Capital One, N.A. v. Peck, 455 N.J. Super. 254 (App. Div. 2018). In the usual foreclosure case, the same entity owns both the note and the related mortgage. The facts of today’s opinion by Judge Koblitz, however, were that the Federal Home Loan Mortgage Corporation, a government sponsored enterprise that is colloquially known as “Freddie Mac,” owned the note, while plaintiff, the successor to the lender who made the loan and the servicer of the loan, continued to hold the mortgage. Defendant argued that plaintiff lacked the right to foreclose since it did not hold the note. Judge Koblitz agreed that “in these unusual circumstances where one entity owns the note and another the mortgage, both the note and a valid mortgage assignment are required to foreclose,” but applied de novo review and affirmed summary judgment in favor of plaintiff “in spite of certain irregularities.”
The reason for that was the particular facts of this case. Defendant had received repeated notices, going back years, that plaintiff was the servicer of the loan. Defendant also conceded that he had been making payments to plaintiff. There had been a prior foreclosure case that was dismissed for failure to make discovery. In connection with that case, plaintiff had brought the original note to court but thereafter returned it to Freddie Mac (the facts of how and where the mortgage and the note resided are somewhat involved, and not necessary to recount here).
The bottom line was that it was not unfair, in these circumstances, and given that Freddie Mac requires that “[f]oreclosures must normally be processed or litigated in the [s]ervicer’s name,” to allow plaintiff standing to proceed. As Judge Koblitz stated, quoting a prior Appellate Division case, “[i]n foreclosure matters, equity must be applied to plaintiffs as well as defendants.” Since standing is not jurisdictional in foreclosure cases, “[d]epending on the equities of the particular proceeding, a foreclosure judgment may not be reversed, even if some irregularities in the foreclosure process are demonstrated by the defendant.”
The equities here called for affirmance of the summary judgment in favor of plaintiff. But Judge Koblitz cautioned that the panel did “not intend by this decision to approve the way this foreclosure was prosecuted. The note should have been in [plaintiff’s] possession at the time it filed this foreclosure complaint.”