US Bank, N.A. v. Hough
210 N.J. 187
| N.J. | 2012Background
- US Bank foreclosed on Nikia Hough's affordable-housing condominium secured by a mortgage that exceeded 95% of the unit's maximum allowable resale price.
- The 2004 Piscataway Township UHAC rules controlled purchase and resale prices and restricted loans to 95% of the resale price; Hough refinanced in 2005 with a loan well above the cap.
- The deed and mortgage referenced the resale restrictions; Hough defaulted in 2007 and the loan was assigned to US Bank in 2007.
- Chancery Division refused to void the mortgage or the loan, finding no windfall, leading to an Appellate Division reversal accepting HMFA's interpretation that only the mortgage might be voided.
- The Supreme Court granted certification to interpret N.J.A.C. 5:80-26.18(e); HMFA urged voiding the mortgage, bank urged equitable mortgage or full voiding.
- The Court held that the loan in excess of the permissible limit is void as against public policy, and the mortgage securing that excess is void while the remaining lawful portion remains enforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What does N.J.A.C. 5:80-26.18(e) void? | Hough and HMFA advocate voiding the mortgage only or the entire debt via equitable remedies. | US Bank argues for an equitable mortgage and collection of the unsecured portion. | The excessive loan portion is void; the mortgage is void to the extent of the excess, leaving the lawful portion secured. |
| Should the court defer to HMFA's interpretation of its regulation? | HMFA interpretation should govern because it administers UHAC and aims to deter predatory lending. | Court should not defer if interpretation is plainly unreasonable. | Court did not accept HMFA's interpretation as plainly reasonable; regulation read plainly requires voiding the excessive loan portion. |
| What is the proper remedy given the regulation's language? | An equitable mortgage up to 95% of value should secure the remaining debt. | Void the mortgage entirely to prevent windfalls and predatory practices. | The remedy is to void only the excessive portion of the loan; the remainder remains enforceable. |
Key Cases Cited
- Mount Laurel II, 92 N.J. 158, 456 A.2d 390 (1983) (N.J. 1983) (affordable housing enforcement context under Mount Laurel decisions)
- Mount Laurel I, 67 N.J. 151, 336 A.2d 713 (1975) (N.J. 1975) (constitutional obligation to provide affordable housing)
- Bedford v. Riello, 195 N.J. 210, 948 A.2d 1272 (2008) (N.J. 2008) (statutory/regulatory interpretation and deference framework)
- In re Election Law Enforcement Comm'n Advisory Op. No. 01-2008, 201 N.J. 254, 989 A.2d 1254 (2010) (N.J. 2010) (agency interpretation given deference unless plainly unreasonable)
- DiProspero v. Penn, 183 N.J. 477, 874 A.2d 1039 (2005) (N.J. 2005) (statutory interpretation approach and intent of drafter)