U .S. Bank v. Hough , 416 N.J. Super. 286 (App. Div. 2010), is the first published decision in New Jersey to address the issue of “whether a commercial lender, which makes a loan secured by a mortgage on an affordable housing unit in excess of the amount permitted by N.J.A.C. 5:80-26.8(b), is prohibited from seeking to foreclose the mortgage.” The Appellate Division ruled affirmatively, holding that although the commercial lender could pursue the borrower for the debt under the note, the mortgage itself was void as against public policy, resulting in a loss of the secured status enjoyed by the lender.
The decision in U.S. Bank is important for two main reasons. First, it highlights an easily avoidable area of liability for commercial lenders, title professionals and attorneys. Second, aside from any legal challenges that may exist to the regulations themselves or legislative action taken as a result of appropriate lobbying efforts, the decision leaves open the possibility for a trial court or another Appellate panel to introduce principles of equity, particularly equitable subrogation, to temper the harsh penalty of a loss of secured lien status by a holder in due course.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
