Editor: David Reiss
Brooklyn Law School

January 12, 2013

New Jersey Appellate Division Affirms Aurora Loan Servicing’s Foreclosure Judgment, Rejecting Homeowners’ “Exceptional Circumstances” Argument

By Joseph Kelly

In Aurora Loan Services, LLC v. Pagano, A-3887-10T1, 2011 WL 6153634 (N.J. Super. Ct. App. Div. Dec. 13, 2011) the Appellate Division of the Superior Court of New Jersey, Atlantic County, affirmed the denial of defendant/homeowners’ motion to vacate their default judgment of foreclosure.

Michael and Janet Pagano had first executed their note and mortgage in July 2007. After defaulting in June 2008, Aurora Loan Servicing commenced a foreclosure action in September 2008, stating the note and mortgage had been assigned to them by MERS, as nominee for AHM Mortgage. Michael Pagano then filed a voluntary Chapter 7 bankruptcy. However, Aurora received an order lifting the bankruptcy’s automatic stay, and a final judgment of foreclosure by default was entered in August 2009. After one pro se motion to vacate and a failed attempt at mediation, the Paganos sought to reargue under R. 4:50-1(f) and the “new law” made in Bank of New York v. Raftogianis, standing for the proposition that “foreclosing plaintiff[s] must have had ownership or control of the underlying debt as of the date of filing of the complaint.”

However, the trial judge found defendants’ motion time-barred and without justification for delay under R. 4:50-l(f). Further, the judge disagreed with defendants’ characterization of the earlier decisions as a “change in law” and concluded the foreclosure was “entirely appropriate.” On appeal, defendants argued exceptional circumstances were present to justify vacating the foreclosure, relying on the general recognition by the judiciary of controlling the integrity of the foreclosure process. However, because these matters were not presented to the trial judge, the court found they were precluded from addressing them. Further, the Appellate Division affirmed the trial judge’s reliance on the bankruptcy records, and found the foreclosure process “consistent with the interests of the holder of the debt” and that defendants were time-barred. Finally, the court addressed defendants’ exceptional circumstances argument and found that “new developments in case law generally do not qualify as such an extraordinary circumstance as to justify relief from a final judgment.” (internal citations omitted). Because there were no exceptional circumstances that would result in a grave injustice here, the Appellate Division affirmed the trial court in its entirety.

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