NJ Foreclosure Defense
BASIC FORECLOSURE FAQ’S
1. What is a foreclosure case?
Foreclosure is the legal process where a court orders the sale of a home when the homeowner doesn’t pay the mortgage. Right now thousands of New Jersey homeowners are having tremendous difficulty making their mortgage payments. It is important for you to know that the lender can’t take your house automatically if you have missed mortgage payments. The lender must take you to court where you have several options to try to save your home. It is important for you to be aware that in many cases a mortgage foreclosure can be prevented. Don’t give up hope if the bank has filed for foreclosure. You can file for bankruptcy, pursue a loan modification, or participate in the foreclosure mediation program.
2. How are mortgage liens treated in New Jersey?
A mortgage is simply an agreement wherein a lender uses a house as collateral for a debt. If a homeowner does not pay his mortgage, then a lender can try to force the sale of the home so that it can be sold to satisfy the debt. After a homeowner signs a mortgage, the original mortgage is then recorded with the County Clerk in the county wherein the house is located.
3. What is a note?
When you sign your mortgage, you also sign a document called a note. The mortgage note is just like an IOU. The note spells out the amount of money you have borrowed and the terms for repayment, such as the interest rate and length of the loan. A loan default occurs when a borrower fails to do what the mortgage note requires. For example, a homeowner who misses a mortgage payment is in default. It is important to identify and understand the terms of your mortgage note. The principal is the total loan amount borrowed and it is the face value of the note. The interest rate is the amount that a borrower pays the lender for the use of the money, expressed as a percentage.
4. How are mortgages foreclosed upon in New Jersey?
In New Jersey the bank must file a foreclosure case with the court. Once the bank obtains a foreclosure judgment then the property will eventually be sold at a public sheriff sale. The court that has jurisdiction over a foreclosure is the Superior Court of New Jersey, Civil Division, General Equity. During the foreclosure process the bank must also file a legal form called a lis pendens. A lis pendens is a recorded document that provides to the public notice that the property is being foreclosed upon. Therefore, the homeowner can’t sell the home to avoid the foreclosure if a lis pendens if filed. The foreclosure unit of the Superior Court handles all foreclosures.
5. What are the legal documents used to effectuate a New Jersey mortgage?
There are two documents that must be executed to create a valid and binding mortgage. These legal documents are known as the mortgage and a promissory note. The mortgage is always filed in the County Clerk’s Office. The promissory note is not filed with the clerk.
6. How long does it take to foreclose upon a home in New Jersey?
In most cases it generally takes 250 days to one full year for an uncontested foreclosure to be processed. This time fluctuates significantly. The two major factors that effect this time line. The first factor is how busy the local county court is wherein the foreclosure case is filed. The second factor is how fast the bank’s lawyer pushes the case. It is important to emphasize that the foreclosure process can be delayed if the borrower contests the foreclosure case, requests adjournments of the sheriffs’ sale, or files for a bankruptcy.
Generally, New Jersey has one of the longest wait times for foreclosures. There are many ways that a defendant can extend a foreclosure case. A defendant has 35 days to answer a foreclosure case. Once a default is entered then the bank must wait another 45 days before entering a final judgment for foreclosure. Thereafter, the bank must file for a writ of execution to be issued and delivered to the sheriff to effectuate the foreclosure sale process. The defaulting borrower must be given at least 10 days notice before the foreclosure sale can take place.
7. Does a borrower have a legal right of redemption in New Jersey?
New Jersey has a statutory right of redemption. This means that the borrower or the party whose property has been foreclosed has a legal right to reclaim that property. The borrower must make a payment in full of the sum of the unpaid loan plus costs to the bank. It must be emphasized that there is a strict time limit of only ten days to exercise a right of redemption after the foreclosure sale.
8. I have recently lost my house at a sheriff’s sale. However, my home sold for $50,000 less than the amount of the mortgage that I owe to the bank. Can the bank still sue me for the balance of the original loan?
Yes, in New Jersey the banks or mortgagee is still entitled to sue a homeowner for any balance that is still due on the mortgage after a sheriff sale. Nonetheless, in my experience deficiency lawsuits are rarely filed. A deficiency judgment can be obtained when the home that is sold at a sheriff sale for less than the mortgage amount. This means that the borrower still owes the bank for the difference between what the home sold for at the sheriff’s sale and the amount of the original mortgage.
