In the state of New Jersey, home foreclosures have been virtually stalled since a court ruling a couple of years ago in which a Lakewood couple was able to forestall proceedings against them because court documents did not contain the name of the mortgage owner. Instead, only the name and address of the servicing company was listed, prompting the couple to claim in court that the documents were inaccurate and essentially illegal.
However, last January 27, the New Jersey Supreme Court overturned that ruling as well as a similar ruling in a 2006 case from East Orange. In both cases the court determined that the lack of the mortgage owner’s identity in court documents was not sufficient cause to throw out a case. The court suggested that when that information is missing, their lower court counterparts can remedy the situation with very little effort and in just a few days. To throw out cases based on such a small matter was deemed inappropriate by the state Supreme Court.
All across the industry experts are calling this a decisive victory for mortgage lenders and banks. I would agree to the extent that failing to identify the mortgage owner does not change the fact that the homeowner has missed enough payments to warrant a foreclosure proceeding. In order for court cases to proceed there must be some official identification in documents and that identification is normally the company who services the loan. Since the loan servicer is the company the homeowner normally deals with, it seems only appropriate that their identification should be sufficient for proceedings to continue.
What the ruling doesn’t do is change the recent settlement reached by 49 attorneys general and a handful of the nation’s biggest mortgage lenders. That settlement dealt with a number of issues, not the least of which is robo-signing, a practice of signing foreclosure papers en masse without actually stopping to read them and check their accuracy. Courts have been riddled with foreclosures where robo-signing allowed document inaccuracies to exist. Some of the inaccuracies put in doubt whether mortgage lenders were following the law in foreclosure proceedings.
Legal experts seem to mostly agree that this case is precedent-setting not only New Jersey, but all across the nation. It could lead to the resumption of foreclosures in many of the hardest hit areas where they have slowed in recent years. At the heart of the issue, from the standpoint of the lenders, is the fact that mortgages are often packaged and repackaged so many times it can be very difficult to determine who actually owns the paper. For simplicity and efficiency lenders have used the identity of loan originators and servicers for legal identification purposes. In all likelihood that trend appears ready to continue unless another court steps in and changes direction.