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Wells Fargo Bank, N.A v. Debra Smith and Matthew Depp

January 11, 2012


On appeal from Superior Court of New Jersey, Chancery Division, Union County, Docket No. F-28990-08.

Per curiam.


Argued October 17, 2011 -

Before Judges Grall and Skillman.

Wells Fargo Bank, N.A. obtained a default judgment in an action to foreclose on a $504,000 mortgage on the home of defendants Debra Smith and Matthew Depp, and purchased the property for $100 at a sheriff's sale. More than a year after the judgment and about two months after the deed was transferred, defendants moved to vacate the default judgment or extend their right of redemption. Finding no abuse of discretion, we affirm.

On February 23, 2007, defendants executed a $504,000 note and mortgage in favor of New Century Mortgage Corporation to purchase a residence in Westfield. The instruments stated that the Mortgage Electronic Registration System, Inc. (MERS) was the lender's nominee. The note and mortgage provided for an initial interest rate of 7.1% that was adjustable after two years, or as of March 1, 2009. The monthly payments due under the mortgage included principal, interest and property taxes. The note gave notice that failure to deliver the full amount of any monthly payment when due would be considered a default. In addition, an acceleration clause permitted the lender to demand payment of the balance due on the principal if the lender did not receive payment within thirty days of the mailing of a notice of default.

After assuming the obligation, defendants made three timely monthly payments but failed to make the fourth payment due in July 2007. By certified mail, Countrywide, the loan servicer for MERS, sent Smith and Depp notice of intention to foreclose on August 2, 2007 as required by N.J.S.A. 2A:50-56. The notice of intent states that if the borrowers do not cure the default within thirty days, the lender will accelerate the mortgage and initiate foreclosure proceedings. It further advises that the borrowers will have the right to cure default after the thirty-day period, but only until the entry of a foreclosure judgment. In addition, the notice advises of options available to prevent foreclosure and invites the borrowers to discuss them with Countrywide. The notice warns that Countrywide's efforts to assist the buyer will be in addition to, not in lieu of, its efforts to foreclose. The notice states: "In the meantime, Countrywide will pursue all of its rights and remedies under the loan documents and as permitted by law, unless it agrees otherwise in writing."

Defendants discussed options with Countrywide. On September 17, Countrywide and defendants agreed to an "informal repayment plan," but that agreement was cancelled for non-compliance on October 7, 2007. Later that month, defendants and Countrywide discussed loan modification and conversion, but by October 29 Countrywide advised defendants to arrange for payment because the plan had still not been approved. By late November, Countrywide advised defendants it would agree to a three-month repayment-to-modification plan. Subsequently, on February 23, 2008, Countrywide advised that if defendants paid $3168.69 by March 5, and on the first day of April, May and June 2008, Countrywide would consider modification. Countrywide's collection notes - a log of contacts the servicer's agents had with defendants that was submitted in opposition to defendants' motion to vacate - reflect confusion on its part about the adequacy of the initial and three-month payments. Those payments were in the amount of the initial monthly payment and include nothing in the way of repayment. For that reason, Countrywide returned one payment defendants tendered in March and subsequently cancelled the repayment-to-modification plan on April 10.

In any event, Countrywide sent defendants another notice of intent to foreclose by certified mail on April 9, 2008 in accordance with N.J.S.A. 2A:50-56. Depp signed for the mail on April 12. On April 14, Depp called and was advised that he would have to restart the process for a repayment-to-modification plan. Although the agent who spoke to Depp asked to have the former plan reopened, that was not done. Defendants made no further payments.

The lender pursued foreclosure in July 2008. On July 28, MERS assigned the mortgage and note to Wells Fargo, and Wells Fargo filed its foreclosure complaint on July 29. The complaint, alleging a default on August 1, 2007, was served on both defendants at their residence by delivery to Depp on August 6, 2008.

Defendants did not answer or otherwise participate in the foreclosure proceeding. According to defendants, their attorney advised them to file for bankruptcy. On October 6, 2008, default was entered. On October 23, Wells Fargo sent a fourteen-day notice of its intention to seek judgment on the default of foreclosure pursuant to N.J.S.A. 2A:50-58a(1).*fn1 That notice reiterates that default cannot be cured subsequent to entry of judgment and that a sheriff's sale will follow.

Wells Fargo moved for entry of judgment on November 24, 2008, and judgment was entered on May 13, 2009. Thereafter, Wells Fargo pursued its remedies along two routes, one ending in sheriff's sale and the other in a short sale. Thus, sheriff's sales scheduled for July 29, September 2, October 7, November 18, December 2, 2009, and January 6, 2010 were postponed while Countrywide made efforts to determine whether defendants would qualify for the Home Affordable Modification Program and considered short sales. The January sheriff's sale was rescheduled for March 10, 2010. On March 8, 2010, Depp inquired about another short sale and was told the offer was rejected and that the sheriff's sale would proceed on March 10, 2010. At that sale, Wells Fargo paid $100 for the property.

On April 1, 2010, Countrywide erroneously advised Depp that the redemption period was ongoing and that a short sale could be considered for twenty days. Defendants assert that Countrywide advised them they had six months to redeem. On April 5, however, Countrywide notified defendants that the offer had been rejected and changed the status of the mortgage from workout to closed. On April 27, a writ of possession was issued. Eviction was scheduled for July 21, 2010.

Four months after the sheriff's sale, by order to show cause dated July 12, 2010, defendants asked the court to vacate the default judgment, order mediation and extend the redemption period. They recited serious misfortunes that had led to their default but did not assert ability to redeem the property. They also challenged service and asserted defenses based on the terms of the note and mortgage and Wells Fargo's non-compliance with statutorily required notices. In opposition, Wells Fargo submitted proof of service of the pertinent documents, its pleadings, notices provided to defendants - including notices of the scheduling and ...

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