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Sunday, July 23, 2017

OCWEN LOAN SERVICES, LLC VS. MARLA WUEBBENS QUINN A-2668-14T3

OCWEN LOAN SERVICES, LLC VS. MARLA WUEBBENS QUINN
          A-2668-14T3(NEWLY PUBLISHED OPINION FOR JULY 10, 2017)
In 2004, defendants David and Louisa Wuebbens conveyed their home to their daughter, Marla Wuebbens Quinn, while retaining life estates in the property. In 2005, Quinn and defendants executed a $260,000 mortgage on the property in favor of plaintiff's assignor, IndyMac Bank, F.S.B. (the 2005 mortgage). In 2007, Quinn refinanced the mortgage loan for $380,000 with IndyMac (the 2007 mortgage) and used the proceeds, in part, to satisfy the 2005 mortgage. IndyMac's title commitment failed to disclose defendants' recorded life estate interests in the property. As a result, defendants did not execute the 2007 mortgage.
In 2009, IndyMac filed an action to foreclose the 2007 mortgage after Quinn defaulted. The issue presented is whether plaintiff's 2007 mortgage lien takes priority over defendants' earlier recorded life estate interests in the property. Applying principles of replacement and modification recognized in the Restatement (Third) of Property Mortgages (1997), the
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court extends its holding in Sovereign Bank v. Gillis, 432 N.J. Super. 36 (App. Div. 2013), so as to grant plaintiff's mortgage limited priority over defendants' life estates. Consequently, the court "capped" plaintiff's mortgage priority at $260,000, and preserved the priority of defendants' life estates over the portion of the 2007 mortgage loan that exceeded that amount.