Sec-

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On November 20, 2014, Wilbur L. Ross, Jr. notified the Board of Directors (the “Board”) of Ocwen Financial Corporation (the “Company”) of his decision to resign as a director on the Board effective immediately as a result of his election as Vice Chairman of Bank of Cyprus and the requirements of certain European regulations which limit directorships of bank officers. Mr. Ross is simultaneously resigning from the board of directors of several other public companies. Mr. Ross’ decision to resign as a director was not due to any disagreements with the Company on any matter relating to the Company’s operations, policies or practices.

[SEC.GOV]

image: Bloomberg

CBS-

Myrtle Lewis is 103-years-old …living in the warmth of her North Texas home and bracing for a fight.

“I’d just fight everything within reach, I’d be so upset,” Lewis told CBS 11’s I-Team, as she sat in her living room, taking time away from a favorite pastime – watching old westerns on TV.

Granddaughter Akelia Hurd and the rest of the family are also mad. “Honestly, it’s so evil … real evil,” said Hurd, 31. “Leave my grandmom alone, just leave her alone,” she said.

Their anger is directed at OneWest Bank, which holds the note on a reverse mortgage loan issued to Lewis in 2003. She was 92 at the time.

[CBS]

(image credit: CBSDFW.COM)

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK : PART 45

—————————————————————~~——-x

U.S. BANK NATIONAL ASSOCIATION, not in its
individual capacity, but as trustee for MERRILL LYNCH
MORTGAGE INVESTORS TRUST, SERIES 2006-RM4
and MERRILL LYNCH MORTGAGE INVESTORS
TRUST, SERIES 2006-RM5,
Plaintiff,

-against-

MERRILL LYNCH MORTGAGE LENDING,
INC., MERRILL LYNCH MORTGAGE INVESTORS,
INC. and BANK OF AMERICA, NATIONAL
ASSOCIATION,
Defendants.

EXCERPT:
The first category of documents that U.S. Bank seeks are those concerning (1) Merrill’s
internal assessment of its repurchase liability with respect to the ResMAE loans that collateralize
the two trusts (Trusts) at issue, and (2) Merrill’s generally-applicable policies and procedures for
repurchasing securitized loans since 2005.

[..]

VIII. Corporate witnesses
Finally, U.S. Bank seeks a corporate witness for deposition regarding two matters: 1)
potential documents and custodians for the 15 representative securitization deals discussed
above, and 2) potential documents and custodians concerning Merrill’s servicing and breach
notification policies. U.S. Bank is entitled to depose representatives of Merrill with knowledge
of the location of relevant documents and the identities of relevant custodians. Merrill must
designate a corporate witness for each of these matters.

ORDERED that the motion to compel the production of documents is granted.

H/T Simonee Cromwell

UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT

BAP No. NC-13-1615-KuPaJu
Bk. No. 14-54193*

In re:
ANTON ANDREW RIVERA and DENISE
ANN RIVERA,
Debtors.
_______________________________

ANTON ANDREW RIVERA; DENISE
ANN RIVERA,
Appellants,

v.

DEUTSCHE BANK NATIONAL TRUST
COMPANY, Trustee of Certificate
Holders of the WAMU Mortgage
Pass Through Certificate
Series 2005-AR6,

Appellee.
_______________________________

Argued and Submitted on October 23, 2014
at San Francisco, California

Filed – November 24, 2014

Appeal from the United States Bankruptcy Court
for the Northern District of California
Honorable M. Elaine Hammond, Bankruptcy Judge, Presiding

Last week, Senator Elizabeth Warren asked the president of the New York Federal Reserve Bank  if he thought of himself as a cop on the street when it comes to regulating banks.  He responded that no, he thought of himself more as a “fire marshal.”

Really?   After dozens of Wall Street scandals, one of the bank’s main regulators doesn’t think of himself as a cop on the beat?  

Help the California Reinvestment Coalition send a message to the New York Federal Reserve that we do need a “Cop on the Beat?”

One of the ways the New York Fed could immediately demonstrate that Main Street is more important than Wall Street is by holding public hearings about a proposed Too Big To Fail Bank merger in California.

This merger, if approved, would combine two troubled banks (OneWest- the new version of IndyMac, which was the 3rd largest bank failure in our country, costing the FDIC $10 billion and counting) and CIT Group (borrowed $2.3 billion from the US government that it will never have to pay back because it declared bankruptcy) to create another Too Big To Fail bank.  The California Reinvestment Coalition, along with over 50 other organizations in California and organizations and consumers throughout the US, is opposing this merger and asking the regulators to hold hearings.

Regulators need to hear from consumers. Can you sign our petition, telling bank regulators that we DO need a “Cop on the Beat”?

If you personally have any experience with IndyMac Bank, OneWest Bank, Financial Freedom (reverse mortgage servicer subsidiary of OneWest), or if  your OneWest morgage was transferred to Ocwen, another troubled firm, please tell the regulators about your experiences, and please join CRC in asking for hearings on this merger.

click image below to sign the petition.

ABC-

Juana and Jaime Coronel of Azusa are very thankful they have a roof over their head this Thanksgiving.

“My kids grow up in this house, all my sons grow up here,” Juana said. “I’ve got a lot of memories and my brother and sister live here too, and my son, everybody — that’s why I don’t want to move.”

For four years, the Coronels fought the foreclosure of their home. They’ve lived in Azusa for 25 years, but like many others, they fell on tough times and fell behind on their mortgage. Jaime suffered a stroke, so he’s now on a fixed income.

[ABC7]

via:

Plymouth County, Iowa v. Merscorp, Inc.

Court of Appeals for the Eighth Circuit

Date Argued: September 8th, 2014

Duration: 32:27

Docket Number: 13-2334

_______________________________________________________

Plymouth County, Iowa v. Merscorp, Inc. et al Iowa Northern District Court

Case No. 5:12-cv-04022-MWB
docket://gov.uscourts.iand.5-12-cv-04022

WILLIAM C. SAMPLE, Appellant,
v.
WELLS FARGO BANK, N.A., Appellee.

Amanda Renee Murphy of Butler & Hosch, P.A., Orlando, for appellee.

MAY, J.

A borrower appeals a final summary judgment of foreclosure. He argues the trial court erred in entering summary judgment because the bank failed to overcome his fourteen affirmative defenses. While we disagree with him about thirteen of them, we do agree that one of the affirmative defenses precluded the entry of summary judgment. We therefore reverse and remand.

The borrower and Mortgage Electronic Registration Systems, Inc., acting solely as nominee for Countrywide Bank, N.A. (“MERS”), executed a mortgage and note. When the borrower failed to pay his monthly payment, MERS sent a notice of default to the borrower.

Several months later, MERS executed an assignment of mortgage in favor of the bank. The bank filed a complaint seeking to foreclose the mortgage, reestablish the lost note, reform the mortgage, and for damages on the promissory note. The bank voluntarily dismissed the lost note count and filed the original note, mortgage, and assignment of mortgage. The borrower propounded a request for production; the bank moved for a protective order.

More than three years later, the bank moved for summary judgment. In support of its motion, the bank filed the payment history, affidavit of costs, and affidavit of indebtedness. The borrower then filed an answer and asserted fourteen affirmative defenses. The bank moved to strike the affirmative defenses and in the alternative replied to them. The borrower filed an opposition to summary judgment, a motion for continuance and mediation, and a motion to compel better responses to his request for production.

The trial court heard the bank’s motion and entered a final summary judgment for the bank. The final judgment contained the legal description requested in the reformation count of the complaint. The trial court did not rule on the borrower’s affirmative defenses, the bank’s motion for protective order, or the borrower’s motion to compel better responses. The borrower moved for rehearing or to set aside the order, which was denied. The borrower now appeals.

The borrower argues error in the entry of final summary judgment because of his asserted affirmative defenses and pending discovery. The bank responds that the affirmative defenses lacked the requisite specificity to be legally sufficient and were refuted. The bank also asserts that having met its burden to provide competent evidence in support of its complaint, the borrower failed to show the existence of a genuine issue of material fact.

We have de novo review. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 172 (Fla. 4th DCA 2012).

“When a party raises affirmative defenses, . . . `summary judgment should not be granted where'” the affirmative defenses are not refuted. Alejandre v. Deutsche Bank Trust Co. Ams., 44 So. 3d 1288, 1289 (Fla. 4th DCA 2010) (quoting Cufferi v. Royal Palm Dev. Co., 516 So. 2d 983, 984 (Fla. 4th DCA 1987)). “[T]he plaintiff must either factually refute the alleged affirmative defenses or establish that they are legally insufficient to defeat summary judgment.” Knight Energy Servs., Inc. v. Amoco Oil Co., 660 So. 2d 786, 788 (Fla. 4th DCA 1995) (citing Cufferi, 516 So. 2d at 984).

In his fourteenth affirmative defense, the borrower asserted that the mortgage attached to the complaint did not contain the legal description of his property, prohibiting the bank from foreclosing on it. The bank pled a count for reformation of the mortgage, but the motion for summary judgment did not request reformation of the mortgage. And, the record, including the bank’s affidavits, failed to either prove reformation of the mortgage or refute the borrower’s affirmative defense.

