), available at http://www.judiciary.state.nj.us/
There is scant New Jersey case law addressing the Foreclosure Mediation Program. In
U.S. Bank Nat. Ass’n v. Williams, supra, 4 N.J. Super. at 372, the court considered whether
the Defendant had been denied a meaningful opportunity to participate in the Foreclosure
Mediation Program because he did not have a housing counselor at the commencement of
mediation. The court found that Defendant was not required to have a housing counselor and,
moreover, that he received the assistance of a housing counselor within one week. Ibid. The
court found that Defendant was provided a full opportunity to participate in the mediation
program, but that an income shortfall prevented him from obtaining a loan modification. Id. at
373. In discussing the requirements of the Foreclosure Mediation Program, the court noted that:
Mediations are successful when the interests of the homeowners and lenders align;
homeowners stay in their homes, paying their mortgages, while lenders avoid foreclosure
costs, carrying charges, and reduce the number of non-performing loans in their portfolio.
New Jersey Foreclosure Mediation, supra, at 1. The main factor affecting the likelihood
of achieving a loan workout is affordability, that is the homeowner’s ability to satisfy the
[Id. at 371.]
No published New Jersey case has approved a sanction against a foreclosure plaintiff for its
conduct in mediation. Case law in other states, however, has addressed the issue.
Both Maine and Nevada have foreclosure mediation programs. Case law in both states
addresses the appropriate remedy where a lender is unprepared or lacks the authority to resolve
the foreclosure through mediation. In Pasillas v. HSBC Bank USA, 255 P.3d 1, 2 (Nev.
), the Nevada Supreme Court addressed “whether a lender commits sanctionable offenses
when it does not produce documents and does not have someone present at the mediation with
the authority to modify the loan, as set forth in the applicable statute, [Nev. Rev. Stat. §
7.06], and the Foreclosure Mediation Rules (FMRs).” As in New Jersey, Nevada has a strong
public policy in favor of allowing homeowners to keep their homes and enacted a “Foreclosure
Mediation Program in 0 in response to the increasing number of foreclosures in th[e] state.”
Id. at 4. Nevada’s Program:
requires that a trustee seeking to foreclose on an owner-occupied residence provide an
election-of-mediation form along with the notice of default and election to sell. NRS
7.06(2)(a)(3). If the homeowner elects to mediate, both the homeowner and the deed
of trust beneficiary must attend, must mediate in good faith, provide certain enumerated
documents, and, if the beneficiary attends through a representative, that person must have
authority to modify the loan or have ‘access at all times during the mediation to a person
with such authority.’ [Nev. Rev. Stat. § 7.06(4), (5)]; FMR 5(7)(a).
At the close of mediation, the mediator must file a statement indicating whether the parties
complied with the statute and rules governing the program. Ibid. The mediator may recommend
sanctions against the lender for noncompliance. Ibid. The homeowner may then file a petition for
judicial review in order to obtain sanctions against the lender. Ibid. If a homeowner fails to
attend mediation, the administrator may certify that no mediation is required in the action. Id. at
4 n. 6.
The Nevada Supreme Court in Pasillas held that the lender’s failure to satisfy statutory
mandates was a sanctionable offense. Id. at 6. Under Nevada’s Foreclosure Mediation
Statute, Nev. Rev. Stat. § 7.06(5):
there are four distinct violations a party to a foreclosure mediation can make: (1)
“fail[ure] to attend the mediation,” (2) “fail[ure] to participate in the mediation in good
faith,” (3) failure to “bring to the mediation each document required,” and (4) failure to
demonstrate “the authority or access to a person with the authority [to modify the loan].”
If any one of these violations occurs, the mediator must recommend sanctions.
The Court noted that:
[a]lthough [the lender] argued on appeal that their counsel at the mediation ‘had the
requisite authority and/or access to a person with the authority to modify the loan,’ [the
lender] did not controvert the mediator’s statement that their counsel claimed at the
mediation that additional investor approval was needed in order to modify the loan.
[Id. at 5-6.]
Thus, the Court held that the lender had failed to meet the statutory requirements and found that
sanctions were appropriate. Id. at 6. The Nevada Supreme Court explained that the trial court
has discretion over the sanctions to be imposed for a violation. The Court explained that:
When determining the sanctions to be imposed in a case brought pursuant to NRS
7.06 and the FMRs, district courts should consider the following nonexhaustive list of
factors: whether the violations were intentional, the amount of prejudice to the
nonviolating party, and the violating party’s willingness to mitigate any harm by
continuing meaningful negotiation.
[Id. at 7.]
The Court in Pasillas remanded the matter to the trial court for a determination of the appropriate
sanctions for the violation. Ibid.
