US Bank, N.A. v. Hough

42 A.3d 870, 210 N.J. 187, 2012 WL 1836284, 2012 N.J. LEXIS 587

• Court: Supreme Court of New Jersey
• Decided: May 22, 2012
• Docket: A-82/83 September Term 2010 067029
• Status: Published

Opinions

Justice ALBIN

delivered the opinion of the Court.

The Fair Housing Act, N.J.S.A. 52:27D-301 to -329.19, is a statutory scheme intended to ensure that municipalities fulfill their constitutional obligation to provide affordable housing to New Jersey’s low- and moderate-income residents. Under the Act, the Housing and Mortgage Finance Agency (HMFA) is charged with the responsibility of establishing programs to assist municipalities in meeting their obligation to provide affordable low- and moderate-income housing. N.J.S.A. 52:27D-321.

In carrying out its statutory charge, HMFA promulgated regulations controlling the use and sale of affordable housing units. See N.J.A.C. 5:80-26.1 to -26.26. One such regulation prohibits a lending institution from issuing a loan—secured by an affordable housing unit—that “exceed[s] 95 percent of the maximum allowable resale price of that unit.” N.J.A.C. 5:80-26.8(b). To enforce this policy, HMFA declared that “[a]ny loan issued in violation of [these regulatory provisions] shall be void as against public policy.” N.J.A.C. 5:80-26.18(e).

The bank in this case issued a loan to the owner of an affordable housing unit—secured by a mortgage—in excess of 95% of the allowable resale price of the unit. Notice of the resale-price restriction was set forth in the deed. The unit owner later defaulted on the loan. The Chancery Division declined to void the mortgage or the loan, finding that to do so would result in a windfall to the unit owner.

Giving deference to HMFA’s interpretation of its own regulations, the Appellate Division held that the lender’s violation of the regulatory scheme required the voiding of the mortgage securing the affordable housing unit, but not the loan or even the amount of the loan in excess of the lawful permissible limits.

We now reverse. Although we accord great deference to a state agency’s interpretation of a regulation within the sphere of its expertise, we cannot ignore the clear, straightforward language of N.J.A.C. 5:80-26.18(e), which states that the loan violating the maximum permissible limit, not the mortgage, “shall be void as against public policy.” HMFA’s interpretation of its regulation only permits the voiding of the mortgage, not the unlawful excess portion of the loan. That interpretation is plainly unreasonable because it permits a lending institution to collect the unlawful part of a loan that the regulation declares to be void. Read in a commonsense manner in accordance with its plain language, N.J.A.C. 5:80-26.18(e) strips the lending institution of any profit from the unlawful portion of a loan it issues, ensuring both that low- and moderate-income housing unit owners will not be saddled with debts they cannot afford and that lenders will not engage in predatory lending practices.

I.

A.

Defendant Nikia Hough met the limited income requirements for a qualified purchaser of a condominium unit under Piscataway Township’s Affordable Housing Program.¹ In January 2004, Hough bought an affordable housing condominium unit for $68,142.86, financing the purchase through a $61,329.00 loan issued by Wells Fargo Home Mortgage, InC.² The Uniform Housing Affordability Controls (UHAC) promulgated by HMFA, N.J.A.C. 5:80-26.1 to -26.26, and the Township’s ordinances controlled the sale and resale price of Hough’s condominium unit. The Affordability Controls also prohibit a lending institution from issuing a loan, secured by an affordable housing unit, exceeding 95% of the unit’s allowable resale price as set by the Township. N.J.A.C. 5:80-26.8(b).

A year later, in March 2005, Hough refinanced her home, which, at the time, by the Township’s calculation, had a resale value of approximately $68,735. Mortgage Lenders Network USA, Ine. (Mortgage Lenders) issued a thirty-year loan to Hough in the amount of $108,000.00, with a fluctuating interest rate between 7.8% and 13.8%. In turn, Hough gave Mortgage Lenders a mortgage on the property securing the entire amount of the loan.³ Both the deed and mortgage referenced the restrictions set forth in Piseataway’s affordable housing ordinances. The proceeds from the loan satisfied Hough’s pre-existing debts, including monies owed on the Wells Fargo loan and unpaid property taxes, and netted Hough a disbursement of $20,080.45.

