In late February 2012, the New Jersey Supreme Court came down with a major decision in US Bank NA v Guillaume. While the ruling addressed important legal issues, its history and result shows why homeowners facing judicial foreclosure cannot assume that a possible mortgage modification will make their problems go away. The Guillaumes, it turned out, had some valid defenses to the foreclosure Complaint when it was served upon them. Instead of filing an Answer raising those defenses, they went to a housing counsellor and tried for a loan modification, which was eventually denied. During the eight months while that request was pending, the foreclosure process marched on. The lender filed a motion for entry of judgment of foreclosure, and gave the Guillaumes the required notice they were doing so. Still the Guillaumes ignored the process. Six months after that motion was filed a judgment was entered against them. Again, they asked for a loan modification. About a month later they received notice of a sheriff’s sale. Only then did they hire an attorney who sought to set aside the judgment of foreclosure and asserted various defenses. That request was denied. Eventually the issues got to the Supreme Court which held in essence that the Guillaumes had slept on their rights and had lost the right to defend the foreclosure.
This is a pattern of denial that we see too often. While the defenses to a foreclosure are limited, they do exist, but the time to seek legal advice is at the start of the process not the end. Too often also, people think that their chances of getting a loan modification are better than they are. No matter what the situation, it does not get better over time. The best time to assess the options available and to work towards a suitable outcome is right away. Whether the solution is bankruptcy, or a vigorous foreclosure defense, or some other option, a foreclosure should be a wake-up call.