Residential Foreclosure Roundup
BY: Daniel Reinganum, Esq.
In 2017 New Jersey claimed a dubious honor: the highest foreclosure rate in the country, with 1.61% of housing units the subject of a foreclosure filing. New Jersey was also among the top five states in terms of average time to foreclose (1,298 days) . However, this number is misleading as newly filed foreclosures are moving to completion much quicker.
Based on my own experience and after speaking with knowledgeable local foreclosure counsel, it seems that newly filed residential foreclosure cases are moving from complaint to sheriff’s sale in ten to twelve months in Camden, Gloucester, and Burlington Counties.
The filing of a foreclosure complaint was traditionally triggered when a homeowner fell three or more months behind. At a certain point in time, the mortgage company stops accepting partial payments and demands that the entire amount of past due payments be paid in a lump sum. When the foreclosure complaint is filed, the mortgage company accelerates the payment of the debt and all amounts are now owed in full.
Fortunately for homeowners, there are options for saving their homes under both state and federal law.
Under the New Jersey Fair Foreclosure Act, a homeowner “…shall have the right at any time, up to the entry of final judgment…to cure the default, de-accelerate and reinstate the residential mortgage…” by paying all past due payments including late fees, court costs, and lender’s attorney’s fees. N.J.S.A. 2A:50-57(a). In other words, at any time before the entry of final judgment, the homeowner can pay all past due amounts owed and the foreclosure case has to be dismissed, the debt de-accelerated, and things are supposed to go back to normal with the mortgage company in terms of making regular monthly mortgage payments.
Under New Jersey State Law, the right to cure is lost upon the entry of the final judgment of foreclosure. However all hope is not lost for the homeowner at this point. Under federal bankruptcy law a debtor has the right to cure and reinstate their mortgage in a case filed before the property is sold at a sheriff’s sale. See 11 U.S.C. §1322(b)(3),(5), and (c)(1) and In re: Conners 497 F.3d 314 (3d Cir. 2007). Homeowners can use a Chapter 13 bankruptcy filing to impose a repayment plan on the mortgage company for the past due amounts over three to five years. A bankruptcy filing will also require a mortgage company to resume accepting regular monthly mortgage payments.
Any time prior to a sheriff’s sale a homeowner can apply for a mortgage modification from their lender. However a mortgage modification application typically will not halt or slow down the sheriff’s sale process. For homeowners that are facing a sheriff sale and want to save their homes with a mortgage modification, the Bankruptcy Court in New Jersey has a fantastic loss mitigation program that gives borrowers time to complete a mortgage modification application in connection with a Chapter 13 case.
But even for the homeowner whose property has already been sold at a sheriff’s sale, there a faint glimmer of hope. New Jersey Court Rule 4:65-5 provides for a ten day period to object to a sheriff sale following the sale, and it is settled state law that anytime during that ten day period a homeowner may redeem their property by paying, in full, the entire foreclosure judgment including sheriff’s costs and fees. See Hardyston Nat’l Bank of Hamburg v. Tartamella, 267 A.2d 495, 498 (N.J. 1970). The filing of a bankruptcy case during the ten day redemption period will extend the time to redeem the property by sixty days from the commencement of the bankruptcy case. See 11 U.S.C. §108(b).
For the homeowner that had equity in their home when it was sold at sheriff sale, redemption may be a viable option. During the redemption period the homeowner can try to redeem their property through a refinance or sale of the property. It will typically be very difficult to accomplish due to the tight timeframes imposed for redemption of the property, and the homeowner’s presumably less than stellar credit at that time. However if there is a sufficient equity cushion and the right lender can be found, it is possible to refinance the property, or alternatively it can be sold to a purchaser for more money that was obtained at the sheriff sale.
This is all to say that homeowners who are in foreclosure have options to try and keep their homes (or salvage what equity in their homes they can) and that there are state and federal laws to help.