Hough did not report, as required by N.J.A.C. 5:80-26.8(a), the refinancing to the administrative agent of the Township who ensures compliance with the appropriate laws governing affordable housing. The loan issued by Mortgage Lenders far exceeded the allowable resale price of the condominium unit and violated N.J.A.C. 5:80-26.8(b)’s bar against loans that exceed 95% of the maximum allowable resale price of the unit.

By February 2007, Hough defaulted on the loan by failing to make the required monthly payment. The loan and mortgage were assigned to US Bank, which, in June 2007, filed an action to foreclose on the property.⁴ In July 2008, US Bank filed an amended foreclosure complaint, naming a number of defendants, including Hough, Piscataway Township, and the New Jersey Housing and Mortgage Finance Agency (HMFA).⁵ The complaint sought the sale of the mortgaged property and a declaration that US Bank’s mortgage had priority over any other legal interests attached to the property.

In September 2008, US Bank moved for the entry of default against all defendants. Thereafter, Piscataway Township filed an answer basically asserting that the foreclosure action was subject to the Township’s affordable housing restrictions in the deed. Through a consent order, US Bank agreed to be bound by those restrictions. In essence, US Bank stipulated that it would not seek a resale price higher than the one allowed by the applicable affordable housing regulations and ordinances and that the unit would be sold only to a qualified buyer.

In January 2009, US Bank filed a notice for entry of final judgment. In March 2009, wrongly believing that a final judgment had already been entered, Hough moved to vacate the nonexistent judgment and to dismiss US Bank’s complaint on the ground that the loan violated the cap permissible under N.J.A.C. 5:80-26.8(b). The Chancery Division did not catch Hough’s mistake and denied the motion to vacate. The court reasoned that to void the mortgage or the loan would give Hough an unwarranted windfall.⁶

Hough filed a notice of appeal in July 2009.

B.

The Appellate Division reversed. US Bank, N.A. v. Hough, 416 N.J.Super. 286, 289, 3 A.3d 1251 (App.Div.2010).⁷ The panel rejected Hough’s argument that, under N.J.A.C. 5:80-26.18(e), US Bank is prohibited from foreclosing on the mortgage or collecting on the unpaid portions of the loan. Id. at 297, 3 A.3d 1251. The panel also rejected US Bank’s proposal that it affirm the Chancery Division’s order denying Hough’s motion to dismiss the foreclosure complaint. Id. at 294-96, 3 A.3d 1251.

The panel invited the Attorney General, on behalf of HMFA, to address the issue of the proper interpretation of N.J.A.C. 5:8026.18(e). Id. at 292, 3 A.3d 1251. HMFA took the position that when a lending institution issues an excessive loan secured by an affordable housing unit, N.J.A.C. 5:80-26.18(e) voids only the mortgage, not the underlying indebtedness. Id. at 295-97, 3 A.3d 1251. Applying principles of agency deference, the panel accepted HMFA’s interpretation of its own regulation, finding that it was not “plainly unreasonable.” Id. at 295, 3 A.3d 1251. The panel, however, permitted US Bank to file a separate action to collect on the unsecured debt. Id. at 297, 3 A.3d 1251. Thus, US Bank lost its status as a secured creditor but was allowed to pursue a judgment for the full repayment of the loan. Id. at 296, 3 A.3d 1251.

C.

We granted US Bank’s petition for certification and Hough’s cross-petition for certification. US Bank, N.A. v. Hough, 205 N.J. 184, 13 A.3d 1290 (2011). We also granted the motions of the New Jersey Land Title Association and HMFA to participate as amici curiae.

II.