The bank admitted the mortgage did not include an accurate legal description, and alleged the inaccurate legal description was a mutual mistake. The bank now asserts that its motion for summary judgment asserted the lack of any genuine issue of material fact and was sufficient to reform the mortgage. However, the borrower denied the bank’s allegation of a mutual mistake and asserted the incorrect legal description as his fourteenth affirmative defense.

The fourteenth affirmative defense was clear and specific. Although one of the bank’s affidavits attested that the complaint’s allegations were true and correct, the affiant did not, and could not, attest that the incorrect legal description was a mutual mistake. That is because one person cannot attest to another person’s knowledge. See West Edge II v. Kunderas, 910 So. 2d 953, 954 (Fla. 2d DCA 2005). In short, a genuine issue of material fact existed, precluding summary judgment.

“A court of equity has the power to reform a written instrument where, due to a mutual mistake, the instrument as drawn does not accurately express the true intention or agreement of the parties to the instrument.” Providence Square Ass’n, Inc. v. Biancardi, 507 So. 2d 1366, 1369 (Fla. 1987) (citations omitted). “This principle . . . can be applied to correct an erroneous land description in order to protect a person’s rights in real property.” Id. (citations omitted). This does not however eliminate the requirement that the motion for summary judgment state with particularity the grounds upon which it is based. Gee v. U.S. Bank Nat’l Ass’n, 72 So. 3d 211, 214 (Fla. 5th DCA 2011) (quoting Fla. R. Civ. P. 1.510(c)).

In Willis v. Bank of New York Mellon, 115 So. 3d 1075 (Fla. 4th DCA 2013), we addressed a similar issue. The trial court granted reformation of a mortgage to include a correct legal description as part of a summary judgment of foreclosure. Id. at 1075. “The appellee [b]ank’s motion for summary judgment and accompanying notice, however, did not raise the issue of reformation as an issue to be addressed at the summary judgment hearing. Because of the lack of notice, the court erred in reforming the mortgage to add a legal description.” Id. (citation omitted).

Here, the bank’s motion for summary judgment was likewise insufficient to put the borrower on notice of the bank’s intention to reform the mortgage. Because the motion failed to provide notice to the borrower, and because the bank failed to prove reformation or refute the affirmative defense of an incorrect legal description, the trial court erred in entering final summary judgment.

We therefore reverse the final summary judgment of foreclosure and remand the case for further proceedings. We find no merit in the other issues raised.

Reversed and Remanded.

STEVENSON and KLINGENSMITH, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

FOR IMMEDIATE RELEASE:
November 20, 2014

CONTACT:
Office of Communications
Tel: (202) 435-7170

CONSUMER FINANCIAL PROTECTION BUREAU PROPOSES EXPANDED FORECLOSURE PROTECTIONS

 Proposal Would Provide Surviving Family Members and Other Homeowners with Same Protections as Original Borrower

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) proposed additional measures to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The proposal would require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, to put in place additional servicing transfer protections, and to take steps to protect borrowers from a wrongful foreclosure sale. The proposal would also help ensure that surviving family members and others who inherit or receive property have the same protections under the CFPB’s mortgage servicing rules as the original borrower.

“The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray. “Today’s proposal would give greater protections to mortgage borrowers.”

Mortgage servicers are responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. They typically handle customer service, collections, loan modifications, and foreclosures. To address shoddy mortgage servicing practices, the CFPB put in place common-sense rules designed to eliminate surprises and runarounds for homeowners. The rules, which went into effect on January 10, 2014, require servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request. The rules also include strong protections for struggling homeowners, including those facing foreclosure. 

Since the Bureau’s mortgage servicing rules took effect, the CFPB has continued to engage in outreach with consumer advocacy groups, industry representatives, and other stakeholders. This proposal  reflects our ongoing effort to ensure the rules are working as intended and to smooth the path for companies to better protect consumers and comply with the CFPB’s rules.

Among other things, today’s proposal would:

• Require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan: Currently, a mortgage servicer must give the borrower certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Under the proposed rule, servicers would have to give those protections again for borrowers who have brought their loans current at any time since the last loss mitigation application. This change would be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship – such as the loss of a job or the death of a family member – that could otherwise cause them to face foreclosure.
• Expand consumer protections to surviving family members and other homeowners: If a borrower dies, CFPB rules currently require that servicers promptly identify and communicate with family members, heirs, or other parties, known as “successors in interest,” who have a legal interest in the home. Today’s proposal would expand the circumstances in which consumers would be considered successors under the rules. The expanded circumstances include when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child or when a borrower who is a joint tenant dies. The proposal also ensures that those confirmed as successors generally receive the same protections under the CFPB’s mortgage servicing rules as the original borrower. Such protections include the right to get information about the loan and right to the foreclosure protections.
• Require servicers to notify borrowers when loss mitigation applications are complete: When a borrower completes a loss mitigation application, key foreclosure protections take effect. If consumers do not know the status of their application, they cannot know the status of their foreclosure protections. The proposal would require servicers to notify borrowers promptly that the application is complete, so that borrowers know the status of the application and their protections.  
• Protect struggling borrowers during servicing transfers: When mortgages are transferred from one servicer to another, borrowers who had applied to the prior servicer for loss mitigation may not know where they stand with the new servicer. The proposal clarifies that generally a transferee servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer. If the borrower’s application was complete prior to the transfer, the new servicer generally must evaluate it within 30 days of when the prior servicer received it. For involuntary transfers, the proposal would give the new servicer at least 15 days after the transfer date to evaluate a complete application. If the new servicer needs more information in order to evaluate the application, the borrower would retain some foreclosure protections in the meantime.
• Clarify servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures: The rules currently prohibit a servicer from proceeding to foreclosure once they receive a complete loss mitigation application from a borrower more than 37 days prior to a scheduled sale.  However, in some cases, borrowers are not receiving this protection and servicers’ foreclosure counsel may not be taking adequate steps to delay foreclosure proceedings or sales.  The Bureau is proposing to clarify what steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale. The Bureau is proposing that servicers who do not take reasonable steps to prevent the sale must dismiss a pending foreclosure action. The proposed clarifications would aid servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
• Clarify when a borrower becomes delinquent: Several of the consumer protections under the Bureau’s rules depend upon how long a consumer has been delinquent on a mortgage. Today’s proposal would clarify that delinquency, for purposes of the servicing rules, begins on the day a borrower fails to make a periodic payment. Under the proposal, when a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances. The proposal also would allow servicers the discretion, under certain circumstances, to consider a borrower as having made a timely payment even if the borrower’s payment falls short of a full payment by a small amount. The increased clarity will help ensure borrowers are treated uniformly and fairly.  
• Provide more information to borrowers in bankruptcy: Currently, servicers do not have to provide periodic statements or loss mitigation information to borrowers in bankruptcy. The proposal would generally require servicers to provide periodic statements to those borrowers, with specific information tailored for bankruptcy. Servicers also currently do not have to provide certain disclosures to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act. The proposal would require servicers to provide written early intervention notices to let those borrowers know about loss mitigation options.

The proposal would make additional changes to the mortgage servicing rules. These changes include providing flexibility for servicers to comply with certain force-placed insurance and periodic statement disclosure requirements. The changes would clarify several early intervention, loss mitigation, information request, and prompt crediting of payments requirements, as well as the small servicer exemption. Further, the proposal would exempt servicers from providing periodic statements under certain circumstances when the servicer has charged off the mortgage.

Further details about today’s proposal can be found in the summary: http://files.consumerfinance.gov/f/201411_cfpb_summary_mortgage-servicing-proposed-rule.pdf

Today’s proposed rule and disclosures will be open for public comment for 90 days after their publication in the Federal Register.

A copy of the proposed rule, which includes information on how to submit comments, is available at: http://files.consumerfinance.gov/f/201411_cfpb_proposed-rule_mortgage-servicing.pdf

###

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Palm Beach Post-

A 90-year-old man is facing foreclosure on a Boynton Beach home he no longer owns after his lender gave him the wrong mortgage payoff amount.

According to court documents, Abraham Maisner, who owned a 3,200-square-foot home in Valencia Lakes, went into foreclosure in 2012 after failing to make payments since May 2010. He had bought the home with his wife, Barbara Maisner, who died in 2011 at 76 years old.

In August, a law firm representing Maisner asked for the payoff amount on the mortgage. A conditional payoff amount was given of $317,211, but it didn’t include $42,092 in interest that had been accruing for four years.

[PALM BEACH POST]

There is no stopping them. It’s going to take a President with some guts to put an end to fraud and corruption inside the government itself.

In These Times-

On October 24, Ron Faris, CEO of Ocwen Financial, made an unusual move for the head of a $2 billion-a-year corporation: He apologized. Specifically, he sent out a mea culpa-filled open letter addressing the 2.7 million homeowners whose mortgages are serviced by Ocwen, apologizing for a glitch that backdated time-sensitive letters. “Letters were dated when the decision was made to create the letter versus when the letter was actually created,” Faris confessed. The missive came on the heels of well-publicized allegations by New York’s Dept of Financial Services (DFS) accusing the company of doing just that, and suggesting that the delayed loan modification letters may have resulted in foreclosures. At first, Faris claimed that only 283 New York homeowners had been impacted. However, he quickly retreated from that number after DFS said the number could be higher, way higher—perhaps in the “hundreds of thousands”—and not confined to New York.

