NJ Appeals Court Boots Rubber Stamped Foreclosure Judgment; Says Bank "Failed To Meet Burden To Establish Bona Fides Of Alleged Assignment"

The following facts are taken from a recent ruling by the New Jersey intermediate appeals court (footnote 1 below is a footnote appearing in the court ruling):

1. Bank filed a foreclosure action against homeowners.
2. Homeowners filed a response, which was accepted as an answer and challenged, among other things, the bona fides of a later assignment of the mortgage.
3. In response, Bank filed a motion for summary judgment, but the judge denied relief pending further information regarding the assignment.
4. Thereafter, Bank filed a supplemental affidavit, executed by Janine Timmons, a manager of Washington Mutual Bank, attesting to the accuracy of facts "based on our computerized business records maintained in the ordinary course."
5. She claimed that the note and mortgage had been executed by homeowner on December 14, 2006, and the note and mortgage had been sold to Bank on January 16, 2007; moreover, an assignment of mortgage was executed on October 31, 2007, two weeks after the filing of the foreclosure complaint on October 18, 2007.(1)
6. After receiving the supplemental affidavit, the motion judge struck homeowners' answer and permitted the foreclosure matter to proceed by default.
7. Thereafter, a judgment was entered, and this appeal followed.

In reversing the ruling of the motion judge and booting the case back to the trial court for further proceedings, the New Jersey appellate court expressed these concerns (bold text is my emphasis):

• The affidavit makes reference to unidentified computerized business records supporting the verification of the facts attested to, but nothing more is set forth regarding the records other than that conclusory statement.
  
  Recently, the Supreme Court reiterated the relevant factors that must be established by a proponent of documents pursuant to N.J.R.E. 803(c)(6). In New Jersey Div. of Youth and Fam. Servs. v. M.C. III, 201 N.J. 328 (2010), Justice Wallace, speaking for the Court, observed:
  
  Under the business records exception to the hearsay rule, a party seeking to admit a hearsay statement pursuant to this rule must demonstrate that "the writing [was] made in the regular course of business," the writing was "prepared within a short time of the act, condition or event being described," and "the source of the information and the method and circumstances of the preparation of the writing must justify allowing it into evidence." State v. Matulewicz, 101 N.J. 27, 29 (1985) (citation omitted). [(Id. at 347).]
  
  The affidavit submitted by Timmons falls far short of meeting this threshold showing. Nothing in her affidavit indicates any of the elements identified in either the rule or M.C.
  
  Additional considerations are cause for concern. N.J.R.E. 1002 mandates that, "To prove the content of a writing or photograph, the original writing or photograph is required except as otherwise provided in these rules or by statute." Here, reference is made to computerized records, yet the record before the trial court or on appeal is devoid of any copies of such records to support the attestations of Timmons. See N.J.R.E. 1001(c) and Fed. Ev. Rule 1001(c) (requiring "original" computer data in the form of printouts or other readable output). Most important, no discovery was permitted to defendants. In such instance, plaintiff should not be allowed to "cut corners" to avoid meeting its burden.
  
  We are satisfied that plaintiff failed to meet its burden to establish the bona fides of the alleged assignment to permit plaintiff to proceed on its foreclosure complaint. We take particular note of the fact that plaintiff has not responded to the appeal so that we are unable to have the benefit of its position on the issues raised by defendants.

For the ruling, see Deutsche Bank National Trust Co. v. Wilson, Docket No. A-1384-09T1 (App. Div., January 19, 2011).

Thanks to Robert Napolitano for the heads-up on this ruling.

(1) The assignment was executed by an individual identified as Laura Hescott who signed the assignment as an assistant vice-president of Washington Mutual Bank. Ms. Hescott has been identified as an employee of Lender Processing Services, Inc. ("LPS"), a servicer of default mortgages. The bona fides of the practices of this service provider have been the subject of increased judicial scrutiny. See, e.g., In re Taylor, 407 B.R. 618, 623 (Bankr. E.D. Pa. 2009).

The Supreme Court has recognized that "[s]erious questions have surfaced about the accuracy of documents submitted to courts by lenders and service-providers in support of foreclosure requests." Administrative order 01-2010, 202 N.J.L.J. 1110 (December 27, 2010). The practice of signing and filing documents without any personal knowledge of the information, also known as "robo-signing," implicates the "overriding concern about the integrity of the judicial process." Id. at 1111. The order provides that "lenders and service providers who have filed more than 200 residential foreclosure actions in 2010 are required, within 45 days, to demonstrate the reliability and accuracy of documents and other submissions to the court in foreclosure proceedings." Ibid. On remand, to the extent the order is applicable to plaintiff, plaintiff shall comply with its terms.