Thankfully, New Jersey however has a Fair Market Credit Doctrine that is codified under N.J.S.A . 2A:50‑3. This law protects a homeowner against low or minimal bids which may give the lender a windfall in the event of a deficiency lawsuit. Under this doctrine the defaulting borrower is given credit for the fair market value of the property regardless of what type of bid was made at the sheriff’s sale. This doctrine is also considered to be an affirmative defense. The borrower must raise this defense in any deficiency lawsuit. Finally, there is a strict time window for the lender to file this type of lawsuit. Any deficiency lawsuit must be filed within three months of the sheriff’s sale.
WAYS TO AVOID FORECLOSURE
9. What are the best ways to avoid a foreclosure case?
Many foreclosures can be prevented by calling your mortgage company and by asking to speak to someone in the Loss Mitigation Department. You could inquire about a loan workout solutions, such as, a repayment plan, loan modification agreement, forbearance agreement, a loan assumption, deed in lieu of foreclosure or short sale. The sooner you ask for help then the easier it will be for you to formulate a plan to save your home. In today’s world it seems that half of New Jersey’s residents are facing the grim prospect of losing their home. Thankfully, in past few years there has been an explosion of foreclosure workouts that enable a distressed homeowner to try to save his home.
Foreclosure mediation is the hottest new option for a homeowner who is faced with foreclosure. The State of New Jersey has recently established a court run foreclosure mediation program. Foreclosure mediation simply gives the homeowner an opportunity to try to negotiate a repayment plan with the lender. A mediator also tries to assist the bank and the homeowner to try to work out a foreclosure alternative. The person appointed by the court is called a mediator. Under New Jersey’s foreclosure mediation program, mediation does not stop the foreclosure case from marching on. If the mediation is successful, and if the parties ultimately reach an agreement, they may agree to stop the foreclosure. In summary foreclosure mediation helps a tremendous amount of New Jersey’ites save their precious homes. There are not many caves in New Jersey. Therefore, you should make every effort to save your home.
Nonetheless, foreclosure mediation can’t save the world. If a homeowner does not have any cash flow, or if he simply can’t afford to pay the mortgage and the taxes, then mediation will only stall the inevitable. The inevitable reality is that the homeowner will ultimately have to sell his home or lose at the sheriff’s sale. Finally, it is important to emphasize that merely because you are participating in the foreclosure mediation program, this even does not alone stop the foreclosure case. There has to be a court order or a written agreement to stop the foreclosure case. Unless you have a court order or an agreement then the foreclosure process will still continue, and you could still lose your home. In many cases a bankruptcy can also help you save your home.
GETTING STARTED
10. I was just served with a foreclosure complaint. What should I do now to try to save my home?
First, take a deep breath and don’t panic. There are several steps that you may take to try to save your home.
A. Obtain records and mark down important deadlines
People get very scared when they are served with a foreclosure complaint. Many of my clients have advised me that they simply throw away or ignore foreclosure complaints. This is a major mistake. You should always open up your mail and read it thoroughly. If you blow off your foreclosure court papers, then you could lose your home, and you won’t even have a chance to try to save your home. If you receive a foreclosure complaint then you should immediately either consider filing for a chapter 13, or enroll in the foreclosure mediation program.
Additionally, you should call your lender’s customer relations line and request an application for a loan modification. All of these options take considerably time and preparation. You should not wait until the last minute to explore these alternatives. In summary, don’t ignore a foreclosure complaint and any other pleadings. Additionally, you should also always mark down any of the deadlines in the legal papers that you receive from the lender. These deadlines have important consequences. Don’t expect that your foreclosure case will disappear or fade away.
B. Obtain a copy of your mortgage documents
If you are faced with a foreclosure then you should also retrieve your mortgage documents. At a house closing a homeowner signs many legal documents so that he can obtain a loan. At the closing you were given a copy of your loan documents. If you can’t find these documents then you should write your bank and obtain a copy of them. You will need to give a copy of these documents to your lawyer if you want to pursue foreclosure mediation, a loan modification, or even bankruptcy.
C. Other documents related to the mortgage
If you are trying to stop your foreclosure then it will also help your case if you have the following documents:
* Your mortgage statements
* Proof of payment such as canceled checks, money order stubs, and credit card statements
* Proof of homeowners’ insurance
* Proof of property tax payments
11. I was just contacted by this company that advised me for $3,000 they could save my home. Are these companies legit?
There are a tremendous amount of foreclosure scams in New Jersey. When people are faced with losing their home, they often become gullible to the countless amount of scoundrels in the world. When you are in a foreclosure case, you will receive a ton of junk mail. Moreover, when you are in a foreclosure case the court records are public and companies use lists of foreclosure filings to mail information about their services to people in foreclosure. Most of these companies that contact you to try to help you save your home is completely bogus. They are just trying to rip you off. I have heard of countless stories wherein desperate people have blow thousands of dollars to companies who gave them false promises that they could save their homes. You should avoid these companies like the plague.