The Faris letter was clearly damage control, an attempt to staunch the bleeding and send a message to the investment community following a Moody’s credit downgrade and a precipitous drop in Ocwen stock, which dropped to $19.04 on October 23 and fell again to $18.55 on October 27, the lowest price since June 2012.

This isn’t the first time that Ocwen has had to circle the wagons in response to jabs and uppercuts by New York DFS Superintendent Ben Lawsky, who’s developed a reputation as somewhat of a regulatory Popeye, taking on the servicing industry with a zeal matched only by Sen. Elizabeth Warren and a few other left-minded Congress members. Lawsky’s prime targets have been non-bank servicers like Ocwen—companies that saw a cash cow in the growing desire of mega-banks like Wells Fargo and Bank of America to shed their so-called “toxic” sub-prime mortgage portfolios in the wake of litigation and regulation from 2010’s “Foreclosuregate.” As Lawsky noted in an address earlier this year to the New York Bankers Association, these non-bank mortgage servicers have bought up a significant share of U.S. mortgages:

[In 2011, all of the ten largest mortgage servicers were traditional banks. Today, four of the top ten are non-banks. And those four non-bank firms alone service more than a trillion dollars of loans—10 percent of the residential mortgage market, and climbing.

[IN THESE TIMES]

Fool me once, shame on me; fool me 1,000 times, you got to go!

HuffPost-

I believe President Obama deserves deference in picking his team, and I’ve generally tried to give him that. But enough is enough.

Last Wednesday, President Obama announced his nomination of Antonio Weiss to serve as Under Secretary for Domestic Finance at the Treasury Department. This is a position that oversees Dodd-Frank implementation and a wide range of banking and economic policymaking issues, including consumer protection.

So who is Antonio Weiss? He’s the head of global investment banking for the financial giant Lazard. He has spent the last 20 years of his career at Lazard — most of it advising on international mergers and acquisitions.

[HUFFINGTONPOST]

Law 360-

Bank of America Corp. and Merrill Lynch have settled a Federal Deposit Insurance Corp. suit over their alleged role in the demise of United Western Bank, the parties said in a document filed Monday, The FDIC claimed they, and Morgan Stanley and RBS Holdings USA Inc., sold $110 million in fraudulent residential mortgage-backed securities to United Western, which lost value.

“The parties have reached an agreement to settle the FDIC’s claims against the Bank of America defendants in this action,” they told the court.

Morgan Stanley and RBS were not affected by today’s news.

In August, the parties were tussling over the effects of two new Tenth Circuit rulings that came out that month.

[LAW360]

“The Federal Housing Finance Agency is supposed to help underwater homeowners, but for 6 years it has not allowed Fannie Mae and Freddie Mac to help a single family by reducing the principal on their mortgage. Today I asked the FHFA director: How many more families have to lose their homes before you act?”

Include the Attorney Generals as well and pretty much throw mostly all of Congress in this too.

WSJ-

We joined the Senate Banking Committee to try to make the banking system work better for American families. That’s why we’re concerned that the Federal Reserve—our first line of defense against another financial crisis—seems more worried about protecting Wall Street than protecting Main Street. Fortunately, this is one problem the Obama administration can start fixing today by nominating the right people to fill the two vacancies on the Fed’s Board of Governors.

The Board of Governors is responsible for supervising the country’s biggest banks. It’s also responsible for overseeing the regional Federal Reserve banks, including the Federal Reserve Bank of New York. For decades, the Board of Governors and the New York Fed have been responsible for supervising Wall Street banks, but after the 2008 crisis and the regulatory lapses it revealed, Congress gave the Fed even more oversight authority. According to the new chair of the Board of Governors, Janet Yellen , the Fed’s obligation to supervise the big banks is now “just as important” as its better-known obligation to set interest rates and conduct the country’s monetary policy.

Two recent reports highlight that the Fed isn’t very good at supervising certain banks. In September, Carmen Segarra, a former bank examiner at the Federal Reserve Bank of New York, released secret recordings she had made of meetings at the New York Fed in 2012. The recordings revealed that New York Fed employees had identified concerns with a proposed Goldman Sachs deal with Banco Santander , calling it “legal but shady.” The New York Fed didn’t attempt to make Goldman address these concerns. The recordings also showed Ms. Segarra’s superiors pressuring her to soften her finding that Goldman did not comply with federal regulations on conflicts of interest. While the recordings offered important new insights, they ultimately confirmed the old suspicion that the Fed is too cozy with big banks to provide the kind of tough oversight that’s needed.

[WALL STREET JOURNAL]

In Re: GORDON A. WASHINGTON, Chapter 13, Debtor.
GORDON A. WASHINGTON, Plaintiff,
v.
SPECIALIZED LOAN SERVICING, LLC, and THE BANK OF NEW YORK MELLON, as Trustee for the Certificate-holders of the CWABS, Inc., Asset-backed Certificates, Series 2007-5, Defendants.

Charles A. Gruen, Esq., Rosa Amica-Terra, Esq., Law Offices of Charles A. Gruen, Westwood, NJ, Special Counsel for Gordon A. Washington.

David V. Mignardi, Esq., Kenneth J. Flickinger, Esq., Karen B. Olson, Esq., Knuckles, Komosinski & Elliott, LLP, Elmsford, NY, Attorney for Specialized Loan Servicing, LLC, and The Bank of New York Mellon.

MEMORANDUM DECISION

MICHAEL B. KAPLAN, Bankruptcy Judge.

I. INTRODUCTION.

“No one gets a free house.” This Court and others have uttered that admonition since the early days of the mortgage crisis, where homeowners have sought relief under a myriad of state and federal consumer protection statutes and the Bankruptcy Code. Yet, with a proper measure of disquiet and chagrin, the Court now must retreat from this position, as Gordon A. Washington (“the Debtor”) has presented a convincing argument for entitlement to such relief. So, with figurative hand holding the nose, the Court, for the reasons set forth below, will grant Debtor’s motion for summary judgment. These matters come before the Court on a motion and two cross motions for summary

judgment in the adversary complaint filed by Debtor to determine the validity, priority and extent of the mortgage lien on his three-family residence in Madison, New Jersey, against Defendant creditors Specialized Loan Servicing, LLC, and The Bank of New York Mellon (as Trustee for the Certificate-holders of the CWABS, Inc., Asset-backed Certificates, Series 2007-5) (“SLS” and “BoNY”) (collectively “the Defendants,” represented by one counsel). The motions are:

(1) the Debtor’s motion for partial summary judgment based on the argument that the 6-year statute of limitations applicable to suit on a negotiable instrument under N.J.S.A. § 12A:3-118(a) has expired, so that Defendants are out of time to sue on their mortgage note on which Debtor defaulted on or about June 1, 2007 (dkt. 7)^[1]; and

(2) the Defendants’ cross motion for partial summary judgment based on the argument that the 20-year statute of limitations applicable to foreclosure of a mortgage under N.J.S.A. § 2A:50-56.1(c) has not expired, so that Defendants may still foreclose the mortgage on which Debtor defaulted on or about June 1, 2007 (dkt. 11); and finally

(3) the Debtor’s cross motion for summary judgment on the mortgage based on the arguments:

(a) that the 6-year statute of limitations applicable to foreclosure of a mortgage in which the maturity date has been accelerated under N.J.S.A. § 2A:50-56.1(a) has expired, so that the Defendants are out of time to sue on either the note or the mortgage; and

(b) that Defendants lack standing to enforce the note and mortgage because the Assignment is defective and because the Defendants waived their interest in the loan under a Settlement Agreement (dkt. 19).

` The Defendants filed a reply brief at dkt. 22.^[2] The Court heard oral argument on September 30, 2014 and reserved on the narrow issue of whether N.J.S.A. § 2A:50-56.1(a) and 11 U.S.C. §§ 502(b)(1) and 506(d) operate to make the mortgage unenforceable, to disallow the Defendants’ claim, and to void the mortgage lien so that the Defendants have no claim against the Debtor, the property or the estate.

II. JURISDICTION.

The Court has jurisdiction over these matters under 28 U.S.C. § 1334(b) and the Standing Orders of Reference entered by the United States District Court on July 10, 1984 and amended on October 17, 2013. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (K) and (O). Venue is proper in this Court under 28 U.S.C. §§ 1408 and 1409.

III. BACKGROUND.^[3]

The acquisition of the property.

On February 27, 2007, the Debtor purchased a three-family home at 11 Walnut Street, Morris County, New Jersey (“Property”), paying a $130,000 deposit and obtaining a 30-year adjustable rate mortgage and note for $520,000 for the balance with first payment due on April 1, 2007 (dkt. 7-2, Debtor’s Certification in Support of Summary Judgment, ¶ 4, Exhibit A, note). The mortgagee was America’s Wholesale Lender (dkt. 7-2, Debtor, ¶ 5, 9). Debtor’s attorney asserts that Countrywide Home Loans served as the mortgage servicer, an assertion disputed by the Defendants (dkt. 7, Debtor SUMF, ¶ 7). Debtor moved into the third-floor apartment and began to renovate the first and second floor apartments to rent (dkt. 7-2, Debtor ¶ 7). During renovation, the first and second floor apartments suffered water damage and became uninhabitable (dkt. 7-2, ¶ 7). Debtor failed to make the July 1, 2007 mortgage payment, and the loan has been in continuous default since that time (dkt. 7-2, Debtor, ¶8).^[4]

The bankruptcy case.

