New Jersey’s Appellate Division recently reversed a lower court and held that a lender erred by not serving a notice of intent to foreclose (“NOI”) before commencing a foreclosure action on a residential reverse mortgage. See Nationstar Mortg., LLC d/b/a Champion Mortg. Co. v. Armstrong, 2018 WL 1386247 (N.J. Super. Ct. App. Div. March 20, 2018). In the case, defendant, as his mother’s attorney-in-fact, obtained a reverse mortgage on her home. The mother died shortly thereafter and, pursuant to 24 C.F.R. § 206.125(a)(2), the plaintiff-lender sent defendant, as administrator of the estate, a notice advising him of his options for satisfying the loan balance. One year later, with the balance still outstanding, plaintiff commenced a foreclosure action. Among his other defenses, defendant argued that plaintiff failed to send a NOI under the Fair Foreclosure Act (the “FFA”), which requires a lender to notify a borrower of its intention to foreclosure at least 30 days before commencing a foreclosure action. See N.J.S.A. 2A:50-56(a). The trial court nonetheless granted plaintiff’s request for final judgment, holding that plaintiff was not required to serve a NOI because the mortgage was a reverse mortgage and the mortgagor’s death was an incurable event of default giving plaintiff an absolute right to obtain the property.
On appeal, the Appellate Division reversed. First, it held that, under the plain language of the FFA, a lender is required to provide a NOI before instituting a residential foreclosure action. The FFA does not include an exception for reverse mortgages, nor does it include an exception for incurable events of default, as plaintiff argues. Moreover, the Court found that this default could have been cured if the estate simply paid off the outstanding mortgage balance. Second, the Court did not accept plaintiff’s argument that its satisfaction of the federal notice obligation under 24 C.F.R. § 206.125(a)(2) replaced its state obligation. Instead, the FFA expressly states that the obligation to serve the NOI “is independent of any other duty to give notice under the common law, principles of equity, State or federal statute, or rule of court and of any other right or remedy the debtor may have as a result of the failure to give such notice.” N.J.S.A. 2A:50-56(e). Finally, the Court held that the appropriate remedy would be to stay the foreclosure action for 30 days to give defendant another chance to pay off the mortgage, noting that the defendant had already greatly delayed the action and been sanctioned by the trial court for his repetitive motions.