Foreclose? Not So Fast!
In a case of first impression in New Jersey, a Superior Court Judge in Atlantic County ruled against the Bank of New York and dismissed its foreclosure action for failing to prove that the bank owned the defendant’s promissory note on the date the case was filed. The ruling, announced in June 2010, indicated that, while no New Jersey cases had addressed this issue, dismissal of the complaint was appropriate since the bank simply could not show the court that it had the ownership interest to enforce the defendant’s debt, when it filed its complaint. The court also indicated that, in the event a loan being foreclosed was assigned as part of a large package of loans, i.e, “securitization,” a bank whose right to bring suit was challenged, would be required to produce the documents which show the assignment of the actual promissory note in question, from the party who originally made the loan, to the party foreclosing the mortgage. Because the majority of foreclosure actions go unchallenged by borrowers, such proof is seldom demanded of a foreclosing plaintiff.
This ruling means that the party bringing suit must establish, with definiteness never before articulated by New Jersey courts, that the borrower owes the money to the party filing the law suit, on the date they file suit. Because the process of securitization is so complex, and involves so many loans being transferred among so many entities, gathering that proof in future cases may not always be easy.
With the number of foreclosures surging, this ruling may renew hope for borrowers who legitimately question whether they owe money to the party demanding payment. In many such cases, the loans have been conveyed to the point where borrowers cannot ascertain with certainty exactly what entity is the real holder of their loan. But it may present a new challenge for lenders seeking repayment, as they traverse the same convoluted paper trail to prove they own the note and the mortgage on a particular property.
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