The Debtor filed a voluntary Chapter 7 petition on March 12, 2014, along with a motion to convert the case to one under Chapter 13. The case was converted by Order entered on April 9, 2014. The claims bar date was August 18, 2014. Thereafter, the Debtor filed an original Plan on May 19, 2014 (main dkt. 17) and a first modified Plan on August 5, 2014 (main dkt. 25); a confirmation hearing is scheduled presently for November 20, 2014. Each Plan proposes to sell the above property in a short period. The first Plan proposes payments of 12 months @$492 plus $554,000 in the last month; the second Plan proposes payments of 17 months @$492 plus $554,000 in the last month. The Debtor projected the value of the property at $550,000-$600,000 and scheduled the Defendants’ debt at $519,000. The Defendants filed a proof of claim for $920,469 (claim 7-1) (the $519,000 scheduled by the Debtor represents only the principal due) and filed an objection to the Plan because it indicates a short sale with a payoff of only $554,000 in the 18th month (main dkt. 34, ¶5). The Plan suggests (does not state) that Debtor seeks to cram down the note on this three-family home to the value of the property; but the clear aim of this adversary proceeding is to render the Defendants’ note and mortgage not only undersecured but wholly unenforceable.

Debtor scheduled $137,000 in general unsecured claims. Proofs of claim timely filed include, in addition to the claim of Defendants, $15,000 in priority tax claims; $70,000 in general unsecured claims (including $15,000 due a relative); and an additional $63,000 due on a student loan. The Debtor proposes a pro rata distribution to the general unsecured creditors.

The adversary proceeding.

The Debtor filed this adversary proceeding on March 18, 2014 (dkt. 1). The Defendants answered on May 2, 2014 (dkt. 4), and on May 19, 2014 the parties entered a Joint Scheduling Order which scheduled trial for December 5, 2014 (dkt. 5). The Debtor filed the initial motion for partial summary judgment on June 2, 2014, and the cross motions followed. On September 30, 2014, in addition to hearing oral argument on these motions, the Court, on Defendant’s motion, entered an Order which compelled discovery, modified the Joint Scheduling Order and rescheduled trial to February 20, 2015 at 10:00 a.m. (dkt. 23).

The mortgage documents and related pleadings.

The February 1, 2007 Adjustable Rate Note (“the note”) between America’s Wholesale Lender and Debtor stated a principal of $520,000, periodic payments beginning April 1, 2007 at 8.950% interest, and monthly debt service of $4,165.34 (dkt. 7, Exhibit A). The note defined March 1, 2037 as the Maturity Date and provided that any amounts due would be paid on that date (dkt. 7, Exhibit A, ¶ 3(A), Maturity Date). The note contained the following default provisions and remedy:

7. BORROWER’S FAILURE TO PAY AS REQUIRED

. . .

(B) Default

If I do not pay the full amount of each monthly payment on the date it is due, I will be in default.

(C) Notice of Default

If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. The date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.

(D) No Waiver by Note Holder

Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.

(dkt. 7, Exhibit A).

The mortgage, dated February 27, 2007, referenced the note and contained its own default provisions:

NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows:

22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 [based on borrower’s transfer of the property] unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceedings and sale of the Property; (e) the Borrower’s right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure; and (f) any other disclosure required under the Fair Foreclosure Act, codified at Sections 2A:50-53 et seq. of the New Jersey Statutes, or other Applicable Law. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclosure this Security Instrument by judicial proceeding. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, attorneys’ fees and costs of title evidence permitted by Rules of Court.

and

UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:

. . .

19. Borrower’s Right to Reinstate After Acceleration. If Borrower meets certain conditions, Borrower shall have the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable law might specify for the termination of Borrower’s right to reinstate; or (c) entry of a judgment enforcing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys’ fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting lender’s interest in the Property and rights under this security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender’s interest in the Property and rights under this Security Instrument, and Borrower’s obligation to pay the sums secured by this Security Instrument, shall continue unchanged Lender may require that Borrower pay such reinstatement sums and expenses in one or more of the following forms, as selected by the Lender: (a) cash; (b) money order; (c) certified check, bank check, treasurer’s check or cashier’s check, provided any such check is drawn upon an institution whose deposits are insured by a federal agency, instrumentality or entity; or (d) Electronic Funds Transfer. Upon reinstatement by Borrower, this Security Instrument and obligations secured hereby shall remain fully effective as if no acceleration had occurred. However, this right to reinstate shall not apply in the case of acceleration under Section 18 [Transfer of the Property or a Beneficial Interest in Borrower].

. . .

(dkt. 7, Exhibit B, ¶¶ 22 and 19). Accompanying the mortgage were an Adjustable Rate Rider and a 1-4 Family Rider which included at paragraph H an absolute assignment of rents (dkt. 7 Exhibit B, Mortgage). Both accompanying documents were dated February 27, 2007.

The mortgage was assigned by MERS as Nominee for America’s Wholesale Lender to co-Defendant The Bank of New York [as Trustee] for the Benefit of the Certificate-holders, CWABS Inc. Asset-Backed Certificates Series 2007-5 (“BoNY”) for $1.00 by an Assignment of Mortgage effective November 12, 2007 but recorded on September 9, 2008 (dkt. 7, Exhibit L, “the Assignment”).

The Assignment recites the original amount of the mortgage as $520,000 and states in relevant part:

And the Assignor covenants that there is now due and owning upon the Mortgage and the Bond, Note or other obligation secured thereby, the sum of $519,132.54 Dollars principal with interest thereon to be computed at the rate of 8.950 percent per year from June 1, 2007, along with such other sums as may be collectible, and that there are no set-offs, counterclaims or defenses against the Mortgage or the Bond, Note or other obligation, in law or in equity, nor have there been any modifications or other changes in the original terms thereof, other than as stated in this Assignment.

(dkt. 7, Exhibit L).^[5] Debtor relies in part on this language in the Assignment for the proposition that the Defendants accelerated the maturity date of the note and mortgage to June 1, 2007 (dkt. 19-13, Debtor’s response to Defendants’ SUMF, ¶ 5; dkt 19-13, Debtor’s Counterstatement of Undisputed Material Facts, ¶ 5, 13; dkt. 19-1, Debtor’s certification in support of cross motion, ¶¶ 6, 9-10, 13; dkt. 19-14, Debtor’s brief in support of cross motion, pp. 1, 2, 8, 12, 14, 16-17).

On December 14, 2007, the Defendants filed a foreclosure Complaint in Superior Court of New Jersey, Chancery Division, Morris County, Dkt. No. F-34837-07 (dkt. 7, Exhibit E) (“the Complaint”). The Complaint described the loan as “an obligation (note) to secure the sum of $520,000.00 payable on March 1, 2037” (dkt. 7, Exhibit E, ¶ 1). The Complaint continues in relevant part:

8. The Defendants named in Paragraphs 1 and 2 above, or their grantee or grantees, if any has failed to make the installment payment due on June 1, 2007, and all payments becoming due thereafter. Therefore the loan has been in default since July 1, 2007, and said payments have remained unpaid for more than 30 days from the date of the mailing of the Notice of Default to the obligor, and are still unpaid. Plaintiff herein, by reason of said default, elected that the whole unpaid principal sum due on the aforesaid obligation and mortgage referred to in Paragraphs 1 and 2 above, with all interest and advances made, shall be now due (Emphasis added).

. . .

10. Notice of Intention to Foreclose was sent in compliance with the Fair Foreclosure Act more than 31 days prior to filing of the complaint.

(dkt. 7, Exhibit E, ¶¶ 8, 10). Debtor also relies on ¶ 8 in the Complaint for the proposition that the Defendants accelerated the maturity date of the loan to June 1, 2007 (dkt. 7, Debtor’s SUMF, ¶ 11; dkt. 7-2, Debtor’s certification in support of motion, ¶ 12; dkt. 7-22, Debtor’s brief, p. 3). The Debtor filed his Answer on February 8, 2008 and in it neither admitted nor denied the allegations in ¶ 8 but denied the allegations in ¶ 10 (dkt. 7, Exhibit F (Answer), ¶¶ 8, 10).

Defendants concur that the payment default occurred on July 1, 2007 (the interest default having occurred on June 1, 2007) but dispute the acceleration date (dkt. 11-2, July 29, 2014 affidavit of Cynthia Wallace for SLS in support of Defendants’ crossmotion, ¶ 4b; dkt. 11-3, affidavit of Matthew R. Stahlhut for BoA in support of Defendants’ crossmotion, ¶ 7). Defendants “assert that the subject loan . . . was accelerated on December 14, 2007 upon the filing of the 2007 Foreclosure Complaint” (dkt. 11-1, Defendants’ response to Debtor’s SUMF, ¶ 8, also ¶ 11; dkt. 11-1 Defendants’ Counterstatement of Undisputed Material Facts, ¶ 5). As explained below, whether the default and acceleration date is reckoned as June 1, 2007, July 1, 2007 or December 14, 2007, does not affect the outcome of this case.