These companies have various ways as to how they can scam you. A common scam is where you are told to transfer the deed to your property to someone else temporarily and then buy your house back in a year or two when your credit improves. This is called a sale leaseback deal. If you fall for this scam then it is very unlikely that you will ever get back the deed to your property. Moreover, it is very likely that the new owner will eventually try to evict you so the new owner can sell the house for a profit. Under no circumstances should you fall for the sale leaseback scam. Finally, another common scam is you are asked to pay a fee to have your mortgage renegotiated. You are told that for a fee, a company will renegotiate your mortgage with your lender. I have never heard of a case wherein one of these companies has been able to be successful renegotiate a distressed mortgage.
12. Why is important to evaluate your finances in foreclosure defense case?
A. Find out how much your house is worth
In any foreclosure bailout scenario it is critically important to have some realistic information as to how much your home is worth. You can find out by obtaining either a market analysis or an appraisal. This step will help you determine if you have any equity in your home. Moreover, if you know the market value of your home, then you will be able to make a more informed decision. If you have no equity in your home then it might make no sense to try to save it via a loan modification, bankruptcy, etc. In many cases the homeowner may actually owe more money on the home that what the house is worth. In scenarios such as this, the best decision may be to abandon the home, and lose it in foreclosure.
B. Analyze your budget
You should sit down with your spouse or partner and review your pay and bills. You should then make the hard decision whether you can afford to keep your home. If you paychecks don’t cover your monthly bills then you will either have get a better job, get a raise, or rent out a room in your home. Alternatively, you might just have to downsize and sell your home.
C. Save your money
If your lender will not accept your mortgage payments, then it is very important that you save all of the money that you would have spent on your monthly mortgage payment. You will need these savings to effectuate and loan modification or forbearance agreement with your lender. If you are not paying your mortgage, then it is essential that you must salt away these missed mortgage payments.
D. Write out your story
If you choose to seek a forbearance agreement or a loan modification that you will be eventually required to provide grounds of hardship to the lender. Therefore, you should write out your own personal story of what happened to you and why your mortgage went into the tank. Your lawyer will need this hardship memorandum to present it to the lender. Moreover, the bank rep who is reviewing your loan modification will also need to review your hardship memorandum.
E. Review and understand your mortgage
Finally, it is important for you to review your mortgage. You should pull out your closing package and review the following documents;
* The mortgage
* The mortgage note
* Any riders to the note
* The Truth in Lending disclosure statement
* The itemization of the amount financed
* All copies of the notice of right to cancel (if any)
After your review all of your mortgage documents and your interest rates, then you should have a discussion with your lawyer and the bank’s representative to discuss your options.
THE FORECLOSURE PROCESS
13. What is the pre‑foreclosure process?
A. You default on your loan
If you miss one mortgage payment then you are considered to be in default. Usually if you miss two or three payments, then the lender will contact you via a letter. The letter will warn you that a pre‑notice of intent to foreclose will be sent out if you do not catch up on your payments.
B. The lender sends you a Notice of Intention to Foreclose
If you don’t catch up on payments then the next step is that the lender will send you a notice of intent to foreclose. The lender will not send out this letter until you miss at least three mortgage payments. The New Jersey Fair Foreclosure Act requires the lender to send this notice to you. The law also requires that certain information must be included in the notice. The lender must send you this notice at least 30 days before the lender files a complaint. If you can cure the default and make up the missed mortgage payments, then the lender must accept your payment and cannot charge you attorneys’ fees at this point.
14. Where is a foreclosure complaint filed?
All foreclosure complaints are filed with the Clerk of the Superior Court, located Richard Hughes Justice Complex, P.O. Box 971, 25 Market St., Trenton, New Jersey 08625. Even though the complaint is filed in Trenton, the complaint’s caption states venue to be the county where the property is located. Any and all court pleadings must be filed in Trenton, until and when the case is transferred to a county court. If the foreclosure case is contested, then the case will be transferred to the county court. Thereafter, any additional pleadings must filed with the General Equity judge in the county of venue.
