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Hsbc Bank, Usa, National Association, As Trustee For Phh 2007-2 v. Carlos Polanco; Mrs. Carlos Polanco

March 21, 2012


On appeal from the Superior Court of New Jersey, Chancery Division, Union County, Docket No. F-47554-08.

Per curiam.


Argued: December 7, 2011

Before Judges Axelrad and Sapp-Peterson.

In this mortgage foreclosure case, defendants Carlos Polanco and Anny C. Santana appeal from orders entered on October 29, 2010, denying their motion to vacate default judgment, and January 21, 2011, denying their motion to quash the writ of execution. Defendants defaulted on their mortgage payments, unsuccessfully attempted to short sell their property, were unsuccessful in reaching an agreement in mediation, obtained several adjournments of a sheriff's sale, and filed bankruptcy. On the eve of the last-adjourned sheriff's sale following a Bankruptcy Court order vacating the automatic stay, defendants finally sought to vacate default judgment or dismiss the complaint without prejudice. Defendants argued that plaintiff did not have standing and failed to comply with the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 to -68, and they demonstrated excusable neglect and a meritorious defense. The court denied defendants' motion. We affirm.

On February 7, 2007, defendants borrowed $531,480 from PHH Mortgage Corporation (PHH Mortgage) to purchase a home located in Elizabeth, secured by a note and purchase money mortgage.*fn1

The mortgage was recorded with the Union County Clerk on February 20, 2007. On August 1, 2008, they defaulted on the loan.

On November 24, 2008, the mortgage "TOGETHER with the Bond, Note, or other Obligation therein described or referred to, and the money due and to become due thereon, with the interest[]" was assigned to plaintiff HSBC Bank USA, National Association, as Trustee for PHH 2007-2. The assignment was recorded by the Union County Clerk on December 17, 2008.

On December 2, 2008, plaintiff filed a foreclosure complaint against defendants. Plaintiff recited the aforementioned history, stating, among other items, that it was the "owner and/or holder of the Note and Mortgage" and "Notice was sent in compliance with the fair foreclosure act more than 31 days prior to filing of the within complaint." Defendants were personally served the complaint at their residence on December 15, 2008. Defendants did not file an answer or respond to the complaint.

Default was entered by the court on January 20, 2009. Defendants attempted a short sale of their property, and by letter of January 27, 2009, were sent an approval package contingent on completion by February 27, 2009. For unknown reasons, the short sale was not completed; Polanco certified that after they found a buyer, PHH Mortgage refused to proceed with the closing. On February 11, 2009, plaintiff forwarded to defendants the appropriate notice of entry of default pursuant to the FFA, N.J.S.A. 2A:50-56(c). On November 16, 2009, the court entered final judgment of foreclosure by default. A writ of execution was entered by the court on November 29, 2009 (incorrectly dated November 29, 2010). On December 2, 2009, plaintiff mailed defendants a copy of the final judgment.

By letter of December 30, 2009, defendants were informed the property was scheduled for sheriff's sale on January 20, 2010. Plaintiff's counsel certified that Polanco contacted him on January 15, 2010 about pursuing a loan modification, and counsel provided the phone number for plaintiff's loss mitigation department. Defendants then obtained two statutory adjournments of the sheriff's sale. N.J.S.A. 2A:17-36. Defendants subsequently filed an emergent application to stay the February 17, 2010 sheriff's sale. Over plaintiff's objection, the sale was adjourned to May 26, 2010 to allow defendants the opportunity to participate in a foreclosure mediation program.*fn2 The parties entered into mediation on May 18, 2010, but were unsuccessful in reaching an agreement. Plaintiff's counsel certified that defendants were represented by counsel at mediation, during which their financial information was reviewed for a loan modification, but was insufficient to support a modified payment or qualify under a federal modification program.

On the eve of the sheriff's sale, through present counsel, Santana filed for Chapter 7 bankruptcy. An order vacating the bankruptcy stay was entered on August 9, 2010.

On August 31, 2010, defendants filed a notice of motion "for an Order either dismissing the Complaint without prejudice or setting aside Default Judgment against [defendants], and allowing them to file a responsive pleading."*fn3 Defendants' position for setting aside the default judgment as stated in counsel's certification was as follows:

[P]laintiff has failed to prove that it is the real party in interest, and is subject to an affirmative defense of predatory lending, actual fraud, consumer fraud and violations of federal banking law. Moreover, HSBC admits that it took assignment of the mortgage after default; therefore, ...

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