On May 31, 2013, the Superior Court Clerk’s Office issued a notice of intent to dismiss the foreclosure case without prejudice for lack of prosecution within 30 days unless the plaintiff produced one of the following documents: amended complaint; request for default or motion to enter default out of time; motion to: strike answer, enter judgment or for summary judgment; proof of bankruptcy filing or other condition that stays the case; affidavit or certification asserting that failure to file or take the next required action is due to exceptional circumstances” (dkt. 7, Exhibit I, “Foreclosure Dismissal Notice”). Counsel for BoNY responded on June 21, 2013 that he intended to file an Order to Show Cause to obtain more time (dkt. 7, Exhibit J, Certification of John Caporale, Esq.). On July 5, 2013, the Superior Court Clerk’s Office issued a Foreclosure Dismissal Order, dismissing the Defendants’ complaint for lack of prosecution without prejudice and with the provision, “Reinstatement of the matter after dismissal may be requested by a motion for good cause” (dkt. 7, Exhibit K) (“Foreclosure Dismissal Order”). BoNY caused a Discharge of Lis Pendens to be recorded on August 21, 2013 (dkt. 7, Exhibit N, “Discharge of Lis Pendens”).

Thus, to date, the Defendants have not obtained a Final Judgment of Foreclosure. Moreover, Defendants admit the dismissal of the foreclosure Complaint without prejudice (dkt. 11-1, response to Debtor’s SUMF, ¶¶ 17, 19).^[6] Debtor certifies that Defendants’ failure to produce the original note, mortgage or assignment was the primary basis for the dismissal (dkt. 7-2, Debtor, ¶¶ 14, 17, 20) and contends that BoNY never produced the original note during the foreclosure proceedings (dkt. 7-22, Debtor’s brief, p. 4), citing N.J. R. 4:64-2(a) (which requires production of original documents in support of foreclosure judgment). Following inspection of Defendants’ files on October 7, 2014, the Debtor appears to concede that Defendants have the original note^[7], but challenged the absence of an Allonge which Defendants assert does not exist (dkt. 25, Debtor’s October 9, 2014 letter to the Court; dkt. 26, Defendants’ October 10, 2014 responsive letter to the Court). The basis for the dismissal of the foreclosure proceeding and whether Defendants possess an Allonge have little or no bearing on the Court’s decision in this matter.

IV. DISCUSSION.

The Parties’ Positions

The Debtor initially argued that BoNY’s claim for action on the note accrued on June 1, 2007, when BoNY declared the default and accelerated the loan. The Debtor asserted that N.J.S.A. § 12A:3-118(a) serves as the statute of limitations for bringing an action on the note as a negotiable instrument (dkt. 7-22, Debtor’s brief, pp. 12-13).^[8] Inasmuch as the statute of limitations under N.J.S.A. § 12A:3-118(a) runs six years after the due date or the accelerated due date, the Debtor posited that BoNY was time-barred from enforcing the note and that the Debtor should be granted summary judgment as a matter of law, declaring the note unenforceable.

In their cross motion, the Defendants conceded that the 6-year statute of limitations for enforcement of the note had run but argued that enforcement of the mortgage is subject to a 20-year statute of limitations recognized as a common law matter in Security Nat’l Partners Ltd. P’ship v. Mahler, 336 N.J. Super. 101, 107, cert den., 169 N.J. 607 (2001) (“Mahler“) and later codified at N.J.S.A. § 2A:50-56.1(c) (“Statute of limitations relative to foreclosure proceedings”) (dkt. 11-14, Defendants’ brief, p. 4). Defendants submit that that they are entitled to foreclose on the property and to apply the sale proceeds to their debt but admit that they are unlikely to be able to enforce any deficiency against the Debtor.^[9] In re Pecora, 297 B.R. 1, 3 (Bankr. W.D.N.Y. 2003) (distinguishing debtor liability for the mortgage debt from the persistence of the mortgagee’s lien, citing Dewsnup v. Timm, 502 U.S. 410, 417-18 (1992) and Johnson v. Home State Bank, 501 U.S., 78, 84-85 (1991)). The Defendants contend that the Trust is entitled to summary judgment because there is no genuine issue of material fact and they can enforce the mortgage as a matter of law.

In his cross motion, Debtor argues that Defendants’ declaration of default and acceleration (which both parties acknowledge with respect to the note, supra) advanced the maturity date of the mortgage to June 1, 2007 so that under N.J.S.A. § 2A:50-56.1(a), which requires the mortgagee to file a foreclosure action within 6 years of the maturity date of the mortgage, Defendants cannot pursue foreclosure of the Property (dkt. 19-14, pp. 12-18; dkt. 7, Exhibits L and E). Whether the accelerated maturity of the mortgage is found to be July 1, 2007, or December 14, 2007 (as urged by Defendants), the Defendants are still out of time under Debtor’s interpretation of N.J.S.A. § 2A:50-56.1(a) to file a foreclosure complaint.

In their response, the Defendants press Mahler and make the bare assertion that the lender-accelerated date does not satisfy the requirement in N.J.S.A. § 2A:50-56.1(a) of a “maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation.” N.J.S.A. § 2A:50-56.1(a) (emphasis added); (dkt. 22, Defendants’ reply brief, pp. 6-7). The question for the Court is whether acceleration of the note and mortgage advanced the maturity date so that N.J.S.A. § 2A:50-56.1(a) cuts off the Defendants’ cause of action, and whether this statute, effective August 6, 2009, applies to the instant case.

The Fair Foreclosure Act and N.J.S.A. § 2A:50-56.1

N.J.S.A. § 2A:50-53 through-68, “Foreclosure of Residential Mortgages” (“Fair Foreclosure Act,” or “FFA”), was approved on September 5, 1995, effective on December 4, 1995 and applicable “`to foreclosure actions commenced on or after that date.'” N.J.S.A. § 2A:50-53, citing L. 1995, c. 244, § 19 (a note to the Act). The Legislature made part of the body of the statute the finding and declaration that it is “public policy of this State that homeowners should be given every opportunity to pay their home mortgages” and that mortgagees benefit when defaulted loans return to performing status. N.J.S.A. § 2A:50-54. The FFA defines “residential mortgage” as one secured by a property with not more than 4 dwelling units, “one of which shall be, or is planned to be, occupied by the Debtor or a member of the Debtor’s immediate family as the Debtor’s or member’s residence at the time the loan is originated” and therefore applies to the 3-dwelling-unit residence occupied by the Debtor when the loan originated. N.J.S.A. § 2A:50-55 (“Definitions”); (dkt 7-2, Debtor, ¶ 7).

The FFA codifies the mortgagee’s obligation to give borrowers precise notice of the mortgagee’s intention to foreclose and the borrowers’ opportunities to cure defaults. U.S. Bank Nat’l Ass’n. v. Guillaume, 209 N.J. 449, 469-70 (2012). The statute acknowledges acceleration of the maturity date as a consequence of default and de-acceleration as a consequence of curing default:

2A:50-56. Written notice of intent to foreclose; contents

a. Upon failure to perform any obligation of a residential mortgage by the residential mortgage debtor and before any residential mortgage lender may accelerate the maturity of any residential mortgage obligation and commence any foreclosure or other legal action to take possession of the residential property which is the subject of the mortgage, the residential mortgage lender shall give the residential mortgage debtor notice of such intention at least 30 days in advance of such action as provided in this section.

N.J.S.A. § 2A:50-56(a) (West 2000 and Supp. 2014) (emphasis added). N.J.S.A. § 2A:50-57 provides:

2A:50-57. Right to cure default; procedure

a. Notwithstanding the provisions of any other law to the contrary . . . the debtor. . . shall have the right at any time, up to the entry of final judgment or the entry by the office or the court of an order of redemption pursuant to [N.J.S.A. § 2A:50-56], to cure the default, de-accelerate and reinstate the residential mortgage by tendering the amount or performance specified in subsection b. of this section. . . .

d. Cure of a default reinstates the debtor to the same position as if the default had not occurred. It nullifies, as of the date of cure, any acceleration of any obligation under the mortgage, note or bond arising from the default.

N.J.S.A. § 2A:50-57 (West 2000 and Supp. 2014) (emphases added). “Acceleration” and “maturity” are not otherwise defined in the statute. Certain courts view as axiomatic the proposition that acceleration advances the maturity date of the debt. Bank v. Kim, 361 N.J. Super. 331, 344 (App Div. 2003) (“In pursuit of this objective [of encouraging homeowners to cure mortgage defaults], N.J.S.A. 2A:50-56 sets forth in considerable detail the steps required of a lender seeking to accelerate maturity and foreclose a residential mortgage upon the debtor’s failure to perform an obligation under the mortgage”); In re LHD Realty Corp., 726 F.2d 327, 330 (7th Cir. 1984) (determining that a mortgagee loses its right to a prepayment premium when it decides to accelerate a debt “because acceleration, by definition, advances the maturity date of the debt so that payment thereafter is not prepayment but instead is payment made after maturity”); cited in Westmark Comm. Mtge. Fund IV, 362 N.J. Super. 336, 345, 346-47 (App. Div. 2003) (which ultimately decided that prepayment premium was due and payable notwithstanding acceleration because the parties had bargained for it).