15. What should you do if you are served with a foreclosure complaint?
You should immediately get legal help as soon as possible! You generally only have 35 days to respond to the complaint. If you look at the summons, which often is the first page of the papers that you received from the lender’s attorney, then you will notice that it demands that you answer the complaint within 35 days after you receive the summons and complaint.
16. What is an answer?
An answer is the document filed by the debtor/property owner (defendant) which contains the response to each of the statements made by the plaintiff. The answer must also contain the reasons or circumstances why the defendant is or is not responsible for any loss claimed by the lender (plaintiff). Answers should give notice to the court and to the other parties, in short and plain terms, why the relief requested in the complaint is opposed. An answer must respond to each numbered paragraph in the complaint and admits the statement, denies the statement or states that the party is without knowledge or information sufficient to form a belief as to the truth of the statement (allegation). In foreclosure case a response that the defendant is without sufficient knowledge or information is not a denial. Answers may also assert affirmative defenses. Affirmative defenses are specific and separate statements of facts asserted to prevent the relief requested in the complaint.
17. How should I prepare a written answer to a foreclosure complaint?
The answer tells the court in short and simple terms whether you admit or deny the statements made by the lender‑plaintiff in the complaint and sets forth every defense you may have to the lender‑plaintiff’s claims. You must respond to each numbered paragraph in the complaint and either admit the allegation, deny the allegation, or state that you are without knowledge or information sufficient to form a belief as to the truth of the allegation. Whenever you deny something in the complaint, you should also state briefly your reason why you are denying it or any part of it. If you have defenses, you should list the facts that explain your action or inaction. You may state as many separate defenses as you have and provide any reasons you have why the plaintiff should not get the relief requested. Sign and date the answer. Nonetheless, it is important to emphasize that an allegation in a foreclosure answer that a party is without knowledge or information does not have the effect of a denial and such a response is viewed as non‑contesting.
18. Where should an answer to a foreclosure case be filed?
You should file, deliver or mail the original and one copy of your answer to the Clerk of the Superior Court, Hughes Justice Complex, P.O. Box 971, 25 Market Street, Trenton, New Jersey 08625 along with the filing fee. If you mail the papers, then it is recommended that you use certified mail, return receipt requested. Enclose a stamped self‑addressed envelope so the file stamped copy can be returned to you. Keep your file stamped copy in a safe place because it is your proof that you filed your answer in the place and on the date indicated in the file stamp. A foreclosure case information statement (FCIS) must accompany all complaints and answers. After you have prepared your answer, you must mail a copy to the attorney who filed the foreclosure complaint against you.
19. What is the difference between a contesting and non‑contesting answers?
The Office of Foreclosure in Trenton receives and processes all of the foreclosure complaints, answers and other pleadings. The Office of Foreclosure reviews every filed answer. The Office of Foreclosure sends contesting answers to judges for case management. A contesting answer challenges the lender‑plaintiff’s right to foreclose. Meanwhile, a non‑contesting answer does not dispute the right to foreclosure or a lien holder’s priority. All non‑contesting answers remain with the Office of Foreclosure for administrative processing.
20. What happens if a defendant fails to file an answer?
If you do not answer the foreclosure complaint in writing then you are admitting the claims of the foreclosure complaint. Thereafter, the lender‑plaintiff can seek entry of a default against you. Finally, the lender‑plaintiff can seek a default judgment. A foreclosure judgment orders either the sale of a home to satisfy a debt or it awards title to the property to the plaintiff. A foreclosure judgment is not a money judgment that can be collected by wage garnishments or by executions against personal property. However, the lender may seek to recover any deficiency which remains following a foreclosure sale in a separate lawsuit that is filed in the Law Division. In a foreclosure on a residential mortgage, the damages are very limited. The lender can only recover damages that are limited to the difference between the mortgage debt and the fair market value of the property.
21. What is the time frame to finalize a foreclosure case?
New Jersey is a judicial foreclosure state meaning that foreclosures are processed through the courts. It normally takes between 250 days to one full year to process a foreclosure. Once the lender obtains a judgment of foreclosure then the county sheriff must then advertise the foreclosure sale once per week for four consecutive weeks in a local newspaper.
22. What are the fees charged in a foreclosure case?
The fee for filing a foreclosure complaint is $200. The fee for filing a foreclosure answer is $135. Any notice of motion is charged a $30 filing fee.
