Judge Peter Doyne has presided over countless foreclosures, but the case of an Ecuadorean immigrant who claims he was duped into taking a mortgage he couldn’t afford “stands out from the others.”
Doyne denied summary judgment in U.S. National Bank Association v. Montesdeoca, finding the bank presented a prima facie case for foreclosure but debtor Oscar Montesdeoca presented sufficient evidence to suggest genuine issues must still be decided.
“Separate and apart from the polemics that ‘banks are bad’ or ‘financial institutions are evil,’ or generic allegations of predatory lending, this case presents specified, detailed allegations … which, if proven to be accurate, would compel a court of equity to consider the appropriate remedy,” he held Sept. 27.
Doyne, Bergen County’s assignment judge, sent the case down for further discovery.
U.S. National Bank is attempting to foreclose on Montesdeoca’s Bergenfield home after he began failing to make his monthly payments of $3,357 on a $486,160 mortgage. Since moving to the United States with his wife and four sons in 2002, Montesdeoca, 63, has earned about $4,400 a month as a truck driver and cleaning company laborer.
U.S. National Bank owns the mortgage, but it was issued by Wells Fargo. Montesdeoca alleges in a counterclaim that a Wells Fargo loan officer listed monthly income on the mortgage application at more than $10,000 a month.
“The loan officer painted a very different picture” of Montesdeoca’s actual income, says his lawyer, Joseph Chang of Paterson. “All he had to show was a good credit score.”
Montesdeoca was approved for his mortgage in August 2006 after paying $1,200 a month in rent for an apartment. He was eventually preapproved for a $607,000 mortgage, divided into two loans. The primary mortgage carried a 7.375 adjustable percentage rate, while the second, to be used for the down payment and closing costs, carried a 14 percent interest rate.
Montesdeoca, who speaks little English, says he was presented at the closing with a “big pile” of documents and told where to sign. He claims he was told he could refinance the two loans at lower rates after two years, assuming he made his payments, but that his attempts after two years to have the loans modified were either ignored or rejected.
Doyne said Montesdeoca struggled to make the loan payments. His sons had to drop out of college because the family could no long afford the tuition. Montesdeoca and his sons also began borrowing money to make the payments.
Finally, in October 2011, Montesdeoca stopped making payments and U.S. Bank moved to foreclose.
In a footnote, Doyne noted an “intriguing” question: “If defendant’s proofs are found credible, what is the appropriate remedy? Surely, forgiveness of the entire loan seems not only draconian but without support in New Jersey case law. That issue, as with many others, shall be left for future consideration.”
Chang agrees that a special remedy may have to be fashioned. “Forgiving the loan and giving him a free house is probably too extreme,” he says. “Maybe we can keep him in the house with more affordable payments.”
In his counterclaim, Montesdeoca alleges common-law fraud, violation of the doctrine of good faith and fair dealing, and violation of the Consumer Fraud Act, which allows for treble damages.
“Treble damages might be too much to ask for,” Chang says. “We’re discussing the matter and trying to come up with a remedy.”
Assistant Mercer County Prosecutor Dorothy Hersh, who handled the appeal, says only that she is pleased with the ruling.
U.S. National’s attorney, Aaron Bender, of the Princeton office of Reed Smith, did not return a call.