Shortly after the Fair Foreclosure Act was enacted, the Appellate Division of the Superior Court of New Jersey in Security Nat’l Partners Ltd. P’shp v. Mahler, 336 N.J. Super. 101, 105 (App. Div. 2000), cert. den., 169 N.J. 607 (2001) addressed the absence of a statute of limitations for foreclosure actions in New Jersey (“this State has never had a statute of limitations expressly referring to mortgage foreclosures”). In Mahler, the parties entered the note and mortgage on June 22, 1988 with final payment due June 22, 2003; the debtors defaulted on March 22, 1989; and the lender filed a foreclosure complaint on August 8, 1990. Id. at 103. After the complaint was filed, the debt was transferred multiple times, and the second-to-last assignee unilaterally dismissed the complaint. On June 26, 1996, the last assignee, the plaintiff-appellant, refiled the complaint which the chancery court dismissed as untimely. Id. at 103. The Appellate Division in Mahler reiterated the distinction between action on the note and action on the mortgage and declared that the lender’s time to sue on the note, governed by the 6-year statute of limitations in N.J.S.A. § 12A:3-118(a), had run. Mahler, 336 N.J. Super. at 105. The court rejected the borrowers’ argument that the same 6-year statute governed suits on the mortgage. Id. at 105.

The Appellate Division in Mahler observed that New Jersey common law had developed a 20-year limitation period for a suit on a mortgage

by borrowing and applying the twenty-year limitation period in certain adverse possession statutes. The concept was that a mortgagor in possession or control of the mortgaged property, who failed to make required payments under the mortgage, was in “adverse possession” of the property since—by his conduct—he was denying the mortgagee’s claim of ownership and right to possession.

Mahler, 336 N.J. Super. at 106.

The Appellate Division in Mahler reiterated that, apart from non-payment throughout the limitations period, the debtor is not required to take any other action to establish adverse possession. Mahler, 336 N.J. Super. at 107. The court in Mahler concluded that a foreclosure action is time-barred if not commenced within 20 years after the debtor’s default; declared that the time had not run in its case; and echoed the request in a well-known treatise that New Jersey adopt a statute of limitations for mortgage foreclosure actions. Mahler, 336 N.J. Super. at 106-107, 108; 30 New Jersey Practice, Law of Mortgages § 298, at 196 (Roger A. Cunningham & Saul Tischler) (1975).

In response to Mahler, the New Jersey Legislature promulgated as part of the Fair Foreclosure Act N.J.S.A. § 2A:50-56.1 (“Statute of limitations relative to foreclosure proceedings”), effective August 6, 2009:

2A:50-56.1 Statute of limitations relative to foreclosure proceedings.

An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation, except that if the date fixed for the making of the last payment or the maturity date has been extended by a written instrument, the action to foreclose shall not be commenced after six years from the extended date under the terms of the written instrument;

b. Thirty-six years from the date of recording of the mortgage, or, if the mortgage is not recorded, 36 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 30 years; or

c. Twenty years from the date on which the debtor defaulted, which default has not been cured, as to any of the obligations or covenants contained in the mortgage or in the note, bond, or other obligation secured by the mortgage, except that if the date to perform any of the obligations or covenants has been extended by a written instrument or payment on account has been made, the action to foreclose shall not be commenced after 20 years from the date on which the default or payment on account thereof occurred under the terms of the written instrument.

N.J.S.A. § 2A:50-56.1 (West 2000 and Supp. 2013) (emphasis added).

As explained in the Assembly Financial Institutions and Insurance Committee Statement, Senate, No. 250-L. 2009, c. 105 (“the Committee Statement”) accompanying the bill which became N.J.S.A. § 2A:50-56.1, the statute “in part, codifies the holding in Security National Partners Limited Partnership v. Mahler, 336 N.J. Super. 101 (App. Div. 2000).” The Committee Statement in an October 6, 2008 report says:

The Assembly Financial Institutions and Insurance Committee reports favorably Senate Bill 250 (1R).

This bill supplements the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.) by applying a statute of limitations to residential mortgage foreclosure actions. The bill is intended to address some of the problems caused by the presence on the record of residential mortgages which have been paid or which are otherwise unenforceable. These mortgages constitute clouds on title which may render real property titles unmarketable and delay real estate transactions. The bill provides that a foreclosure action must be commenced by the earliest of: (1) six years from the date of maturity on the mortgage or other obligation secured by the mortgage, matching the six-year statute of limitations on actions based on contract law; (2) 36 years from the date of recording or execution of the mortgage, provided the mortgage itself does not provide for a period of repayment in excess of 30 years, again relying upon the six-year statute of limitations for contract law; or (3) 20 years from the date of default by the debtor on the mortgage or other obligation secured by the mortgage, matching the 20-year statute of limitations on adverse possession actions. Thus, the bill allows a determination that certain mortgages are not clouds on title because a party can no longer bring an action to foreclose them beyond the bill’s expressly stated statute of limitations, as borrowed from actions in contract law or adverse possession, as applicable.

The bill, in part, codifies the holding in Security National Partners Limited Partnership v. Mahler, 336 N.J. Super. 101 (App. Div. 2000) which applied a 20-year statute of limitations to a residential mortgage foreclosure action based on a default due to nonpayment. In its decision, the court noted that since there is currently no statute of limitations expressly applicable to mortgage foreclosures in these situations, courts have resorted to drawing analogies to adverse possession statutes which bar rights of entry onto land after 20 years. This bill would resolve the uncertainties surrounding this area of law by providing a specific statute of limitations of 20 years from the date of the default by the debtor.

(cited at N.J.S.A. § 2A:50-56.1 (West 2000 and Supp. 2013)) (emphases added).

While federal courts allow recourse to legislative history to interpret a statute only if the text is “ambiguous or otherwise unclear,” the New Jersey Supreme Court has encouraged the use of “extrinsic aids” to interpretation. Compare U.S. v. Cheeseman, 600 F.3d 270, 285-86 (3d Cir.), cert den., ___ U.S. ___, 131 S. Ct. 636 (2010) (concurring) with Nat’l Waste Recycling, Inc. v. Middlesex Cty. Improvement Auth., 150 N.J. 209, 224 (1997); but see U.S. Bank. Nat’l Ass’n. v. Guillaume, 209 N.J. at 471-72 (the court must construe a statute from its plain language; stop the “`interpretive process'” if there is no ambiguity, and “`not resort to extrinsic interpretive aids when the statute is clear and unambiguous'”) (internal citations omitted). The legislative history accompanying N.J.S.A. § 2A:50-56.1(a) provides a limited measure of guidance as to whether the maturity referenced in the statute includes an accelerated maturity date. The Committee Statement notes that the six-year limitations period “match[es] the six-year statute of limitations on actions based on contract law.” If the foreclosure statute is meant to parallel N.J.S.A. § 2A:14-1, that statute is neutral on acceleration and maturity:

Every action at law . . . for recovery upon a contractual claim or liability, express or implied, not under seal, or upon an account other than one which concerns the trade or merchandise between merchant and merchant, their factors, agents and servants, shall be commenced within 6 years next after the cause of any such action shall have accrued [except for action on breach of sale governed by N.J.S.A. § 12A:2-275].

N.J.S.A. § 2A:14-1 (“Limitation of Actions/Adverse Possession/Various Actions/Six Years”). If the foreclosure statute is meant to parallel N.J.S.A. § 12A:3-118 (“Negotiable Instruments/ General Provisions and Definitions/Statute of Limitations”), there is a stronger argument that an accelerated maturity date applies and starts the running of the statute of limitations:

Except as provided in subsection e. of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.

N.J.S.A. § 12A:3-118(a) (emphasis added) (As stated earlier Uniform Commercial Code cmt. 2 to this section iterates, “If the note is payable at a definite time, a six-year limitations period starts at the due date of the note, subject to prior acceleration.”)

The Application of N.J.S.A. § 2A:50-56.1 to this Case

N.J.S.A. § 2A:50-56.1 went into effect on August 6, 2009 (West 2000 and Supp. 2014). The statute does not state whether the effective date is measured against the date of the mortgage, the date of the default, or the date on which the foreclosure action is filed. The parent Fair Foreclosure Act became effective on the 90th day after its September 5, 1995 enactment (effective December 4, 1995) and “appl[ied] to foreclosure actions commenced on or after the effective date.” N.J.S.A. § 2A:50-53, citing L. 1995, c. 244, § 19 (a note to the Act) (emphasis added). If the amendment at N.J.S.A. § 2A:50-56.1 is presumed to measure effectiveness in the same manner, then the statute does apply to the instant case in which the Defendants have not yet filed a viable foreclosure complaint.

Defendants contended at the September 30, 2014 hearing that a foreclosure complaint filed now should “relate back” to the complaint filed on December 14, 2007 and dismissed without prejudice on July 5, 2013 (dkt. 7, Exhibits E and K). In the unsolicited letter of October 9, 2014, Debtor argued that a foreclosure action filed now would not “relate back” to the original proceeding because the Defendants discharged the lis pendens and failed to appeal the July 5, 2013 dismissal, with the 45-day appeal period having expired (dkt. 25, October 9, 2014 letter to the court; N.J.R. 4:37-1, cmt. 1.2; N.J.R. 4:37-2(a), cmt. 4; O’Loughlin v. Nat’l Comm. Bank, 338 N.J. Super. 592, 603 (App. Div.), cert. den., 169 N.J. 606 (2001) (“[a] dismissal without prejudice adjudicates nothing and does not constitute a bar to re-institution of the action, subject to the constraint imposed by the statute of limitations”) (affirming the dismissal of a complaint in part because plaintiff failed to refile by the deadline stipulated in a consent order, citing the comment to N.J.R. 4:37-1). In their reply letter, the Defendants did not respond to the Debtor’s challenge to their “relation back” argument (dkt. 26, October 26, 2014 letter to the Court).