In Holt v. Reg’l Tr. Serv. Corp., 266 P.3d 602, 604 (Nev. ), the Nevada Supreme
Court addressed whether sanctions from a failed foreclosure mediation should preclude the
lender from seeking another certificate for a foreclosure sale. Ibid. In that matter, the trial court
held that denial of “the FMP certificate needed to conduct a valid foreclosure sale” and attorney
fees for the homeowner were appropriate sanctions where the lender had failed to appear for two
different mediation sessions. Ibid. The matter came before the Nevada Supreme Court to address
whether the lender could obtain a new FMP certificate, not the sanctions imposed by the trial
court. Ibid. The Nevada Supreme Court held that the lender was not precluded from seeking
another FMP certificate. Ibid. Likewise, in Daane v. Eighth Judicial Dist. Court of Nev., 261
P.3d 6, 7 (Nev. ), the Nevada Supreme Court reviewed whether a lender should be
precluded from reinitiating a foreclosure after sanctions related to the FMP. Ibid. In Daane, the
trial court found that denial of an FMP Certificate and attorney fees and costs was the
appropriate sanction for a lender’s failure to produce necessary documents and send a
representative with the authority to negotiate. Ibid.
Bank of N.Y. v. Richardson, A.3d 756, 75 (Me. ), provides an example of one
trial court’s approach to sanctions for bad faith negotiations within the context of foreclosure
mediation. In Richardson, the Supreme Judicial Court of Maine considered a lender’s appeal of a
trial court’s decision to dismiss the lender’s foreclosure complaint with prejudice. The lender
failed to appear at mediation on February 26, , and the homeowner moved, unsuccessfully,
to dismiss the foreclosure action. Ibid. At that time the court cautioned that the lender could be
sanctioned for its failure to mediate in good faith. Ibid. The court rescheduled mediation for May
, , which was adjourned to May , at the lender’s request. Ibid. The lender failed to
appear at mediation for the second time on May , . Id. at 75. On May , , the court
held a telephone conference and dismissed the foreclosure action with prejudice. Ibid. The court
also required the lender to pay the homeowner’s attorney’s fees and a $2,500 fine to the
Foreclosure Diversion Program. Ibid. The court held that the lender’s “failure to attend the
second scheduled mediation was ‘unexcused and clear evidence of bad faith and disregard for the
Court.’” Ibid. The trial court also allowed the homeowners to proceed on their counterclaims.
Ibid. The lender subsequently filed an appeal. Ibid. The Supreme Judicial Court of Maine found
that the appeal was interlocutory and dismissed it without reaching the merits. Id. at 760.
Here, the parties attended mediation sessions on two separate occasions prior to February
, . The court anticipated that the parties would continue to review financial documents at
the February mediation session so that Plaintiff could determine whether a loan modification
would be offered to Defendants. Meaningful negotiation did not occur on that day, however, due
to Plaintiff’s failure to provide a representative of the lender willing to negotiate with
Defendants. In fact, counsel for both Plaintiff and Defendant were surprised when the
representative of the client made available to Plaintiff’s counsel by telephone for the purposes of
the mediation stated that a loan modification would not be considered for the Durellis at all
because of Freddie Mac’s policy of denying loan modifications to borrowers engaged in active
litigation over the foreclosure. As a result of this posture, the mediation session was rendered
futile. All participants, including the mediator, committed time and resources unnecessarily, and
a valuable mediation slot on the court’s calendar was wasted. In its February , letter,
Plaintiff explained that Freddie Mac’s “policy” of denying modifications in contested cases is
waivable and that the Freddie Mac representative made available to Plaintiff’s counsel during
mediation was misinformed about the policy. Plaintiff also stated that it was not Freddie Mac’s
policy, but Defendants’ income shortfall that caused the parties’ mediation attempts to fail.
Defendants seek dismissal of the foreclosure complaint due to the futile mediation
session. Such a remedy is much too harsh. The court does conclude, however, that some sanction
is appropriate for Plaintiff’s conduct. Our court rules provide guidance in an analogous context.
Rule 1:2-4 governs the imposition of sanctions for failure to appear. The rule states, in relevant
[i]f without just excuse or because of failure to give reasonable attention to the matter, no
appearance is made on behalf of a party on the call of a calendar, on the return of a
motion, at a pretrial conference, settlement conference, or any other proceeding
scheduled by the court, . . . the court may order any one or more of the following: (a) the
payment by the delinquent attorney or party . . . of costs, in such amount as the court shall
fix, to the Clerk of the Court made payable to “Treasurer, State of New Jersey,” or to the
adverse party; (b) the payment by the delinquent attorney or party or the party applying
for the adjournment of the reasonable expenses, including attorney’s fees, to the
aggrieved party; (c) the dismissal of the complaint, cross-claim, counterclaim or motion,
or the striking of the answer and the entry of judgment by default, or the granting of the
motion; or (d) such other action as it deems appropriate.