23. What will be the case management of a contested foreclosure case?
Once you have filed your answer (and the Office of Foreclosure marks it as a contesting answer), then you will get other papers from the lender’s attorney and notices from the court. In many case the lender’s attorney will file a motion to strike the answer or for summary judgment. The vast majority of foreclosure cases never go to trial. Most are decided by way of summary judgment.
24. What is the foreclosure process once a case is transferred in the Superior Court system?
After the case is transferred to a Superior Court judge in the county where the property is located, you must get ready to have a trial. The lender will try to convince the court either by a motion or at a trial that it has the right to foreclose on the property. You must convince the court that the lender does not have the right to foreclose on the property for the reasons you described in your answer.
Only in very rare cases will you have a trial. Instead, the lender will file for a motion for summary judgment. A motion for summary judgment is a special kind of motion. In a motion for summary judgment, the lender asks the court to decide the case in its favor without a trial or any further legal proceedings. Many times, the lender will file a motion for summary judgment as soon as you file an answer. To win a summary judgment motion, the lender must show the court that:
The lender and homeowner agree to all of the important facts that would affect the judge’s decision in the case, and the law is completely on the lender’s side.
25. How can a borrower respond to a motion for summary judgment?
The defendant/homeowner must file and serve a written response to the motion for summary judgment. If the homeowner does not file and serve a written response to the motion for summary judgment, then the lender will win automatically whether the lender is right or wrong.
26. How do the courts normally rule on summary judgment motions?
To decide a summary judgment motion, the court looks at the lender’s motion and your response to decide whether or not you have any legal defenses to foreclosure. After the court receives the papers, the court may also decide to hold a hearing before making a decision. If the court decides that you do not have legal defenses to foreclosure, then the court will usually decide the summary judgment in favor of the lender. This means that the lender now has the right to proceed to foreclose on your property. If the court decides that the defendant homeowner does have legal defenses to foreclosure, then the court will probably decide the motion in your favor and deny summary judgment to the lender. In short if a homeowner successfully defends against a motion for summary judgment, then he will now have a full‑blown trial.
27. I have a foreclosure trial scheduled in May of next year. What steps do I have to take to prepare for trial?
If you are entitled to a foreclosure trial then it is critical that you conduct full discovery. Discovery is another activity that takes place before the trial. Discovery is the process by which the parties the plaintiff and defendant use several types of tools to ask for facts, documents, and other information before the trial takes place. In a foreclosure case, each may ask the other to provide information that may help prove or disprove the right to foreclose.
The judge assigned to the case may write a letter to the parties setting up a case management conference (CMC). A CMC is a meeting that will include you or your attorney, the judge, and the lender’s attorney. The main purpose of the CMC is to set up a time schedule with deadlines for discovery. The court may also schedule a trial date at the case management conference. The CMC is not an official hearing in the courtroom. No one will be sworn in, and the judge will not make any decisions about whether the lender may foreclose. At the meeting, the judge may ask some questions to get an idea of the issues involved in your case. The judge will also explore whether settlement is possible. At a trial, the lender must prove it has the right to foreclose. Then you must prove that the lender should not be permitted to foreclose because of the defenses you have raised.
28. How will a foreclosure case proceed if I don’t answer it?
If you miss the deadline to file an answer, or file a non‑contesting answer, the lender will probably file papers with the court asking the court to enter a default.
29. I have failed to answer my lender’s complaint for foreclosure. However, I honestly believe that I have a good faith defense to the case. What can I do to stop the foreclosure?
New Jersey Court Rule 4:43‑3 allows you to file a written request with the court asking the court to cancel/undo the default and to give you another chance to file an Answer. You must show good cause in order for the Court to give you a second chance to file an Answer. The case of O’Conner v. Abraham Altus , 67 N.J. 106, 129 (1975) is an example of a case where a court set aside a default for good cause. Good cause simply means that you have a defense to a mortgage foreclosure case.
30. What will happen I don’t contest the lender’s request for an entry of default?
If you do not respond to the lender’s request for entry of default, then the lender may go forward and ask the court to enter a final judgment in the lender’s favor. The lender does this by making a motion for entry of final judgment. However, before the lender may file this motion, the lender must give you notice and one final chance to cure the default. This notice is called the Lender’s Notice of Motion for Entry of Final Judgment. This notice must be sent fourteen days before the lender asks for the court to enter final judgment. The lender must send you a notice in the form of a letter advising you of this information.