To the extent that N.J.S.A. § 2A:50-56.1 applies to this case only if given retroactive application, this statute meets the criteria for retroactive application reiterated in James v. N.J. Mfrs. Ins. Co., 216 N.J. 552, 558, 563 (2014). In New Jersey, statutes are given prospective application (1) unless “`the Legislature intended to give the statute retroactive application'” and (2) provided retroactive application does not “`result in either an unconstitutional interference with vested rights or a manifest injustice.'” James, 216 N.J. at 563, quoting In re D.C., 146 N.J. 31, 50 (1996) and Phillips v. Curiale, 128 N.J. 608, 617 (1992) (other internal citations omitted by James). The court in James, collecting other cases, expanded the first prong to three circumstances:

(1) that the Legislature expressed or implied its intent for retroactivity (necessity for fulfilling a legislative goal; unworkability without retroactive application);

(2) that the amendment is merely curative or clarifying rather than representing a change in existing law; or

(3) that the expectations of the parties warrant retroactivity.

James, 216 N.J. at 563. If any of these circumstances exists, the Court still examines whether retroactive application would result in “manifest injustice,” meaning that “`the parties relied on prior law to their detriment, such that retroactive application would cause a “deleterious and irrevocable” result.'” James, 216 N.J. at 565, quoting Gibbons v. Gibbons, 86 N.J. 515, 523-24 (1981). Myron Weinstein in New Jersey Practice indicated that giving the broadest application to N.J.S.A. § 2A:50-56.1 fulfills legislative purpose:

It is not clear whether the statute is retroactive or whether it only applies to mortgages or defaults after the effective date. If so, its benefits would be greatly reduced, as one of its stated purposes is to remove mortgage constituting “clouds on title which may render real property titles unmarketable and delay real estate transactions.

Myron, Weinstein. Law of Mortgages. 29 New Jersey Practice § 13.16 (“Statute of Limitations”) (emphasis added). By any prospective or retroactive measure of effectiveness, N.J.S.A. § 2A:50-56.1 applies to the instant case.

The Defendants accelerated the maturity date of the loan to the June 1, 2007 default date, as acknowledged in the Assignment (dkt. 7, Exhibit L).^[10] Moreover, neither the Debtor nor the Defendants have taken any measures under the note or mortgage, or under the Fair Foreclosure Act, to de-accelerate the debt, and the Defendants have further failed to file a foreclosure complaint within 6 years of the accelerated maturity date as required by N.J.S.A. § 2A:50-56.1(a). Accordingly, the Defendants are now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure.

The Disallowance of the Defendants’ Proof of Claim and Avoidance of the Underlying Mortgage.

On July 17, 2014, the Defendants timely filed secured proof of claim 7-1 under 11 U.S.C. § 501(a) for $920,469.86 based on their note and mortgage (the claims bar date was August 18, 2014). A claim in bankruptcy is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). Debt is “liability on a claim.” 11 U.S.C. § 101(12). Moreover, pursuant to 11 U.S.C. § 102(2), a claim against the Debtor’s property also constitutes a claim against the Debtor. Thus, while Defendants have only in rem claims, having failed to sue on the note within the six years permitted under the statute, such claims remain claims against the Debtor in this bankruptcy proceeding.

11 U.S.C. § 502(a) controls the claims allowance process: “A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest . . . objects.” 11 U.S.C. § 502(a). Debtor’s adversary complaint includes a demand which constitutes an objection to the Defendants’ proof of claim: “Determine that Defendants have no allowed secured claim” (dkt. 1, “Request for Relief, p. 4, ¶ b) and triggers the Court’s review. 11 U.S.C. § 502(b) governs unenforceability of claims and states in relevant part:

(b) Except as provided in subsections (e)(2), (f), (g), (h) and (i) of this section [not relevant here] if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that—

(1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.

11 U.S.C. § 502(b)(1) (emphasis added). 11 U.S.C. § 506 controls the allowance of secured claims and provides that, if the claim underlying the lien is disallowed, then the lien is void:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

. . .

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless [conditions not relevant here exist].

11 U.S.C. § 506(a)(1) and (d)(emphasis added).

As explained above, by application of N.J.S.A. § 2A:50-56.1(a) and (c), the Defendants are time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Defendants’ proof of claim 7 must be disallowed under 11 U.S.C. § 502(b)(1) as unenforceable against the Debtor or against Debtor’s property under applicable state law. Having determined that Defendants do not have an allowed secured claim, the underlying lien is deemed void pursuant to 11 U.S.C. §§ 506(a)(1) and (d).^[11]

V. CONCLUSION.

In light of Defendants’ acceleration of the maturity date of the underlying debt as of June 1, 2007, and because neither Debtor nor Defendants took any action under either the mortgage instruments, or the Fair Foreclosure Act, to de-accelerate the maturity date, Defendants’ right to file a foreclosure complaint expired 6 years after the June 1, 2007 acceleration date under N.J.S.A. § 2A:50-56.1(a). Given that Defendants’ putative secured claim is unenforceable under 11 U.S.C. § 502(b)(1), by applicable New Jersey statute, their mortgage lien is void under 11 U.S.C. § 506(d), and the Debtor retains the property, free of any claim of the Defendants. Debtor is to submit a form of judgment. The Court will proceed to gargle in an effort to remove the lingering bad taste.

[1] Docket references are to adv. pro. no. 14-1319 unless stated otherwise. Debtor provided a signed Rule 56.1 Statement of Undisputed Material Facts (“Debtor SUMF”) at dkt. 8 to replace the unsigned copy at dkt. 7, but this opinion refers to the Debtor’s SUMF at dkt. 7 for consistency with the other elements of Debtor’s motion.

[2] At dkt. 22, p. 1, n.1, the Defendants note the procedural impropriety of the Debtor having filed a cross motion to a cross motion. The Court considers the Debtor’s cross motion at dkt. 19 as opposition to the Defendants’ cross motion, and the Defendants’ reply memorandum at dkt. 22 as a response thereto. For consistency with the docket entries, however, this opinion cites to Debtor’s dkt. 19 as to the `cross motion.’

[3] The facts recited herein are undisputed by any of the parties.

[4] Debtor believes that a friend made the July 1, 2007 payment but has not pressed or proven that point (dkt. 7-2, Debtor, ¶ 8). The unassailable fact that Debtor went into default within 90 days of the loan closing makes this decision even less palatable. 4

[5] The Defendants also provided a copy of this recorded Assignment at dkt. 11, Exhibit C. Debtor questions the authenticity and effectiveness of the Assignment generally, because a different version of it, unrecorded and bearing different officer signatures, was attached to the foreclosure complaint, infra (dkt. 19, Exhibit 3, “Unrecorded Assignment”). Both the recorded and the Unrecorded Assignment contain the clause accelerating the debt to June 1, 2007.

Matthew R. Stahlhut, officer at Bank of America (“BoA”), asserts that BoA serviced the loan from its inception through transfer of servicing rights on November 16, 2013 to defendant-servicer SLS (dkt. 11-3, Stahlhut cert., ¶5). Defendants provide an Amended Assignment of Mortgage signed on December 31, 2013, recorded on January 8, 2014, purportedly to correct the name of BoNY (dkt. 11, Exhibit D, “Amended Assignment”). The Amended Assignment is different in format from the original Assignment and does not contain the acceleration clause.

[6] In response to Debtor’s SUMF, ¶ 16, that the Defendants “never obtained a judgment against the Homeowner in the 2007 Foreclosure Complaint,” Defendants assert without documentary evidence or certified response that they obtained “summary judgment,” but that judgment (not provided) appears simply to have stricken the Debtor’s answer (dkt. 11-1, Defendant’s response to Debtor’s SUMF, ¶ 16).

[7] Cynthia Wallace, an officer of SLS, certifies that CWABS, Inc., Asset-Backed Certificates, Series 2007-5 (“the Trust”) “maintain[s] . . . through its custodian” the note, mortgage, assignment, and corrective assignment signed December 31, 2013 and recorded on January 8, 2014 (dkt. 11-2, Wallace cert. ¶¶ 1, 3 and dkt. 11, Exhibits A, B, C, D).

[8] N.J.S.A. § 12A:3-118(a) provides: “Except as provided in subsection e. of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.” N.J.S.A. § 12A:3-118(a) (emphasis added). Uniform Commercial Code cmt. 2 to this section iterates, “If the note is payable at a definite time, a six-year limitations period starts at the due date of the note, subject to prior acceleration.”

[9] Defendants state that the 6-year statute of limitations would obviate any deficiency claim, but Debtor’s eventual discharge in Chapter 13 or Chapter 7 would also relieve him of personal liability for the debt. N.J.S.A. § 2A:50-52 (“No deficiency judgment”) also prohibits deficiency judgments on foreclosures under this statute.

[10] Whether the default were measured from July 1, 2007 or from the December 14, 2007 filing date of the foreclosure complaint, the statute of limitations under N.J.S.A. § 2A:50-56.1 has still run.

[11] In as much as the Court finds that the Defendants are time-barred from enforcing the note or the mortgage, it is not necessary to address Debtor’s arguments that Defendants lack standing to enforce the note and mortgage based on alleged defects in the Assignment or the alleged impact of a Settlement Agreement.

