On Tuesday, February 28, 2012, the New Jersey Supreme Court issued its long-awaited decision in U.S. Bank National Association v. Guillaume, 11-068176. The Supreme Court’s decision in Guillaume resolved a conflict in the decisions of the Appellate Division of the Superior Court with respect to the requirements for the Notice of Intention to Foreclose (NOI) under New Jersey’s Fair Foreclosure Act (FFA).
Specifically, in August 2011, the Appellate Division held in Bank of New York v. Laks, 422 N.J. Super. 201 (App. Div. 2011), that the FFA requires the NOI "to identify" the "Lender" even when the loan is being serviced by a third party. Industry practice with respect to NOIs had been only to identify the servicer of the loan. Based on the failure to identify the Lender in strict compliance with the FFA, the appellate court held that the NOI in Laks was invalid. The appellate court in Laks further held that an invalid NOI presented a jurisdictional defect, meaning that the foreclosure action had to be dismissed.
The Laks decision was understood to mean that any material defect in an NOI (not just the particular defect identified in Laks) would render the NOI invalid, requiring dismissal of the foreclosure action. The practical effect of Laks was to substantially slow prosecution of pending foreclosure actions in New Jersey.
In Guillaume, the Supreme Court agreed with the decision in Laks that the FFA requires the NOI to list the name and address of the Lender (defined to mean the original mortgagee or its assigns) in addition to providing contact information for the loan servicer.
However, the Supreme Court disagreed with Laks’ holding that an NOI’s failure to comply with the requirements of the FFA deprives the state’s equity judges of jurisdiction to hear the foreclosure action. Accordingly, the Supreme Court held "that dismissal without prejudice is not the exclusive remedy for the service of a notice of intention that does not satisfy [the FFA]." Instead, the court held that the state’s equity judges could "dismiss the action without prejudice, order the service of a corrected notice, or impose another remedy appropriate to the circumstances of the case."
In an important footnote, the Supreme Court clarified the interplay between the requirements of the FFA, on the one hand, and its 2010 and 2011 amendments to New Jersey Court Rules 4:64-1 and 4:64-2, on the other. The amendments to Rules 4:64-1 and 4:64-2 require foreclosure counsel to certify that foreclosure counsel has communicated with an employee of the Plaintiff or its loan servicer and confirmed the accuracy of the Note and other foreclosure documents. Foreclosure counsel, in their amicus brief in Gillaume, expressed concern that these amendments, in combination with Laks, prevented foreclosure counsel from preparing the required certification because of uncertainty about potential changes in judicial construction of the FFA’s notice requirements. In Guillaume, the Supreme Court responded to this concern by holding: “The affidavit or certification of diligent inquiry required by Rule 4:64-1 and Rule 4:64-2 reflects the attorney’s reasonable, good faith compliance with the law, as it exists at the time of the document’s execution.
It is expected that Supreme Court's decision will allow many foreclosure actions to resume.