On July 31, 2017, the New Jersey Supreme Court in GMAC Mortgage, LLC v. TamiLynn Willoughby said that the Chancery and Appellate Courts incorrectly found that a settlement agreement between a homeowner and GMAC Mortgage, LLC was provisional and not enforceable, which ultimately led to her home being sold to GMAC at a sheriff’s sale for $100.00. In a unanimous opinion, the Supreme Court reversed that result and enforced the agreement.
In this case, GMAC foreclosed on Ms. Willoughby’s home after she defaulted on her mortgage loan. Prior to the sheriff’s sale, the parties entered into mediation through New Jersey’s Residential Mortgage Foreclosure Mediation Program, which was established in 2008 following the collapse of the housing market. The mediation process led to an agreement between GMAC and Ms. Willoughby that gave her a “path to save her home through a ‘permanent modification’ of the loan.” The agreement set forth the required down payment and monthly payments, the unpaid principal balance, the amount in arrears, and the length and interest rate of the loan.
Ms. Willoughby complied with the terms of the agreement, making the down payment and each monthly installment for one year. Then, GMAC sent Ms. Willoughby a “wholly new modification agreement” that contained less favorable terms than the original agreement – GMAC shortened the maturity date and increased the monthly payments. Ms. Willoughby moved to enforce the agreement in the Chancery Division. The Chancery Division initially sent the parties back to mediation, and then denied Ms. Willoughby’s motion to enforce the agreement, holding that it was a “provisional settlement.” Ms. Willoughby appealed, but the Appellate Division upheld the Chancery Division’s ruling. The Supreme Court then agreed to hear the case.
The Supreme Court determined that the language of the parties’ agreement, the majority of which was handwritten by GMAC’s attorney, “spoke of a ‘permanent modification’ that was final and binding.” The agreement explicitly stated that “if Willoughby made ‘all trial payments,’ GMA would ‘make modification permanent.'” Importantly, the Supreme Court noted that “[Ms.] Willoughby has endured years of litigation, ending with the loss of her home,” and that she “was entitled to the benefit of the agreement for which she had bargained.” The Supreme Court found that the Chancery Division should have granted Ms. Willoughby’s motion to enforce the agreement, stating that the terms of the agreement indicate that “the parties intended a permanent loan modification.” The Supreme Court reversed the rulings of the lower courts and remanded the case to the Chancery Division to “craft an appropriate remedy” given the sale of the Ms. Willoughby’s home at a sheriff’s sale.
The case is available at:
https://scholar.google.com/scholar_case?case=1772018196564857519&hl=en&as_sdt=6&as_vis=1&oi=scholarr
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