31. How should I respond to the plaintiff’s request for a final judgment?
If you believe that you might be able to cure and pay back your mortgage arrears, then you should respond with a Good Faith Statement within 10 days of receiving the lender’s notice. You will have 45 days from the date of receiving the letter notice to cure the default. You should end your response by certified or registered mail, return receipt requested. If you intend to file for bankruptcy, then it is a good idea to file before any type of default judgment is entered against you.
32. What will the lender do next if a borrower does not make an offer to cure?
If you are unable to cure, then the lender will file a motion to the court to enter a final judgment. This is the court’s judgment that the lender is entitled to foreclose on the property. It sets forth the amount of money that the lender is entitled to receive when the property is sold at a sheriff’s sale. At this point, if you disagree with the amount of the judgment, then you have 10 days to file an objection to the lender’s motion. This objection may alter the amount of the foreclosure judgment, but it will not prevent the foreclosure. After the court has entered a final judgment in favor of the lender, then you still have one last chance to undo the judgment. You can try to reopen the case and file an answer, and perhaps prevent foreclosure. New Jersey Court Rule 4:50‑1 permits you to file a motion with the court to vacate the judgment.
33. What is the sheriff’s sale process?
If the court grants the lender a final foreclosure judgment, then the court will also issue a writ of execution. The writ of execution will order the County Sheriff to sell your house to the highest bidder at a public auction. You will receive a notice that informs you when your house will be scheduled to be auctioned. A notice also will then be posted in a newspaper.
34. What can I do to stop a sheriff’s sale?
If your home is scheduled for a sheriff’s sale, then you may apply to the County Sheriff in person for two two‑week delays of this sale. These delays are called adjournments or stays. You must pay a fee to the sheriff’s office for this stay. You should be prepared to pay a fee of under $50 by cash or money order. You do not have to prove good cause or appear before a judge to get these stays.
You may also apply for a stay at the Superior Court, Chancery Division, in the county where the property is located. The courts often will grant a stay to allow you to participate in the court’s mortgage mediation program. However, courts rarely grant stays for any other reason, except in very compelling circumstances, such as to allow a homeowner to complete a sale or refinance of the property that is in progress. These stays are temporary, and it will not give you an opportunity to have any of your defenses heard by a judge. They only give you the opportunity to try to complete some other plan.
35. Can I get my home back after the sheriff’s sale?
After the auction, you will have ten days to redeem or to get back your home. During this period of time, you can save the property by refinancing or you can sell the property. A bankruptcy filed after the sheriff’s sale will extend the period of time in which you can redeem the property, but you will not be able to raise your defenses in bankruptcy court at this time.
If the lender wins the court case, then the Sheriff will sell the property. The money from the sheriff’s sale is paid to the lender to make up for the homeowner’s failure to pay. If the house sells for more than the amount of the mortgage, then the homeowner is entitled to the difference. If the house sells for less than the amount of the mortgage, then the lender has the right to sue the homeowner for the rest of the money that the homeowner owes. This type of lawsuit is called a deficiency case.
After the sheriff’s sale, you will receive a notice from the sheriff that advises you when you must vacate or move out of the house. If you do not move out of the house by that date, then the sheriff may come into the property and remove you and your belongings. In summary, it can take a year or more for an uncontested foreclosure to be final, from the date of the notice of intention to foreclose through the date the sheriff takes possession of the property.
HOW TO PROTECT YOUR HOME FROM FORECLOSURE
36. How can I stop my house from being foreclosed upon?
Many foreclosures can be prevented simply by calling your mortgage company and by asking to speak to someone in the Loss Mitigation Department about loan workout solutions, such as a repayment plan, loan modification agreement, forbearance agreement, loan assumption or a deed in lieu of foreclosure or short sale. The sooner you ask for help, then the easier it will be for you to formulate a plan to save your home. The bank does not want to sell your home. However, if you don’t pay your mortgage then it has no other choice but to file for foreclosure.
37. What is foreclosure mediation?
New Jersey has just recently started a court run foreclosure mediation program. Mediation is an opportunity to try to negotiate a payment plan with the lender, with the assistance of a person appointed by the court. Foreclosure mediation is a last ditch opportunity for a homeowner to try to save his home. The program aims to assist homeowners to avoid foreclosure by proposing workout and payment arrangements. The program is free to participate in. The mediators attempt to encourage the borrowers and the mortgage lender to reach a settlement. Before you attend the mediation session, you should know the terms of your mortgage, and how much of a monthly mortgage payment you can make. It is important to emphasize that the foreclosure mediation does not stop the foreclosure process from continuing. If the mediation is successful, and if the parties come to an agreement, they may then agree to stop the foreclosure case. However, unless there is a court order or a written agreement to stop the foreclosure, the foreclosure process will continue while the mediation is still going on.
