At the direction of the Chief Justice of the New Jersey Supreme Court, the New Jersey Superior Court yesterday directed six of the nation’s largest mortgage lenders and servicers to show cause why uncontested foreclosure actions they have filed should not be suspended. 

The Order to Show Cause, which was issued sua sponte, states that the six named companies “were selected based on a public record of questionable practices” and that immediate judicial action “is necessary to protect the integrity of the judicial foreclosure process in New Jersey.” It requires the six companies to respond by January 5, 2011, and directs them to appear at a hearing on January 19, 2011. At the hearing, the Court will consider not only whether to suspend their foreclosure actions but also whether a Special Master should be appointed to examine their documentation preparation practices and to review any remediation plans they may be required to submit.

Also issued yesterday was an Administrative Order by the Acting Administrator of the New Jersey Courts naming another 24 lenders and servicers who, according to the Order, have each filed more than 200 residential foreclosure actions in 2010. That Order gives the 24 companies 45 days to submit documentation concerning their foreclosure procedures to a Special Master appointed effective January 3, 2011. In their submissions, the companies are required to detail the processes they follow “in order to demonstrate the reliability and accuracy of documents and other submissions to the court in foreclosure proceedings.” The Order warns that a finding of irregularities by the Special Master could result in the suspension of a company’s foreclosure actions. The Administrative Order was accompanied by a Notice to the Bar informing New Jersey lawyers of emergency amendments to the Rules of Court adopted by the New Jersey Supreme Court effective December 20, 2010, requiring new documents to be filed in foreclosure actions.

Ballard Spahr is currently assisting several companies in responding to the Orders (Order to Show Cause 12.20.10 Administrative Order 12.20.10). Since foreclosure documentation concerns surfaced this fall, several clients have retained Ballard Spahr to conduct due diligence reviews of their mortgage foreclosure procedures and files and to help them respond to regulatory inquiries. The firm has also conducted a webinar and an in-person program on the issue. In addition, the firm has issued a series of legal alerts on foreclosure developments that can be found on the firm’s website.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact group Chair Alan S. Kaplinsky, 215.864.8544 or; Vice Chair Jeremy T. Rosenblum, 215.864.8505 or; Martin C. Bryce, Jr., 215.864.8238 or; or Barbara S. Mishkin, 215.864.8528 or  




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