Sarah Portlock, The Star-Ledger

The state’s chief justice has given financial institutions that are foreclosing on homeowners more direction about how to file proper foreclosure paperwork.

The judicial order, signed Wednesday by New Jersey Supreme Court Chief Justice Stuart Rabner, comes six weeks after the high court ruled unanimously that a mortgage lender must list its own name and contact information, as well as that of the loan’s servicer, on the document that initiates the foreclosure process, known as the notice of intent to foreclose. Because many loans have been bundled and sold to investors, financial institutions have often only listed the servicer, a third party that collects monthly payments.

Any filing that only lists the servicer is now considered deficient, and the court order said the loan holder must submit additional information for uncontested foreclosure filings so a judge can make a decision. Nearly 95 percent of foreclosures in New Jersey are uncontested, the court has said. The lender must also send a copy of the updated paperwork to the homeowner.

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Rule In Favor Of Guillaumes

David Voreacos and David McLaughlin, Bloomberg

New Jersey’s Supreme Court ruled that the lender must be named in documents indicating a bank’s intention to foreclose on a mortgage before a residential property can be seized.

The case involves the foreclosure on an East Orange home owned by Maryse and Emilio Guillaume, who received a notice of intention to foreclose in May 2008. That notice included the name of the mortgage servicer, America’s Servicing Co., while omitting the name of the lender.Credit Suisse AG (CSGN) made the loan and assigned it to US Bank NA.

The state high court in Trenton ruled yesterday that the notice sent to the Guillaumes failed to comply with New Jersey’s Fair Foreclosure Act, which requires the name and address of the actual lender, as well as contact information for a loan servicer. Failure to do so creates “potential for significant prejudice” to homeowners, the court said.

“A misunderstanding about a lender’s identity could prompt a homeowner to make a critical error at a time when he or she is struggling to avert foreclosure,” the court said in the opinion.

The court ruled that while a trial court judge erred on that point in interpreting the Fair Foreclosure Act, the judge reached the correct conclusion in ordering a default judgment against the couple. The Guillaumes failed to demonstrate either “excusable neglect” or a “meritorious defense” to their foreclosure, according to the ruling.

‘Restores Order’

The decision “restores order” to New Jersey’s real estate market, said Mark Melodia, a lawyer for Minneapolis-based US Bancorp (USB), the parent of US Bank.

“This is a reaffirmation that our Chancery Court judges are best positioned to determine in a given case whether a technical defect in foreclosure paperwork requires the extraordinary step of dismissing the case — which, like this one, may have been pending for years before the defect was identified — or whether a less drastic remedy, such as sending a new notice, is the fairer way to proceed,” Melodia, of Reed Smith LLP, said in a statement.

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