It has been almost a decade since the subprime mortgage crisis rocked financial markets across the world. In response, we saw the introduction of the Dodd-Frank legislation, civil suits against many of the country’s largest banks, and the emergence of a new market for purchasing defaulted loans. Since this initial flurry of activity, the economy has slowly recovered and the topic largely disappeared from the public eye. However, the legal wake continues to reverberate in the foreclosure litigation arena, with mortgage holders continuing to search for additional sources of recovery on loans secured by underwater homes.
In New Jersey, a recently filed suit now turns the attention to appraisers of homes that lost value following the crisis. As a state with one of the highest rates of foreclosure in the country, and a period of inactivity while notice provisions were examined by the state Supreme Court, New Jersey continues to see foreclosure litigation as a significant portion of its dockets in 2017. This includes foreclosure related actions, such as the current suit alleging that the defendant-appraisers failed to adhere to the Uniform Standards of Professional Appraisal Practice, performed inadequate research, and failed to adjust for negative property values. The plaintiffs are demanding the difference in value between the appraised price and the amount obtained during foreclosure sale, which is alleged to be over $100,000 for some of the properties cited.
Lawsuits such as this only add to the existing litigation involving homeowners pointing the finger back at the mortgage holder after a default occurs. Much like a trustee in a bankruptcy action, mortgage holders are increasingly looking for creative ways to increase their recovery on defaulted loans. While this particular theory of recovery has been raised in other states, it appears New Jersey will be tackling it for the first time. How the courts will treat it is yet to be seen, but it is clear that even eight years after the subprime mortgage crisis, foreclosure litigation continues to boom and any reduction in volume has just been replaced with increasing complexity.