Here, the court finds that an appropriate sanction for Plaintiff (and not Plaintiff’s counsel) for the
wasted mediation session is the payment of a reasonable counsel fee to Defendants’ attorney for
attending the mediation session on February , . Indeed, this matter is similar to Pasillas,
where the Nevada Supreme Court found a lender’s inability to provide a representative with
authority to negotiate and modify the loan during mediation to be a sanctionable offense, despite
the fact that the representative was mistaken about its authority to negotiate. Although Plaintiff’s
representative may have been mistaken about Freddie Mac’s policy, her misinformation caused
undue delay and entailed extra costs for Defendants. Plaintiff’s failure to provide a representative
of the lender who was ready and willing to negotiate and modify the loan is akin to the failure of
the Plaintiff to appear at the mediation session. Thus, the court finds that the sanction of payment
of a reasonable counsel fee to Defendants is an appropriate response to Plaintiff’s conduct.
New Jersey courts have cautioned that dismissal of a matter for failure to appear must be
the sanction of last resort. See State v. Prickett, 240 N.J. Super. , 7 (App. Div. 0); State
v. Audette, 1 N.J. Super. 4, 4- (App. Div. 5). As the Appellate Division explained,
“[t]here are ways short of dismissal or default to deal with slowdowns which cost a party money,waste the lawyers’ time, prejudice a plaintiff’s ability to collect a judgment or a defendant’s
ability to defend against one, or unjustifiably consu judicial resources.” Audubon VolunteerFire Co. No. 1 v. Church Constr. Co., 6 N.J. Super. 405, 407 (App. Div. 6). New Jerseycourts have found that the imposition of costs and attorney’s fees is an appropriate remedy for a
party’s failure to appear at judicial proceedings. See Bayne v. Johnson, 403 N.J. Super. 5, 5
(App. Div. 0), certif. den., N.J. 3 (0); Rabboh v. Lamattina, 3 N.J. Super. 47,
43 (App. Div. ); Oliviero v. Porter Hayden Co., 241 N.J. Super. 31, 30-31 (App. Div.
0); State v. Prickett, supra, 240 N.J. Super. at 7-. Where the imposition of costs is
authorized, “the allowance of costs is generally committed to the court’s discretion.” Oliviero v.
Porter Hayden Co., supra, 241 N.J. Super. at 31 (citing Fortugno Realty Co. v. ShiavoneBonomo
Corp., 3 N.J. 32, 36 (63); Hirsch v. Tushill, Ltd., Inc., 0 N.J. 644, 646, ()).
The court notes that while Defendants seek the dismissal of the foreclosure complaint on
the basis of Plaintiff’s bad faith conduct in mediation, they did not file a cross-motion. Thus,
Defendants’ request is procedurally improper. Further, dismissal of the foreclosure complaint is
too harsh a remedy to redress Plaintiff’s actions. See, e.g., Holt, supra, 266 P.3d at 604; see
generally State v. Prickett, supra, 240 N.J. Super. at 7. Despite the setback that occurred
during mediation on February , , Plaintiff promptly corrected its misstatement by letter
dated February , . Further, it appears that Plaintiff has continued to evaluate whether a loan modification might be possible for Defendants. Plaintiff’s actions, however, caused Defendants to needlessly incur attorney’s fees and costs to attend the mediation session on February , . Foreclosure defendants are almost always in financial distress and can ill afford to pay an attorney to attend a mediation session rendered futile by Plaintiff’s actions. Thus, the court finds that the appropriate remedy for Plaintiff’s inability to provide a bank representative willing to negotiate at mediation to be the award of reasonable counsel fees incurred by Defendants for appearing at the February , mediation. After establishing that the party seeking fees is entitled to an award, a reasonable fee must be determined. See RPC 1.5(a), which catalogues the “factors to be considered in
determining the reasonableness of a fee.” Here, the court will compensate Ms. Robinson for her appearance at the mediation session. Taking into account the relevant factors set forth in RPC 1.5(a), the court finds that a fee of $500.00 is reasonable under the circumstances and would provide for Ms. Robinson’s time spent at court and travel time at $0.00 per hour for 2.5 hours. The court hopes that imposition of this modest sanction will prevent similar occurrences in the
Plaintiff’s motion for summary judgment is granted and Defendants’ answer and
counterclaims are stricken. Plaintiff has demonstrated standing by proving that it became the
holder of the note, as well as the recipient of a properly authenticated assignment prior to its
initiation of this foreclosure action. Further, Plaintiff has demonstrated that it was authorized by
Freddie Mac to pursue the instant foreclosure litigation in its own name.
The court denies Defendants’ request to dismiss the foreclosure complaint on the basis of Plaintiff’s bad faith conduct during mediation, but finds that a reasonable attorney’s fee is an appropriate remedy to redress Plaintiff’s actions.