A New Jersey Superior Court Appellate Division has ruled that Deutsche Bank has to start the default foreclosure process all over again on a property it tried to foreclose in 2008.
After winning a summary judgment and obtaining possession of a two-family house in Plainfield during a sheriff's sale in May 2010, the court ruled that the German bank did not have possession of the note for the loan when it filed the original foreclosure complaint three years ago.
“The assignment was not perfected until after the filing of the complaint, and plaintiff presented no evidence of having possessed the underlying note prior to filing the complaint,” the appellate division said in its ruling. “If plaintiff did not have the note when it filed the original complaint, it lacked standing to do so, and it could not obtain standing by filing an amended complaint. Given that Deutsche Bank has not demonstrated standing, we cannot decide at this time whether it was a holder in due course of the mortgage.”
Jacqueline Bethea was the victim of a buy-lease-back mortgage rescue scam that Deutsche was trying to execute on her house. Bethea obtained a mortgage for the property in January 2003 from Home American Credit Inc. for $150,000. Due to ongoing medical conditions and the death of her mother, Bethea failed to meet monthly mortgage payments and sought options to prevent foreclosure of the property.
Steve French, president and CEO Of Elite Financial Services, promised Bethea that he could save her home by buying out the property. French guaranteed Bethea that following his advice would help her keep the home, pay off her debt and improve her credit score.
In February 2006, a straw buyer (Constance Lawrence Mitchell) purchased the property from Bethea for $355,000 and obtained a $319,500 mortgage from Long Beach Mortgage Co. As part of the consulting agreement, Bethea agreed to give the straw buyer a $35,500 mortgage on the property, which came out to $1,680 a month. This mortgage contribution allowed the defendant to rent the house for two years with an opportunity to repurchase it within this time period for $319,500.
By May 2008, Bethea stopped making the monthly rental payments because French told her to “start saving money to move.” On May 13, Deutsche filed a foreclosure complaint against Mitchell and Bethea without having the mortgage assigned to them.
On June 2, Deutsche filed an amended complaint, in which the state Superior Court indicated, “Deutsche Bank had standing to file the foreclosure complaint and was a holder in due course of the mortgage.”
However, the state's law division ruled against the Superior Court and supported Bethea's counterclaim alleging violations of the Truth in Lending Act, Home Ownership Equity Protection Act, Real Estate Settlement Procedures Act and New Jersey Home Ownership Security Act.
“In the absence of a showing of such ownership or control, the plaintiff lacks standing to proceed with the foreclosure action and the complaint must be dismissed,” the appellate division said. “Deutsche Bank did not have standing when it filed the original complaint because it did not have an assignment nor did it demonstrate that it possessed the note at that time. We vacate the sheriff's sale, the final judgment and the order granting summary judgment and remand to the trial court for further proceedings in conformance with this opinion.”