US Bank concedes that pursuant to N.J.A.C. 5:80-26.18(e), the “legal mortgage between [it] and Hough is void.” Nevertheless, it submits that the Chancery Division properly exercised its discretion by allowing for an equitable mortgage—as agreed to by US Bank and Piscataway Township—in which the foreclosure on Hough’s condominium unit would be subject to the applicable affordable housing restrictions. That is, the property could be sold only to an income qualified buyer and only at a price not higher than the unit’s maximum resale price as set by the UHAC regulations. US Bank argues that to read N.J.A.C. 5:80-26.18(e) as stripping it of its security interest in the property would constitute not only a “plainly unreasonable” interpretation, but also a violation of the judiciary’s constitutional authority to exercise its equitable powers. Under US Bank’s construct, it has the right to pursue Hough for the amount of the unpaid loan remaining after the sale of equitably mortgaged property.

Amicus Land Title Association echoes the arguments advanced by US Bank, urging the adoption of the approach taken by the Chancery Division. According to the Association, an equitable mortgage in an amount equal to that allowed by the affordable housing regulations is a compromise that avoids a “forfeiture” by the bank and “unjust enrichment” by the debtor.

On the other hand, Hough argues that N.J.A.C. 5:80-26.18(e), properly applied, invalidates both the mortgage and the indebtedness. She reasons that the loan is illegal because it exceeds the maximum resale price of the affordable housing unit as set forth in N.J.A.C. 5:80-26.8(b) and that enforcement of the loan and the mortgage, which are inextricably linked, is against public policy as evidenced by the unambiguous language of N.J.A.C. 5:80-26.18(e). It is likewise against public policy, Hough contends, to apply an equitable mortgage to undermine a regulation and revive an illegal contract. She declares that HMFA’s regulations are intended not only to assist qualified applicants in purchasing affordable housing, but also to protect them from “predatory and illegal lending practices of financial institutions which have vastly superior resources, expertise, sophistication and bargaining power.”

Last, amicus HMFA asks this Court to affirm the Appellate Division and to defer to HMFA’s interpretation of its own regulation—an interpretation that “voidfs] the mortgage that uses the affordable unit as security for an excessive loan.” HMFA notes that had US Bank acted with “due diligence” it would have known of the resale restrictions, which were included in a publicly recorded deed. HMFA maintains (1) that its interpretation of the regulation does not result in a forfeiture because US Bank has the opportunity to collect the full amount of the debt as an unsecured creditor; (2) that US Bank should not benefit from an equitable mortgage because it “is at fault for failing to abide by the resale restrictions” of the affordable housing unit; and (3) that Hough should not be unjustly enriched by the voiding of the entirety of the debt she incurred.

III.

We are called on to interpret the meaning of N.J.A.C. 5:80-26.18(e), an administrative regulation that is one part of the enforcement apparatus of the Fair Housing Act, N.J.S.A. 52:27D-301 to -329.19. The Act was passed in the wake of this Court’s Mount Laurel decisions. L. 1985, c. 222; see N.J.S.A. 52:27D-302(a) (citing Mount Laurel decisions within legislative-findings section); see also S. Burlington Cnty. NAACP v. Twp. of Mount Laurel (Mount Laurel I), 67 N.J. 151, 336 A.2d 713, cert. denied, 423 U.S. 808, 96 S.Ct. 18, 46 L.Ed.2d 28 (1975); S. Burlington Cnty. NAACP v. Twp. of Mount Laurel (Mount Laurel II), 92 N.J. 158, 456 A.2d 390 (1983). Responding to the baneful effects of exclusionary zoning, those decisions required municipalities to provide, through their land use regulations, “a realistic opportunity for the construction of [their] fair share of low and moderate income housing.” Mount Laurel II, supra, 92 N.J. at 220-21, 456 A.2d 390.

The goal of the Fair Housing Act is to promote the development of affordable housing in New Jersey. See N.J.S.A. 52:27D-303 (declaring that “the statutory scheme ... comprehends a low and moderate income housing planning and financing mechanism in accordance with regional considerations and sound planning concepts”). To implement the Act, the Legislature created the Council on Affordable Housing, conferring it with authority to “[a]dopt criteria and guidelines” to determine each municipality’s fair share of affordable housing. N.J.S.A. 52:27D-305(a) and - 307(e).