38. Can filing for a bankruptcy help me save my home from a foreclosure?
Sometimes, filing bankruptcy can help you save your home. Bankruptcy may be especially helpful if you have more than one mortgage on your home. In some cases you may be able to strip‑off and eliminate second mortgages, such as home equity loans in bankruptcy. As soon as you file a bankruptcy, all court actions against you are automatically stayed or stopped. Therefore, filing bankruptcy automatically stops foreclosure cases and sheriff’s sales. This stay gives you some temporary breathing room to try to sort things out. You are eligible for this automatic stay unless you have filed several bankruptcies recently that have been dismissed.
39. What different types of bankruptcy can I file to help me save my home from foreclosure?
There are two types of consumer bankruptcies. One is called a Chapter 7 and the other is called a Chapter 13.
A. Chapter 7 bankruptcy
In a chapter 7 bankruptcy the court will discharge and cancel all of your unsecured debt. Unsecured debt means that there is no collateral for the debt. For example, credit card debt is unsecured debt. Alternatively, mortgages are considered to be secured debt. You have promised the mortgage company that your home can be sold through court action if you do not pay your mortgage debt. Therefore, mortgage debt will not be canceled in a chapter 7 case.
B. Chapter 13 bankruptcy
In a chapter 13 bankruptcy, you will be required to pay your secured debt a little at a time, over no more than five years. If you have a good mortgage, but you had a temporary setback such as an illness or temporary job loss, then a chapter 13 bankruptcy can help you get back on track. In order to qualify for a chapter 13 bankruptcy, you must be able to afford to make your current mortgage payments. You must also have enough extra income to pay off the mortgage arrears a little bit at a time.
If there is any chance you might need to file bankruptcy, you should contact an approved credit counselor. A list of approved credit counselors can be obtained through the Bankruptcy Court’s Web site. You must get a certificate showing that you completed credit counseling or the bankruptcy court will dismiss your bankruptcy. Your credit counseling certificate is good for six months. You can file bankruptcy at any time, but it is best to file bankruptcy before final judgment of foreclosure is entered against you.
40. Can a loan modification stop a foreclosure case?
With the increase of distressed mortgage loans around the country, most banks are now offering a variety of loan modification options. A loan modification is when the bank agrees to modify any of the terms of the original note. The bank may agree to reduce the interest rate, to extend the terms of the loan, or to reduce your monthly payment. The bank will agree to a loan modification as an alternative to filing a long drawn out and expensive foreclosure case. Nonetheless, most banks have requirements and qualifications before they will agree to any loan modification. In many cases a loan modification can reduce delinquent payments, back end missed payments, extend the term of the loan, and reduce interest rates. Moreover, many banks will also permit a homeowner to refinance their loan.
41. Can a short sale stop a foreclosure case?
In today’s volatile housing market, many homeowners are unable to sell their home at a sales price that will enable them to pay off their mortgage. A short sale is an agreement between a mortgage lender and the homeowner that allows your home to be sold for less than your mortgage payoff amount. In a short sale the homeowner sells his home less than the payoff amount of the loan. At the closing the sale proceeds will be sent to the bank in full satisfaction of the mortgage.
A short sale will allow you to finally get out from under the mortgage that you cannot afford anymore. You may also qualify under the Mortgage Forgiveness Debt Relief Act of 2007 to be exempt from taxation on the realized income from that short sale. Many of the banks would prefer to short sale of the home rather than to foreclose so that they may offset the costs involved in foreclosure, such as the legal fees, carrying costs, eviction, etc.
FORECLOSURE MEDIATION FAQ’S
42. What is foreclosure mediation?
Mediation is a dispute resolution process in which a mediator, helps you and the bank to negotiate a settlement to your foreclosure case. Mediation is a non‑binding process. This means it is not a final decision on your case. Mediators do not decide matters in the foreclosure case. A mediator’s only job is to assist the bank and the homeowner to try to reach a settlement.
43. What is the mediator’s role?
Mediators are experienced lawyers who are required listen to the parties and to try to assist them to reach a settlement or a foreclosure solution. Mediators may suggest creative and innovative solutions for the parties to consider. Mediators have no legal authority to impose an outcome or to decide the outcome of a foreclosure case.
