Monday, September 19, 2011

NJ Supreme Court: Mortgage Servicer's Conduct Related To Post-Foreclosure Judgment Forbearance Agreement Subject To State Consumer Fraud Act

Lexology reports:

  • In its August 29, 2011 opinion in Gonzalez v. Wilshire Credit Corp., et al., the New Jersey Supreme Court held that a servicer’s post-foreclosure forbearance agreement was subject to the New Jersey Consumer Fraud Act (CFA), which covers, among other things, unconscionable lending practices.(1)


  • The Court held that a servicer’s action toward collection or enforcement of a loan constitutes activity falling within the coverage of the CFA. Finding that the forbearance agreements were “nothing more than a recasting of the original loan” and separately constituted the extension of credit, the Court held that Wilshire’s conduct in connection with the subsequent performance of that loan fell within the CFA.

  • The Court rejected Wilshire’s and amicus New Jersey Bankers Association’s contention that such a holding would discourage work-outs by lenders and lead to more sheriff’s sales, stating its view that lenders “want a return on their capital, not to buy and sell homes.”

  • The Court also emphatically noted that “lending institutions and their servicing agents are not immune from the CFA; they cannot prey on the unsophisticated, those with no bargaining power, those bowed down by a foreclosure judgment and desperate to keep their homes under seemingly any circumstances.”

For more, see New Jersey High Court applies Consumer Fraud Act to forbearance agreements (requires paid subscription; if no subscripion, GO HERE, or TRY HERE - then click the appropriate link for the story).

See also, Day Pitney LLP: NJ Supreme Court Rules Consumer Fraud Act Applies To Post-foreclosure Judgment Forbearance Agreements.

(1) The New Jersey Supreme Court affirmed the ruling of the state intermediate appeals court in Gonzalez v. Wilshire Credit Corp., 411 N.J. Super. 582, 988 A. 2d 567 (App. Div. 2010).

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