The Legislature also directed the already existing Housing and Mortgage Finance Agency, N.J.S.A. 55:14K-4(a), to “establish affordable housing programs to assist municipalities in ... providing] low and moderate income housing,” N.J.S.A. 52:27D-321, and to “establish requirements and controls to insure the maintenance of [such] housing,” N.J.S.A 52:27D-321(f). In fulfilling its statutory mandate, HMFA promulgated the regulation at issue in this case, N.J.A.C. 5:80-26.18(e), which is found in the subchapter entitled “Housing Affordability Controls.” Subchapter 26 is intended to “assur[e] that low-and moderate-income units created under the [Fair Housing] Act are occupied by low-and moderate-income households for an appropriate period of time.” N.J.A.C. 5:80-26.1.

Subchapter 26 sets controls on the purchase and resale price of affordable housing units, N.J.A.C. 5:80-26.6, and restricts the sale of those units only to qualified low- and moderate-income households, N.J.A.C. 5:80-26.7.⁸ In this case, Piseataway Township officials are the administrative agents responsible for establishing the initial purchase price and maximum resale price of an affordable housing unit. See N.J.A.C. 5:80-26.6; see also N.J.A.C. 5:80-26.14(e) (noting that “[a] municipality itself ... may elect to serve as the administrative agent for some or all restricted units in the municipality”).

The regulations also protect an affordable housing unit owner from incurring excessive debt by forbidding exorbitant loans secured by a unit. As such, “neither an owner nor a lender shall at any time cause or permit the total indebtedness secured by an ownership unit to exceed 95 percent of the maximum allowable resale price of that unit, as such price is determined by the administrative agent”—here, Piseataway Township officials. N.J.A.C. 5:80-26.8(b). In addition, an affordable housing unit owner may not incur an indebtedness secured by the unit “unless and until the administrative agent has determined in writing that the proposed indebtedness complies with the [applicable affordable housing regulations].” N.J.A.C. 5:80-26.8(a).

The focal point of this case is the meaning of N.J.A.C. 5:80-26.18(e), the enforcement provision that applies when an excessive loan is secured by an affordable housing unit. Before looking at the precise language of the regulation, we turn to our standard of review.

When construing a law, we conduct a de novo review and do not accord any special deference to a trial court’s interpretation. Balsamides v. Protameen Chems., 160 N.J. 352, 372, 734 A.2d 721 (1999); Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378, 658 A.2d 1230 (1995) (“A trial court’s interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.”). We interpret a regulation in the same manner that we would interpret a statute. Bedford v. Riello, 195 N.J. 210, 221-22, 948 A.2d 1272 (2008). Determining the intent of the drafter is our paramount goal. See DiProspero v. Penn, 183 N.J. 477, 492, 874 A.2d 1039 (2005). Generally, the drafter’s intent is found in the actual language of the enactment. Bedford, supra, 195 N.J. at 221, 948 A.2d 1272. Whether construing a statute or a regulation, it is not our function to “rewrite a plainly-written enactment,” or to presume that the drafter intended a meaning other than the one “expressed by way of the plain language.” See DiProspero, supra, 183 N.J. at 492, 874 A.2d 1039 (internal quotation marks omitted). We cannot rearrange the wording of the regulation, if it is otherwise unambiguous, or engage in conjecture that will subvert its plain meaning. See ibid. In short, we must construe the regulation as written.

Only when a fair “reading of the enactment leads to more than one plausible interpretation” do we look to extrinsic evidence. Bedford, supra, 195 N.J. at 222, 948 A.2d 1272. Such evidence includes the meaning given to the particular regulation by the agency charged with its enforcement. Ibid. Significantly, nothing in the history of the rulemaking process leading to the promulgation of N.J.A.C. 5:80-26.18(e) sheds light on the meaning of the regulation beyond its plain language.

