At the end of 2010 the New Jersey Supreme Court responded to national outrage about foreclosure irregularities, including the practice of ‘robo-signing’. The Supreme Court’s response was to forbid over thirty mortgage servicers from initiating or continuing foreclosures. Among those halted were the the six largest mortgage servicers: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Ally Financial and OneWest Bank.
In August of 2011 this hold was lifted for Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Everybody was expecting the courts to be flooded with foreclosures again. But it didn’t happen. The mortgage servicers held off on filing the foreclosures. But why?
The answer is found in the case of US Bank National Association v. Guillaume. This case focuses on the New Jersey Fair Foreclosure Act’s requirement that every borrower receive a notice identifying the lender. Often the original lender make a number of mortgage loans and then bundled the mortgages together and sold them to other investors, or put the bundle of mortgages into a large mortgage-backed security. It is common industry practice for mortgages to be serviced by people who do not own the mortgages. In other words, Joe Investor may have purchased Harry Homebuyer’s mortgage as an investment, but Harry Homebuyer will make payments to and deal with Bank of America. In this situation, Bank of America is the mortgage servicer.
In this case US Bank sent out a foreclosure notice that identified the mortgage servicer as the lender. The notice did not identify the lender as the lender. The question for the NJ Supreme Court is whether this defect in the notice is meaningful enough to require the mortgage servicers to re-start all of the foreclosures where these (potentially) defective notices were sent.
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