NJ judge allows foreclosure to proceed even with lost mortgage note

January 26, 2011 05:34PM

A Bergen County judge ruled that a foreclosure action can go forward even though the original lender lost the mortgage note and never passed it along when it assigned the mortgage to the bank now trying to enforce the debt, the New Jersey Law Journal reported. The Jan. 11 ruling is perceived as good news for mortgage lenders, who are under increased judicial scrutiny and face a possible suspension of foreclosures in New Jersey over alleged “robo-signing” and other lax practices.

The defendant, Janet Alvarado, did not dispute that she took out a $292,000 mortgage loan from Washington Mutual Bank on a Bogota property. The mortgage was transferred to LaSalle Bank, which was acquired by Bank of America in 2007. When Alvarado defaulted in 2008, Bank of America went to court to foreclose. Alvarado challenged the action, saying that Bank of America had not shown it had possession of mortgage note. The bank admitted that it did not have the note on Aug. 20, telling the court that WaMu lost the note before it transferred the obligation and gave an affidavit of lost note, dated July 14, 2006.

When the motion was re-argued, Judge Mary Thurber granted summary judgment for Bank of America even though it did not possess the note. “The common law doctrine of assignment is sufficiently broad to permit assignment of the right to enforce a lost note,” she wrote in the decision. Even if it is not, “the equitable remedy of unjust enrichment would still compel the result reached here,” the decision said. [New Jersey Law Journal]