This appeal does not come to us from a final agency determination, but rather from a judgment of the Chancery Division, which interpreted the regulation without any input from HMFA—a named party in the litigation. The Appellate Division invited the Attorney General, as counsel to HMFA, to offer its interpretation of N.J.A.C. 5:80-26.18(e), and we have granted HMFA amicus status in this appeal. HMFA has offered its opinion concerning the application of N.J.A.C. 5:80-26.18(e) to the facts of this case.

When reviewing a final agency decision, we are “ ‘in no way bound by the agency’s interpretation of a statute or its determination of a strictly legal issue.’” Univ. Cottage v. N.J. Dep’t of Envtl. Prot., 191 N.J. 38, 48, 921 A.2d 1122 (2007) (quoting In re Taylor, 158 N.J. 644, 658, 731 A.2d 35 (1999)). However, we “defer to an agency’s interpretation of ... [a] regulation, within the sphere of [its] authority, unless the interpretation is ‘plainly unreasonable.’ ” In re Election Law Enforcement Comm’n Advisory Op. No. 01-2008, 201 N.J. 254, 262, 989 A.2d 1254 (2010). We do so because “a state agency brings experience and specialized knowledge to its task of administering and regulating a legislative enactment within its field of expertise.” Ibid.

Even though this appeal does not arise from a final agency determination, HMFA has given its view of the meaning of N.J.A.C. 5:80-26.18(e), a regulation that it promulgated and that falls within its sphere of authority. Consequently, we will accord due deference to HMFA’s interpretation. See Bedford, supra, 195 N.J. at 222-23, 948 A.2d 1272 (giving weight to “long-standing interpretation” of regulation by agency even though agency was not involved in matter); In re Adoption of a Child by W.P., 163 N.J. 158, 173-74, 748 A.2d 515 (2000) (giving deference to interpretation of statute by agency, which intervened as amicus curiae). Nevertheless, we are not bound by an agency’s “plainly unreasonable” interpretation of a regulation. See In re Election Law Enforcement, supra, 201 N.J. at 262, 989 A.2d 1254.

In light of the clear language of N.J.A.C. 5:80-26.18(e), we conclude that not only is HMFA’s interpretation “plainly unreasonable,” but also that the interpretations of the regulation by Hough and US Bank are equally unpersuasive.

IV.

We begin our analysis by noting that the key facts are essentially undisputed. US Bank’s predecessor issued a loan to Hough secured by her affordable housing unit that exceeded 95% of the maximum allowable resale price of the unit in violation of N.J.A.C. 5:80-26.8. Hough did not seek permission from the appropriate Piseataway Township official—the administrative agent—before incurring this indebtedness, also a violation of N.J.A.C. 5:80-26.8. Each of the interested parties, however, proposes a different remedy based on the language of N.J.A.C. 5:80-26.18(e). Hough contends that both the loan and mortgage should be voided; HMFA contends that only the mortgage should be voided; and US Bank contends that an equitable mortgage covering the maximum resale price of the unit should protect its interest in the property and the remainder of the debt should be collectible by other means.

We conclude that none of the proposed remedies flow from the plain language of the regulation. The language of the regulation itself clearly indicates the remedy that applies when an excessive loan is secured by an affordable housing unit. N.J.A.C. 5:80-26.18(e) provides:

Banks and other lending institutions are prohibited from issuing any loan secured by owner-occupied real property subject to the affordability controls set forth in this subehapter, if such loan would be in excess of amounts permitted by the restriction documents recorded in the deed or mortgage book in the county in which the property is located. Any loan issued in violation of this subsection shall be void as against public policy.

[N.J.A.C. 5:80-26.18(e) (emphasis added).]

We agree with HMFA that, based on the regulation’s language, “it is against public policy for a lending institution to issue a loan secured by an affordable unit for an amount in excess of the restricted price.” HMFA properly points out that “[t]he deed restrictions are recorded as public documents and, therefore, lending institutions can easily determine whether a unit has a restricted price.” Whatever fault may lie with Hough for failing to seek approval from Piseataway Township’s administrative agent before taking on the indebtedness, the fact remains that the lender did not exercise simple due diligence before issuing a loan that exceeded the permissible limits under the law.

