newjerseynewsroom.com

BY JOE TYRRELL

NEWJERSEYNEWSROOM.COM

As it joins other major lenders in opposing closer scrutiny of their New Jersey foreclosure practices, Wells Fargo Bank has suffered a setback because of missing documentation in a Bergen County case.

In blunt language, a three-judge appellate court rejected the bank's attempt to foreclose on a Westwood property. Significantly, the case began in 2006, raising questions about mortgage and foreclosure practices well before the collapse of the national housing bubble.

The ruling underscores the issues that caused New Jersey Chief Justice Stuart Rabner to order Ally Bank (GMAC), Bank of America, CitiBank, JPMorgan Chase, OneWest and Wells Fargo to justify their foreclosure actions after improprieties surfaced in other cases.

Rabner acted in December after a report from Legal Services of New Jersey about "robo-signings" of mortgage documents by employees of banks or other companies with no direct knowledge of the transactions. Rabner designated Judge Mary C. Jacobson to oversee the review.

She also required two dozen other smaller lenders to demonstrate there are no irregularities in their foreclosure proceedings. Retired Superior Court Judge Walter R. Barisonek has been recalled to handle those responses.

In the current case, appellate Judges Stephen Skillman, Joseph L. Yannotti and Marianne Espinosa found in favor of homeowner Susan Ford of Westwood.

Ford had attempted without success to question mortgage and foreclosure practices in trial court, challenging the sequence of events after she took out a loan from Argent Mortgage in March 2005. Ford claimed she was the victim of "predatory and fraudulent acts" by Argent.

But just five days after Ford closed on her loan, Argent purportedly assigned the mortgage and note to Wells Fargo, according to the lenders. Wells Fargo filed for foreclosure in July 2006, at the time saying the assignment had occurred but had not yet been recorded.

Wells Fargo provided the court with documents, including a certification from Josh Baxley, which identified him as an attorney representing HomEq Servicing Corp. and Wells Fargo and asserted that an attached mortgage and note were true copies.

Baxley's certification did not indicate how he knew this, and did not include the assignment of the mortgage, according to the appellate judges. Meanwhile, Ford argued that some of the documents were forgeries, including one that stated her income was much higher than the reality.

In an oral opinion, the trial judge said Ford had raised "disturbing questions" about Argent, but they did not affect Wells Fargo as the holder of the mortgage. The case proceeded to foreclosure in April 2007. Ford appealed, but everything was put on hold when she sought to file for bankruptcy.

Eventually, Ford's bankruptcy was dismissed. In June 2010, the appeals court stayed a sheriff's sale of her house, and heard arguments in October. The three judges pointed out that the bank's submitted "assignment of mortgage" had not been authenticated by Baxley or anyone else. As a result, it is unclear whether the bank is the mortgage holder, they said.

The bank's other arguments, that Ford could not contest its standing in the case; that her arguments were "counterintuitive," or that her brief, filed by New Jersey Legal Services exceeded the scope of the case, "are clearly without merit and do not warrant discussion," Skillman wrote.

"We conclude that Wells Fargo failed to establish its standing to pursue this foreclosure action," the judges found.

They sent the matter back to the trial court, with an added finding that it is too late for Argent to indorse the loan and make Wells Fargo the holder in due course. Unless it could properly documenting a previous assignment, Wells Fargo would not be shielded from claims involving Argent, the court said.

Argent was a unit of Ameriquest Mortgage, a major issuer of "subprime" mortgages. Often made to borrowers who did not qualify for, or were unfamiliar with, standard rate mortgages, subprime loans were often more expensive for borrowers. Consolidated and sold as investments despite their risk, they were major contributors to the collapse of housing markets.

Citbank acquired Argent in August 2007, when Ameriquest closed. In 2008, a former Argent vice president was convicted of mortgage fraud in Florida, but the company reportedly cooperated with authorities.

The six national mortgage lenders are all fighting Rabner's proposal to suspend their foreclosure cases, appoint a special master to review them and possibly impose sanctions. In responses filed in January, most said they are regulated by the federal government and the state action would violate the New Jersey and U.S. constitutions as well as court rules.

But Citibank was conciliatory and most of the other big banks acknowledged some past problems, arguing they had already taken steps to correct them. Wells Fargo repeated those points but threw down the gauntlet, saying there "is certainly no evidence... that any foreclosure filed by Wells Fargo was unjustified."

"Wells Fargo respectfully states that there is no basis for the Court to presume that data in any, let alone all, affidavits filed by Wells Fargo are, or were, fatally inaccurate," said its brief, filed by attorneys Mark S. Melodia of Reed Smith in Princeton and Rosemary Alito of K&L Gates in Newark.

Court records show Wells Fargo is second in foreclosures in New Jersey, with 9,235 in 2010 and 21,825 total for the recession period of 2007-10. It trails only Bank of America and its BAC subsidiary.

Joe Tyrrell may be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it