New Jersey Supreme Court Finds Post-Foreclosure-Judgment Agreement Subject to CFA

Posted by NCBRC - September 7, 2011

In Gonzalez v. Wilshire Credit Corp., (A-99-09) (065564) (N.J. Sup.Ct., August 29, 2011), the New Jersey Supreme Court found that the state Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -195, applies to a post-foreclosure-judgment agreement.In that case, the debtor, an uneducated, disabled woman, who neither spoke nor read English, entered into two new agreements with the servicer of the mortgage secured by her residence. The second agreement specified arrearages greater than the amount found by the trial court, and “packed” the loan with force placed insurance. The court rejected the lender’s characterization of the agreement as a settlement of the foreclosure action and instead determined that the post-judgment agreement was an extension of credit in and of itself and, therefore, constituted a new loan which was subject to the CFA’s prohibition against unconscionable practices. The court noted that the realities of the mortgage industry, in which the original mortgagee rarely continues to hold and service the loan, did not insulate the servicer from the consequences of its fraudulent lending practices. In reaching its conclusion the court cited the article co-authored by NCBRC’s Tara Twomey relating to the role of a servicing agent in the mortgage industry. Adam J. Levitin & Tara Twomey, Mortgage Servicing, 28 Yale J. on Reg. 1, 15, 23, 25-28 (2011).



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