The regulation—apparently recognizing the disparity in resources between a lending institution and low- and moderate-income households—concentrates on the excessiveness of the loan as the chief evil. See N.J.A.C. 5:80-26.18(e). A bank can reasonably be expected to know that persons who qualify for affordable housing are unlikely prospects for paying off an exorbitant loan— one exceeding the maximum resale price of the unit. Indeed, the issuing of high-risk loans, secured by real property, to borrowers with insufficient means is one of the principal reasons for the recent collapse of the real estate market and the filing of mass foreclosure actions. See David Schmudde, Responding to the Subprime Mess: The New Regulatory Landscape, 14 Fordham J. Corp. & Fin. L. 709, 715-27 (2009).

We do not agree with HMFA that “it is the mortgage secured by the affordable property that offends the regulation” and therefore “the purpose of the regulation is met by voiding the mortgage as against public policy.” N.J.A.C. 5:80-26.18(e) states that the “loan issued in violation of this subsection shall be void as against public policy.” Of course, it is the loan secured by the affordable housing unit—not just any loan—that is at issue. Nevertheless, it is the excessive loan, not the mortgage, which is void under the regulation. If the drafters intended the voiding of the mortgage to be the remedy, the regulation would read: “Any loan issued in violation of this subsection shall [result in the voiding of the mortgage ] as against public policy.”

Words in a statute or regulation make a difference. Business entities and ordinary people rely on the plain language of laws when engaging in everyday transactions. We cannot insert qualifications into a statute or regulation that are not evident by the enactment’s language. We cannot rewrite the regulation to achieve some other worthy purpose; we must enforce it as written, unless doing so would lead to an absurd result.

Reading the plain language in a commonsense manner leads to a very unremarkable result. The “loan” that violates the affordable housing regulations is that part in excess of 95% of the maximum resale price of the unit. It is the excessive amount that is void as against public policy. If the loan issued had been 95% of the maximum resale price, no one would argue that the loan or mortgage should be void.

HMFA declares that voiding the entirety of the mortgage will ensure that “the unit is not lost to the affordable housing stock.” However, the voiding of the mortgage does not achieve that goal. Rather, it is the deed restriction controlling the resale price that will keep the unit in the pool of low- and moderate-income housing. The restriction on the resale price is based on the affordable housing regulations. Accordingly, Hough’s unit will remain affordable housing regardless of HMFA’s proposed remedy.⁹

Not only does HMFA’s interpretation not follow from N.J.A.C. 5:80-26.18(e)’s plain language, but that interpretation seemingly would lead to the discordant result of delaying the inevitable. If only the mortgage were voided, then the bank could obtain a judgment against the debtor and execute against the affordable housing unit and whatever other assets the debtor possessed. Although the bank must take additional steps in the march to judgment, the debtor remains underwater.

The regulation, as written, gives the most powerful incentive to a lending institution not to issue an excessive loan to a person who qualifies for affordable housing. Indeed, the regulation strongly discourages predatory lending. Nothing in the language of N.J.A.C. 5:80-26.18(e) supports HMFA’s supposition that “it is the mortgage secured by the affordable property that offends the regulation and is void as against public policy.” For that reason, we find HMFA’s interpretation of the regulation “plainly unreasonable.” We come to this conclusion while according HMFA full agency deference, and understanding that it will be a rare day when an agency cannot give a plausible interpretation for one of its own regulations.

We also find that Hough’s argument—that the regulation voids both the entirety of the loan and the mortgage—to be wholly unreasonable in view of the regulation’s plain language. Although the language of N.J.A.C. 5:80-26.18(e) does not impose any penalty on Hough—despite her own violation of the affordable housing rules by not securing approval for the debt from the administrative agent—the regulation does not reward her with a completely undeserved windfall. There is no reason why Hough should not be responsible for the lawful portion of the loan—the portion representing 95% of the maximum resale price of her unit—or for the mortgage securing that part of her debt. Hough can hardly complain. She will be relieved of repaying $40,000, which represents the part of the loan that is “void as against public policy.” See N.J.A.C. 5:80-26.18(e).

