Foreclosure Prevention Unit Preserves Housing

Financial difficulties often go hand in hand with divorce. But, resolving a mortgage default after a divorce can be complicated. Nassau Suffolk Law Services’ Foreclosure Prevention Unit, including attorneys Vivian Storm and Heather Graham and paralegal Luz Cartagena-Collado, recently obtained a loan modification for a client who had been struggling to resolve her mortgage default for nearly 14 years because of complications related to her divorce.

When JO filed for divorce, her ex-husband responded by taking out a substantial new mortgage loan on the family home in violation of a court order. He quickly dissipated the proceeds of the loan and defaulted on payments. JO ultimately was awarded the title to the home in her divorce settlement, and her husband was ordered to bring the loan current.

It should have been a happy ending, but shortly thereafter JO was injured at work and missed several mortgage payments. When JO got back to work, she approached the lender to try to bring the loan current. Because JO was not the original borrower on the mortgage loan, however, the servicer refused to speak with her.

A federal law called Garn St. Germain (12 U.S. Code § 1701j-3(d)(7)) and implementing regulations (Regulation X (12 CFR § 1024.38)) address situations like this. They require mortgage servicers to allow family members who acquire property through a divorce, or the death of the original borrower to be treated as “successors in interest.” Nonetheless, divorced spouses, widows, and widowers routinely face roadblocks when they attempt to resolve problems with the loans on their homes. JO’s servicer would not accept payments from her without a modification to bring the loan current. And they would not allow her to modify the loan without the participation of her ex-husband.

The servicer commenced and then failed to prosecute a foreclosure proceeding. Over the next several years through a succession of different servicers, JO repeatedly applied for loan modifications and attempted to resolve her default. Sometimes she was even granted a modification only to have it withdrawn when she was unable to obtain the signature of her estranged ex-husband. As the years passed, the arrears grew to make an affordable modification more and more difficult to achieve.

Eventually, a servicer commenced a new foreclosure proceeding. JO contacted NSLS’ Foreclosure Prevention Unit seeking help opposing a Motion for Judgment of Foreclosure and Sale. NSLS discovered that JO was never properly served with the Summons and Complaint. The Foreclosure Prevention Unit brought a Motion to Dismiss based on lack of personal jurisdiction. This motion was eventually resolved through a stipulation allowing JO to submit a late answer. Discovery proceeded and the servicer brought a motion for summary judgment in the midst of the pandemic. After the Foreclosure Prevention Unit opposed that motion, the servicer finally agreed to grant JO an affordable modification without requiring her ex-husband’s participation.

15 years after her divorce, JO finally has full control of her own home.