Bankruptcy Court Finds Debtor Entitled to a “Free House” Because Mortgage Foreclosure Complaint Barred by New Jersey Statute of Limitations

In a recently released article to JD Supra Business Advisor, Duane Morris LLP discusses a recent decision by the United States Bankruptcy Court for the District of New Jersey.

Bankruptcy Court Finds Debtor Entitled to a “Free House” Because Mortgage Foreclosure Complaint Barred by New Jersey Statute of Limitations

Mortgage lenders should be aware of the New Jersey statute of limitations on mortgage foreclosure complaints. In In re Washington, 2014 Bankr. LEXIS 4649 (Bankr. D.N.J. Nov. 5, 2014), the United States Bankruptcy Court for the District of New Jersey held that a mortgagee and its servicer were time-barred from enforcing their rights under a note and accelerated mortgage more than six years after the borrower’s default pursuant to the New Jersey Fair Foreclosure Act, N.J.S.A. § 2A:50-56.1. As a result, the Bankruptcy Court concluded that the borrower would effectively receive a “free house.”

In 2007, the borrower in Washington purchased a three-unit residential property in Morris County, New Jersey. The borrower financed the purchase, in part, by a note for $520,000, which was secured by a 30-year mortgage, maturing in March 2037. However, after making only three monthly payments on the note and mortgage, the borrower defaulted in July 2007. Thereafter, pursuant to the note and mortgage, the lender accelerated the maturity date.[1]

In December 2007, the lender filed a foreclosure complaint in New Jersey Superior Court, which averred that the lender “by reason of said default, elected that the whole unpaid principal sum due on the aforesaid obligation and mortgage … shall be now due.” Three years later, in October 2010, the Superior Court notified the lender of various filing deficiencies and returned the foreclosure complaint packet for supplementation. Another three years later, in July 2013, the Superior Court issued an order dismissing the foreclosure complaint for lack of prosecution, without prejudice. The lender never re-filed the foreclosure complaint, and in March 2014, the borrower filed a petition for relief under chapter 7 of the Bankruptcy Code. Thereafter, the borrower (now a bankruptcy debtor) initiated an adversary proceeding in the Bankruptcy Court to determine the validity of the lender’s mortgage lien.

The borrower sought summary judgment in the adversary proceeding on the grounds the lender was foreclosed from enforcing the loan documents by the relevant state statutes of limitations. Specifically, the borrower claimed that the six-year statute of limitations applicable to negotiable instruments precluded the lender from initiating suit for the borrower’s default on the note. See N.J.S.A. § 12A:3-118(a) (establishing a six-year statute of limitations for negotiable instruments). Likewise, the borrower claimed that any action on the mortgage was time-barred after six years because the state Fair Foreclosure Act required any such enforcement within “[s]ix years from the date fixed for the making of the last payment or the maturity date[.].” See N.J.S.A. § 2A:50-56.1.[2]

Incredibly, the lender conceded that the six-year statute of limitations for enforcement of the note had run. In re Washington, 2014 Bankr. LEXIS 4649 at *20. However, the lender countered that enforcement of the mortgage was subject to the 20-year limitation period recognized under New Jersey common law. Id. Though neither party disputed that the loan was accelerated to 2007, the lender argued that the maturity date – as stated in the loan documents – remained March 2037 for purposes of the Fair Foreclosure Act.

Following exhaustive discussion of the relevant section of the Fair Foreclosure Act and its legislative history, the Bankruptcy Court concluded that the lenders had in fact accelerated the maturity date of the loan to the 2007 default date. Id. at *35. The Bankruptcy Court further noted that neither party had made any effort to de-accelerate the debt and that the lender had failed to file a valid foreclosure complaint within six years of the accelerated maturity date as required under the Fair Foreclosure Act.[3] Accordingly, the Bankruptcy Court held that the lender was now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure. Id. at 36.

Given its conclusion that the lender could no longer pursue a valid foreclosure action against the borrower, the Bankruptcy Court was also compelled to disallow the lender’s secured claim against the borrower’s bankruptcy estate pursuant to section 502 of the Bankruptcy Code. See 11 U.S.C. § 502(b)(1) (providing that a claim should be allowed “except to the extent that [it] is unenforceable against the debtor and property of the debtor, under any agreement or applicable law[.]”). Moreover, because the lender lacked an allowed secured claim, the underlying lien was deemed void pursuant to section 506 of the Bankruptcy Code. The end result, to the clear displeasure of the Bankruptcy Court, was for the borrower to retain the subject property free and clear of any claim of the lender.[4]


1.  The parties disputed the acceleration date, which was variously identified as June 1, 2007, July 1, 2007, or December 14, 2007. In its opinion, the Bankruptcy Court recognized that under any reckoning, the lender was time-barred from enforcing the loan documents. In re Washington, 2014 Bankr. LEXIS 4649 at *16.

2.  This section provides, in relevant part:
An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or note … whether the date is itself set forth or may be calculated from information contained in the mortgage or note … ;
b. Thirty-six years from the date of recording of the mortgage … ; or
c. Twenty years from the date on which the debtor defaulted … .

N.J.S.A. § 2A:50-56.1.

3.  The Bankruptcy Court rejected the lender’s argument that its renewed efforts to initiate foreclosure proceedings would relate back to its original foreclosure complaint.

4.  The Bankruptcy Court’s opinion closes: “The Court will proceed to gargle in an effort to remove the lingering bad taste.” In re Washington, 2014 Bankr. LEXIS 4649 at *39.

Please click here to view the article online.

About Safeguard 
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow.  Website:



Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.


Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.



Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.


General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.


Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.


AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.


AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.


AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.


AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.


AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.


Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.