We likewise consider US Bank’s position to be unpersuasive. US Bank asks us to impose an equitable mortgage on the affordable housing unit equal to 95% of the maximum resale price and then allow it to obtain a judgment against Hough for the illegally excessive part of the loan issued to her. The regulation, in our view, does not disturb its mortgage up to the legally permissible limits, so there is no need for an equitable mortgage. Moreover, as already explained, N.J.A.C. 5:80-26.18(e) voids the excessive part of the loan as against public policy. No party cites any authority suggesting that the loss of the illicit part of the loan would rise to an unconstitutional forfeiture.

V.

In conclusion, we reverse the judgment of the Appellate Division, which held that N.J.A.C. 5:80-26.18(e) only requires the voiding of the mortgage securing the loan and that US Bank can file a separate action to collect on the unsecured indebtedness. We find that interpretation—the one advanced by HMFA—to be “plainly unreasonable” when viewed against the precise language of N.J.A.C. 5:80-26.18(e). That regulation clearly states that “[a]ny loan issued in violation of [the applicable affordable housing regulations] shall be void as against public policy.” Accordingly, the portion of the loan exceeding the permissible limits of N.J.A.C. 5:80-26.8(b) is void and not collectible by US Bank. The remainder of the loan is secured by the affordable housing unit.

We remand to the Chancery Division for proceedings in accordance with this opinion.

1 We recite here only those parts of the procedural history that are relevant to the disposition of the issue before us. A more detailed discussion of the procedural background can be found in US Bank, N.A. v. Hough, 416 N.J.Super. 286, 289-92, 3 A.3d 1251 (App.Div.2010).

2 We use the term "loan" as a substitute for the term "note,” which is the document signifying the promise to repay a debt. See Black's Law Dictionary 1088-89 (8th ed. 2004). The term "mortgage”—as distinct from "loan”—is used to refer to the document giving the lender a security interest in the property pledged as collateral for repayment of the debt. See Black's Law Dictionary 1031 (8th ed. 2004).

3 The mortgage stated that Mortgage Lenders’ nominee. Mortgage Electronic Registration System, Inc., had the right to foreclose on the property for nonpayment of the note.

4 US Bank was not the legal holder of Hough’s debt at the time it filed the complaint. The legal assignment of the debt to US Bank did not occur until July 20, 2007 and was not recorded until August 14, 2007. US Bank’s right to prosecute the foreclosure complaint is not an issue in this case.

5 The amended complaint also named as defendants Hough’s non-existent husband, the New Jersey Department of Community Affairs, the Council on Affordable Housing, the State of New Jersey, and the Commons at Piscataway, Inc.

6 Another Chancery Division judge entered final judgment on the amended complaint in favor of US Bank in December 2009. The court's order set the amount owed to US Bank at $136,516.16, in addition to counsel fees of $1,515.16 and interest, and directed that Hough’s property be sold at a Sheriffs sale to satisfy the monies owed.

7 The appellate panel noted that the appeal was from an interlocutory judgment, not a final judgment. US Bank, supra, 416 N.J.Super. at 291, 3 A.3d 1251. Indeed, the appeal was filed before the entry of final judgment in December 2009. It is not clear whether the Appellate Division was aware of the December 2009 Chancery Division order. Nevertheless, the panel granted leave to appeal “because of the importance of the issue presented." Id. at 291-92, 3 A.3d 1251.

8 N.J.A.C. 5:80-26.7(a) provides that "[L]ow-income ownership units shall be reserved for households with a gross household income less than or equal to 50 percent of median income. Moderate income ownership units shall be reserved for households with a gross household income less than 80 percent of median income.”

9 This is a point conceded by the Attorney General, appearing for HMFA, during oral argument before this Court.