44. Who are the mediators?
The mediators who participate in the foreclosure mediation program are screened by the AOC to ensure they have foreclosure mediation training in addition to basic mediation training.
45. Why should I try foreclosure mediation?
The mortgage lenders do not generally want to own houses especially in these hard times. Almost all of the lenders are willing to talk with homeowner‑borrowers about reaching a reasonable settlement.
46. How does foreclosure mediation work?
Upon receipt of this request for foreclosure mediation and a financial worksheet by the Office of Foreclosure, the material will be then distributed to court staff in the local courthouse and to the lender’s attorney. Local court staff will then assign a mediator to your case and set a date for the mediation when the lender and homeowner‑borrower must appear.
47. What happens at a foreclosure mediation session?
At the mediation session, you will meet with the mediator, the lender’s attorney and a representative of the lender. The mediator will explain his role and he will organize discussions about what arrangements you and the lender can agree upon that will allow you to keep your home. If the mediation is successful, then a foreclosure mediation settlement memorandum will be prepared by the mediator and signed by all parties.
48. What are some possible outcomes?
There are a number of possible solutions that you and the lender can explore. The solution will depend upon what you can afford based on what your income and expenses are, what other financial resources you have, what type of loan you have, the amount you owe in arrears. Each lender has a slightly different loss mitigation program. However, every lender will require that you have a reasonable ability to repay the modified monthly mortgage loan payment. If you cannot show ability to pay, then your lender has no incentive to effectuate a workout. The following are some possible solutions:
A. Reinstatement: Your lender could agree that all amounts required to bring your loan current can be paid (including late fees, attorney fees, taxes, insurance, etc.). Once these amounts are paid, then the foreclosure will be dismissed, and you will be back on your regular payment plan.
B. Repayment Plan: An agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up (i.e., the lender raises the monthly payment for a set period of time until the arrears amount is caught up).
C. Forbearance Agreement: Forbearance agreements are plans that allow borrowers to repay a loan delinquency over time. Regular monthly payments are made according to your loan agreement, and an additional monthly payment is made each month that is applied to the delinquent amount. Once the delinquent amount is paid in full, the normal payment amount resumes. It fully reinstates the loan. A forbearance plan may include one or more of the following features: (a) suspension or reduction of payments for a period sufficient to allow the borrower to recover from the cause of default; (b) a period during which the borrower is only required to make his/her regular monthly mortgage payment before beginning to repay the arrears; (c) a repayment period of at least six months and (d) allow reasonable foreclosure costs and late fees accrued prior to the execution of the forbearance agreement to be included as part of the repayment schedule. However, they frequently may only be collected after the loan has been reinstated through payment of all principal, interest and escrow advances.
D. Extension Agreement: This is an agreement in which you pay a portion of the amount of your delinquency, and the remaining portion of the delinquent amount is added on the end of your loan.
E. Loan Modification: An agreement that permanently changes one or more terms of your mortgage. For example, (1) extend the amortization schedule, (2) converting a sub‑prime loan into a fixed rate loan, (3) reducing the mortgage interest rate, (4) adding missed payments to the existing loan balance.
F. Loan Guarantee Partial Claim: If your mortgage is insured, your lender might help you with a one‑time interest‑free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan.
G. Time to Refinance: Provided you have a reasonable prospect of arranging to refinance the loan, your lender may agree to some period during which it will not schedule a sheriff’s sale.HOPE for Homeowners Program is a program for borrowers at risk of default and foreclosure and provides new, 30‑year, fixed rate mortgages that are insured by the Federal Housing Administration (FHA). Refinancing without the benefit of a government program may be impractical for most homeowners. In today’s falling market, home values are often less than the amount of the original loan and refinancing lenders generally will loan no more than 70‑80% of the value of the home.
H. Reverse Mortgage: Reverse mortgages, or home equity conversion mortgage (HECM) loans, are commonly used to help senior citizens tap into their home equity for retirement. As a foreclosure prevention device, you generally need to be age 62 or older and have adequate accumulated home equity.
I. Principal Reduction: Loan principal is reduced. This may be possible if you have a negative amortization loan (you are paying less than is necessary to full amortize (payoff) the loan during the loan’s term) and the lender is willing to reduce principal to the original loan amount. A principal reduction program may be agreed upon in exchange for a shared appreciation mortgage (SAM). A SAM is a fixed rate, fixed term loan. In exchange for a lower interest rate, you agree to give up a portion of the home’s future value. The future value is the difference between what it is worth now and what it will be worth in the future.