NJ-

In what may be a first in New Jersey, a Morris County man who defaulted on his $520,000 mortgage in 2007 has instead won the right to retain ownership of his house, according to court records.

Earlier this month, Gordon A. Washington of Madison won a challenge against creditors Specialized Loan Servicing LLC and Bank of New York Mellon to collect the debt, saying they failed to file a viable foreclosure complaint within a six-year statute of limitations.

In his written opinion, Judge Michael B. Kaplan repeatedly expressed his reluctance to nullify the mortgage agreement — stating he did so with a “figurative hand holding the nose” — but, nonetheless, he ruled in favor of Washington by voiding the mortgage lien.

[NJ.com]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Someone made a telephone call to Eric Holder. This is beyond repulsive! Criminal Suit more like it.

NYT-

Federal prosecutors are wrestling with whether to file a civil fraud lawsuit against Angelo R. Mozilo, the former chief executive of Countrywide Financial, which was at the center of the subprime mortgage boom and bust, people briefed on the matter say.

This summer, the United States attorney’s office in Los Angeles was said to be close to filing a lawsuit against Mr. Mozilo over his role in Countrywide’s sale of millions of mortgages to home buyers with questionable credit histories. Prosecutors there were planning to move forward with a civil fraud lawsuit nearly three years after it had abandoned a criminal investigation of Countrywide and Mr. Mozilo, the firm’s co-founder.

But Stephanie Yonekura, the acting United States attorney for the Central District of California, which includes Los Angeles, has had lingering questions about the litigation because of arguments raised by lawyers for Mr. Mozilo and other potential defendants, said the people briefed on the matter, who were not authorized to speak publicly about a current investigation.

[NEW YORK TIMES]

Decided on November 14, 2014

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT

NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED

BOCA STEL 2, LLC,
Appellant,

v. Case No. 5D13-2659

JPMORGAN CHASE BANK NATIONAL
ASSOCIATION, ET AL.,
Appellees.
________________________________/

Opinion filed November 14, 2014.

Non-Final Appeal from the Circuit Court
for Orange County,

Ted P. Coleman, Judge.

Mark P. Stopa and R. Riley, of Stopa Law
Firm, Tampa, for Appellant.
William L. Grimsley, of McGlinchey
Stafford, Jacksonville, for Appellee,
JPMorgan Chase Bank, N.A.

WALLIS, J.

Boca Stel 2, LLC (“Appellant”), appeals the denial of a motion to quash service of
process in which Appellant argued JPMorgan Chase Bank National Association’s
(“Appellee”) return of service and subsequent service by publication were defective.
Appellant argues that the trial court’s denial of the motion to quash was improper
without first holding an evidentiary hearing.1 We agree and, therefore, reverse and
remand for an evidentiary hearing.

Appellee published constructive service in a weekly newspaper on November 9
and 16, 2012, following failed attempts at personal and substituted service of process.
On March 25, 2013, Appellant filed a verified motion to quash constructive service of
process. Appellant argued that notice of action was defective because Appellee’s return
of service failed to allege that Appellant evaded service, did not reside in Florida, or that
Appellant’s whereabouts were unknown. Appellant also argued in the motion to quash
that Appellee’s constructive service was defective because of an insufficient search.
The trial judge denied the motion to quash, without an evidentiary hearing, for failure to
provide evidence besides the verified motion to quash. This appeal followed.

A trial court’s ruling on a motion to quash service of process is subject to a de
novo standard of review. Hernandez v. State Farm Mut. Auto. Ins. Co., 32 So. 3d 695,
698 (Fla. 4th DCA 2010) (citing Mecca Multimedia, Inc. v. Kurzbard, 954 So. 2d 1179,
1181 (Fla. 3d DCA 2007)). Appellant “must be able to demonstrate the invalidity of the
service of process by clear and convincing evidence before the motion to quash could
be granted.” Travelers Ins. Co. v. Davis, 371 So. 2d 702, 703 (Fla. 3d DCA 1979)
(holding that the lower court erred in not granting movant an evidentiary hearing on a
motion to quash service of process). A motion to quash service of process entitles the
movant to a full evidentiary hearing. Linville v. Home Sav. of Am., FSB, 629 So. 2d 295,

1 Appellant further alleged that service was ineffective because the published
notice of action failed to include either a date of first publication or a date within which
Appellant should file defenses pursuant to section 49.09, Florida Statutes (2012). The
record shows that the notice of action, as published in the Apopka Chief newspaper,
contained the two specific dates of publication required under section 49.09.
295-96 (Fla. 4th DCA 1993) (ruling that “neither the submission of affidavits nor
argument of counsel is sufficient to constitute an evidentiary hearing” (citing Sperdute v.
Household Realty Corp., 585 So. 2d 1168, 1169 (Fla. 4th DCA 1991))).

In this case, the trial court’s order found that the only evidence presented was
Appellant’s verified motion to quash. Here, as in Linville, “[t]he unrebutted allegations
contained in appellant’s motion to quash service of process . . . , if proven by clear and
convincing evidence, would establish appellee’s failure to effect valid service of process
. . . .” Id. at 296 (citing Slomowitz v. Walker, 429 So. 2d 797 (Fla. 4th DCA 1983)).

Accordingly, we reverse and remand for an evidentiary hearing.

REVERSED and REMANDED with instructions.

LAWSON and LAMBERT, JJ., concur.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
July Term 2014

MOHAMMAD SALAUDDIN,
Appellant,

v.

BANK OF AMERICA, N.A.,
Appellee.

No. 4D13-2747
[November 12, 2014]

Appeal from the Circuit Court for the Nineteenth Judicial Circuit, St. Lucie County; James W. Midelis, Senior Judge; L.T. Case No. 2008CA006539.

Andrea H. Duenas of Law Office of A. Duenas, P.A., Lantana, for appellant.
Travis Halstead of McCalla Raymer, LLC, Orlando, for appellee.

PER CURIAM.

Appellant, Mohammad Salauddin (“the homeowner”), appeals the trial court’s order granting final judgment in favor of Bank of America (“the bank”), specifically as to the amount of interest the trial court ordered. The homeowner argues that, since the bank did not produce evidence of a change in the interest rate, the trial court erred in adopting the interest amount set forth in the bank’s proposed final judgment. We agree and reverse.

The bank filed a one count mortgage foreclosure complaint based on a mortgage and note executed by the homeowner. The note was an adjustable rate note, and based on its terms, the yearly interest rate was set at eight percent. However, beginning on May 1, 2012, and every six months thereafter, the interest rate would change based on an index. The note stated that although the interest rate could change, it could never be less than five percent or greater than thirteen percent.

In June 2013, a trial was held on the mortgage foreclosure count. At trial, the homeowner’s payment history was entered into evidence, as well as the note, and the trial court also took judicial notice of the original note which had previously been filed with the court. The bank’s representative also testified that the date of the last payment made by the homeowner was in December 2007, and therefore, the default date was in January 2008.

At the end of the bank’s case, the homeowner moved for an involuntary dismissal based on the fact that the bank failed to prove the interest rate. The motion was denied. After the homeowner rested his case without presenting any evidence, the homeowner requested that any interest contained within the proposed final judgment, prepared by the bank, be removed, because the bank failed to prove the interest rate. The following exchange occured:

HOMEOWNER’S COUNSEL: Judge, it’s just our position though that the actual evidence at the trial did not support the interest rate.

THE COURT: Well, if the – – okay. Now, if the business record is admitted in evidence, all of the figures in there are admissible as well.

The trial court entered a final judgment of foreclosure in favor of the bank, ordering an interest award of $106,499.87. The homeowners timely filed a notice of appeal.

The standard of review for a motion for involuntary dismissal made at trial is de novo. See Martin Cnty. v. Polivka Paving, Inc., 44 So. 3d 126, 131 (Fla. 4th DCA 2010) (explaining that the standard of review for a motion for directed verdict is de novo); Charlotte Asphalt, Inc. v. Cape Cave Corp., 406 So. 2d 1234, 1236 (Fla. 2d DCA 1981) (explaining that motions for a directed verdict and motions for an involuntary dismissal at a nonjury trial are governed by the same principles).

Since the note and payment history were entered into evidence at trial, there was a basis for the court to determine the starting interest rate and the remaining amount owed by the homeowner. What was not presented at trial was whether there were any changes in the interest rate based on the adjustable rate clause in the note, and what those changes were.

Since the amount of interest from the time the homeowner defaulted on the loan until May 1, 2012, was based on the starting fixed interest rate (eight percent), the amount of interest owed for those months is supported by the note and payment history. However, the amount of the actual interest rate after May 2012, is unknown, and there was no testimony or evidence provided at trial as to the actual interest rate for those months. Therefore, since the note stated that the interest rate would not drop below five percent, this percentage was the only proof the bank supplied at trial, and the trial court should have used this interest rate to calculate the amount of interest after May 1, 2012. We do not agree with the bank that the difference between the amount of interest ordered and the amount based on the five percent interest rate is de minimis.

We therefore reverse the trial court’s order as to the amount of interest, and remand for the trial court to calculate the interest amount (five percent after May 1, 2012) consistent with this opinion.

Reversed and remanded.

WARNER, MAY and CONNER, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing