What is the Mortgage Foreclosure Process in New Jersey?
The threat of looming foreclosure can be a scary thought for many New Jersey residents. It can be seen as an attack on your home or place of business – two of the things many people work incredibly hard to get and maintain. When faced with the prospect of foreclosure, it can be even more intimidating and stressful if you do not know the process of foreclosure in New Jersey.
Foreclosure cannot happen right away. You must miss multiple payments and be unable to work out a restructured payment plan with your lender. Only at that point can foreclosure proceedings begin. The first thing to happen in such proceedings is that the lender files a complaint with the court stating why they are foreclosing on your property. Then, you are given notice that a foreclosure is underway. After that, the lender can go to court and, if you do not fight back, can win by default and foreclose on your property. If you do decide to fight against foreclosure in court, there are other options available to you.
If you need help with your foreclosure-related matters, call Young, Marr, Mallis & Associates’ New Jersey foreclosure defense lawyers at (609) 755-3115 for a free analysis of your case.
What is Foreclosure in New Jersey?
Foreclosure is a process by which a lender, called a mortgagor, takes the mortgaged property after the property owner, called the mortgagee, misses several mortgage payments, and “defaults” under the terms of the mortgage.
A default simply is something that is not allowed by the mortgage. Usually, this means that the mortgagee missed a payment or two. However, a default can be anything prevented by the terms of the mortgage. For example, if there is a mortgage on a building housing a coffee shop that, in its terms, says that it cannot be used for residential purposes, the owner cannot put an apartment or two above the shop.
Foreclosures happen specifically when you miss payments on a mortgage. Other kinds of defaults may trigger consequences other than foreclosure. For example, these other defaults could include using a building for something that is not allowed under the terms of the lease. Usually, this exists to make it so that a residence cannot also be used as a place of business or vice versa.
Important Terms to Know for Foreclosure in New Jersey
Foreclosure, and indeed real estate law in general, can be very complicated, even for attorneys. Part of the reason for all the confusion is that there are quite a few archaic, nonstandard terms that are frequently used in real estate and foreclosure proceedings. Although it is primarily the concern of our Trenton, NJ foreclosure defense lawyers to know these terms and what they mean, it is also useful for you to have a general understanding of some terms that will be used in foreclosure legal proceedings so that you can know what is going on to a greater degree. We’ve compiled a list of some important terms to know for the foreclosure process in New Jersey below.
Mortgagor and Mortgagee
Often, the parties involved in a mortgage are called the “mortgagor” and “mortgagee.” These are just fancy terms that mean “lender” and debtor.” The mortgagor is the borrower of the loan. In this case, that would mean you. A mortgagee is the lender for the loan. In most cases, this will be a bank, but it could be any entity that loaned you money to purchase the property secured by the mortgage.
Liquid and Non-Liquid Assets
In law and economic terms, the term “liquid” refers to cash. Therefore, a liquid asset is simply money. A non-liquid asset is something of value that is not money. In a foreclosure context, this will include the property in question. If an asset is “liquidated,” it is being sold for cash. In some circumstances, some of your assets may be exempt from liquidation. Check with our lawyers to see if you can have your property at risk for foreclosure be made exempt.
Loss mitigation refers to steps that are taken by the mortgagor and mortgagee to try and prevent a foreclosure from happening in the first place. Loss mitigation can take many forms, but one of the most common is a restructuring of the payment plan so that the mortgagee can get the payments they are entitled to.
If a foreclosure does happen, a sheriff’s sale is the term for the sale of the property. The sale is carried out by law enforcement personnel, hence the name. If worst comes to worst, you may be able to place a bid on your property at a sheriff’s sale. However, doing this can be complicated, so speak to our lawyers about this possibility.
Things that Happen Before Foreclosure in New Jersey
Contrary to what some people may think, foreclosure cannot happen immediately after a mortgage payment is missed. There are a number of what could be considered safeguards in place to try and let individuals who are at risk of foreclosure get their affairs in order and, hopefully, prevent a foreclosure from happening at all. This process is known as “pre-foreclosure.” Below, we will go into some of the important things that happen before a foreclosure can take place in New Jersey.
Generally, when you miss mortgage payments, you are given a “grace period” to pay them before any real consequences can happen. This grace period is usually somewhere between ten and 15 days. Consult your mortgage (or have our lawyers look at it) to determine what the exact grace period is for you. The grace period exists because, ultimately, lenders want to get paid. Having a grace period lets the unexpected happen without immediately destroying what may have been a perfectly normal mortgagor-mortgagee relationship.
Default Because of Missed Payments
The first real point at which there is a real risk of foreclosure on your property is after you have defaulted under the terms of the mortgage by missing a certain amount of mortgage payments. Once you default under the terms of the loan, the lender is required to try and work with you and see if a new plan can be made so that you can pay them what you owe them.
That being said, some lenders will be more cooperative than others. It may be the case that your lender does not want to work things out and will only present terms as lip service to the law rather than as a good-faith effort to work things out.
How Many Mortgage Payments Can You Miss Before Foreclosure in New Jersey?
Foreclosure proceedings can only begin after you miss a certain number of payments on your mortgage. You can only be foreclosed on after you have not made payments for 120 days. Since payments are generally made every 30 days, this means that your property cannot be foreclosed on until you have missed four mortgage payments. However, that does not mean that there are no consequences or downsides if you have missed less than four payments.
The First Missed Mortgage Payment
After you miss your first mortgage payment, you have a grace period of about ten to 15 days, depending on the terms of your mortgage, to send payment to your lender. If you are able to get the payment in within that timeframe, you cannot be foreclosed on. However, you may be charged a late fee or other extra surcharge for the late payment.
The Second Missed Mortgage Payment
After your second missed payment, your lender is required by Federal law to try and contact you about how to fix the situation per 12 C.F.R. § 1024.39. This notice must be in writing. While many lenders will provide multiple notices of missed payments, they are only required by law to do so once.
The Third Missed Mortgage Payment
After your third missed payment, you are very likely to receive written or phone contact from your lender. This letter will likely be more strongly worded than any prior letters sent. This is called a “breach letter” because it lets you directly know that you are in breach of the terms of your mortgage by not making the payments you are supposed to.
The Fourth Missed Mortgage Payment
After the fourth missed payment, mortgagees can begin foreclosure proceedings. At this point, they will likely be contacting court officials to start foreclosure proceedings rather than contact you directly.
The Start of Foreclosure Proceedings in New Jersey
Foreclosure is a long, stressful, and complicated process with many steps. The good news is that means that there are many points at which you can try and work out the situation with your lender or try and challenge the foreclosure altogether. Our New Jersey foreclosure defense lawyers can help you with whatever path you choose during the difficult process of facing foreclosure on your home, business, or other property.
Once the lender decides to foreclose on your property, they will file what is called a foreclosure complaint with the court. This complaint will state the facts of the situation as the lender understands them and sets forth why they believe they have the right to foreclose on your property.
Summons and Foreclosure Complaint
The next step is that you are “served,” or delivered, a summons or foreclosure complaint. This is a formal notice that you are the subject of court proceedings and that your lender is trying to foreclose on your property. While getting this information in person from one individual’s hand to another is ideal, you could also be told about foreclosure through a public ad in the newspaper or by physical or electronic mail.
Response to the Complaint
Once you know that you are being foreclosed against, it is very important that you respond to the complaint and do so quickly. If you do not respond, the lender can ask for what is called a “summary judgment” against you. Essentially, the opposing attorney is asking that you lose by default because you did not respond or show up to court, and your property will be foreclosed.
Generally, you will have about 35 days to respond to the initial complaint. After that time, a default judgment will be issued, which means that you will lose automatically. It is incredibly important that you retain legal counsel by this point so that you are given your fair shake in the legal system.
Depending on how you respond to the complaint, a number of outcomes could happen. As previously stated, if you do not file an answer, the lender will win by default. If you file a counterclaim, the case will proceed further in the court system. If the lender has committed a violation of your loan agreement, which could include not honoring a loan modification, refusing payments, or other unpermitted actions, the foreclosure may be stopped in its tracks.
Other Ways to Stop Foreclosure Proceedings in New Jersey
Fighting a foreclosure directly in court is not the only way to stop proceedings. Once of the most commonly used ways to prevent foreclosure is to file for bankruptcy. When you file for bankruptcy, the court places what is called an “automatic” stay on any debt collection, which includes any foreclosure proceedings.
Depending on what chapter of bankruptcy you file under, the property could still be able to be liquidated, so it is important that you speak with our lawyers so that you choose the best option for your situation.
Call Our New Jersey Foreclosure Defense Lawyers
If you need help with your foreclosure situation, call our Cherry Hill, NJ foreclosure defense lawyer from Young, Marr, Mallis & Associates at (609) 755-3115.