In the practice of mortgage foreclosures in New Jersey, defendants may be minors, incapacitated persons, or servicemembers on active duty in the military. Before the Plaintiff (the mortgage lender, most likely a bank) can obtain a final judgment against any of these persons, NJ Rules of Civil Procedure 4:64-1(h) requires that a “Guardian ad Litem” (a “GAL“) be appointed to protect the interests of the minors or the disabled, and an Attorney be appointed for a defendant on active duty in the Military. Here is the text of the rule:
Rule 4:64-1(h) Minors; Mentally Incapacitated Persons; Military Service. Except as otherwise provided by law or by R. 4:26-3 (virtual representation) no judgment or order for redemption shall be entered under this rule against a minor or mentally incapacitated person who is not represented by a guardian or guardian ad litem appearing in the action. No judgment or order for redemption shall be entered against a defendant in military service of the United States who has defaulted by failing to appear unless that defendant is represented in the action by an attorney authorized by the defendant or appointed to represent defendant in the action and who has appeared or reported therein.
Minors: A minor might become a defendant in a foreclosure under many circumstances, two of which are very common:
- The most common is when the borrower is deceased and his or her interest in the Property passes to children pursuant to the Decedent’s Will or the laws of Intestate Succession. The child becomes the “owner” of the Property by inheritance and so, stands in the shoes of his or her deceased parent.
- The other very common way is for a child to have a judgment (typically for personal injury) against someone whose name is the same as the owner of the Property. Under NJ law, a judgment is a lien on real estate, and if the particular minor’s judgment is a lien on the Property being foreclosed, the minor must be named as a defendant in the foreclosure. Oftentimes, the defendant in the minor’s law suit is not one and the same person as the Property owner (e.g., if the defendant is named “Mary Jones”) and so the minor has no interest in the foreclosure. If the defendant in the minor’s suit is one and the same “Mary Jones” then the minor has a judgment that is a lien on the Property being foreclosed and the minor has rights that can be exercised in the foreclosure.
Disabled: For purposes of the appointment of a Guardian ad Litem, being disabled is a question of a person having the mental capacity to understand the proceedings. A person does not have to be actually adjudicated an incapacitated person; rather, a GAL must be appointed if there is any basis to believe that a Defendant might be mentally impaired. I have had cases where a neighbor tells a process server that the defendant is “deranged” or “retarded” and such information, even though unsubstantiated, will be the basis for my appointment of a GAL.
Military Personnel: Military service often interferes with the ability of Servicemembers to fulfill their financial obligations. They may be unable to appear in Court to argue against the foreclosure, to raise defenses to the action. The Servicemember might be in a trench in a war zone, on assignment at an undisclosed location, or for some other reason may be unreachable.
Fortunately, Congress and state legislatures have long recognized the need for legislation to respond to the special circumstances that may be faced by Servicemembers, and protective legislation has long since been in place.
- During the Civil War, Congress enacted legislation suspending any statute of limitations where the war worked to thwart the administration of justice.
- In World War I, the Soldiers’ and Sailors’ Civil Relief Act of 1918 directed trial courts to take whatever action equity required when servicemembers’ rights were involved in a controversy.
- A modern version of these laws, the Soldiers’ and Sailors’ Civil Relief Act of 1940, was penned on the eve of World War II. Based on the 1918 legislation, the Act provided for stays in civil proceedings, interest rate reduction, protection against double taxation, and other types of relief. Experience during World War II and subsequent armed conflicts led to changes, but the law’s basic intent – allowing military personnel to give full attention to their military duties – remained clear. As the Supreme Court has said, this legislation benefits “those who dropped their affairs to answer their country’s call.”
- In 2002, Congress began taking a renewed interest in this legislation and in 2004 enacted the Servicemembers Civil Relief Act of 2004 (“SCRA”). The SCRA mandated that an attorney be appointed to represent the Servicemember to raise defenses and assert his or her rights.
Whether appointed as a Guardian ad Litem for a minor or a disabled person, or as an Attorney for someone in the military, the task of a Court appointed is essentially the same:
- To determine whether the Defendant has any defenses to the foreclosure (perhaps it has been paid, or the bank has engaged in some misconduct) and, if so, to raise the defenses;
- is there a basis for an objection to the validity of the mortgage (perhaps it was signed under coercion or by forgery), the result of predatory lending or other unlawful conduct;
- Does the defendant have any wish or financial ability to exercise any of the rights of a person with legal rights in the Property. These rights might be to sell the Property, pay off the mortgage, refinance the mortgage, restructure or reform the terms of the mortgage loan, or to reinstate the mortgage (i.e., bring it current and continue to pay it).
I have had well over 300 GAL appointments by Courts in all counties in New Jersey. Whether I am called a Guardian ad Litem or an Attorney appointed under the SCRA, I am acting as an officer of the Court – a fact finder. My task is to investigate, gather facts, draw conclusions, and to make recommendations to the Court. My findings may require that I file objections, or motions asking the Court to grant relief of one form or another.
More often than not, there are no defenses or objections to be raised, and no rights to be protected or asserted. Possibly the person believed to be a minor is now over the age of 18, or the person believed to be disabled is not, or the Servicemember is no longer in the military. These cases are simple and result in a Report that I file with the Court recommending that the foreclosure proceed as uncontested.
There are other cases, however, that give rise to protracted involvement and litigation.
- A Defendant might be incapacitated and unable to communicate whether there are any defenses or objections. In such a case, I have had to initiate a plenary guardianship action that is separate and apart from the foreclosure.
- Lenders sometimes violate Federal and/or State rules concerning Mortgage Foreclosure procedure (such as the Mortgage Servicing Rules promulgated by the Federal Consumer Financial Protection Bureau). In such cases, I have brought these issues to the attention of the Court and recommended that the foreclosure be delayed and/or dismissed, or that the Court appoint an attorney to defend against the foreclosure. In my experience, Courts are particularly attentive to borrowers who may have been the victims of predatory lending practices.
- There are programs that are available to assist homeowners in default and I may be in the position to assist the borrowers in obtaining financial assistance to reinstate the mortgage or otherwise give the lender an incentive to modify the mortgage to make it affordable.