New Jersey Foreclosure Process
Several years ago, we published a post called New Jersey Foreclosure: From Complaint to Sheriff’s Sale which turned out to be one of our more popular posts. Since there have been many changes in the foreclosure process in New Jersey, we thought it would be helpful to take an updated look a the process now with some comments on how the law, process and options may have changed.
New Jersey Foreclosure: Overview
One thing that has not changed in New Jersey mortgage foreclosure is that it remains a legal process which is only fully understood with the help of an experienced attorney. We present this outline to provide helpful and useful legal information. Legal information is not legal advice. Information is best used to inform New Jersey homeowners facing foreclosure of a “50,000 foot view” of the process.
But if you a New Jersey property owner facing a foreclosure – at any stage in the process – the best advice is to promptly consult an attorney who is experienced in New Jersey Foreclosure and the laws and options which may be available to you. Far too often, our clients will tell us that they delayed seeking our advice and that this only increased their stress and confusion about what was best for them.
Only an attorney – after reviewing your specific circumstances – can provide advice about the laws that protect you and the legal remedies that may be available to you.
I. Notice of Intent to Foreclose
The beginning of a foreclosure process often starts with the homeowner receiving a “Notice of Intent to Foreclose” from their mortgage company.
The Notice of Intent – commonly referred to as an NOI – is required by the New Jersey Fair Foreclosure Act, N.J.S.A. 2A:50-56 (“FFA”). The FFA is the controlling law on New Jersey residential foreclosures. Keep in mind, the FFA only applies to residential foreclosures – not commercial foreclosures.
The NOI must be sent to a borrower – the person responsible on the mortgage – at least thirty days (30) before the filing of a foreclosure complaint. The FFA requires the NOI to give a homeowner information about what must be done to bring the mortgage current and to give that borrower an opportunity to “reinstate” the mortgage before a foreclosure complaint is filed with the Court.
Under the FFA, the NOI must “clearly and conspicuously” state:
- The particular obligation or real estate security interest.
- The nature of the default claimed.
- The right of the Debtor to cure the default as provided in the Act.
- The amount of money, including any interest, that must be tendered to cure the default.
- The date by which the default must be cured in order to avoid foreclosure proceedings.
- The name, address and telephone number of a person to whom to the payment should be made, that failure to cure the default will allow the lender to take steps to terminate the Debtor’s ownership in the property by commencing a foreclosure suit.
- The right to transfer the real estate to another person subject to the security interest, advise that the owner seek counsel from an attorney of their own choosing and provide information regarding the New Jersey Bar Association, Lawyer Referral Service or, if appropriate, Legal Services Offices in the county.
- The possibility of financial assistance through State, Federal or Non-Profit programs.
- The name and address of the lender and the telephone number of a representative of the lender, if the owner disagrees with the lender’s assertions.
If a homeowner has not cured the default (paid the arrears on the mortgage and all contractually required costs and fees resulting from the failure to timely pay), the mortgagee may file a foreclosure complaint which asks the Court to enter a Foreclosure Judgment against the homeowner and thereafter conduct a Sheriff’s Sale of the home.
One development since the dawn of the mortgage recession is that New Jersey Courts have found that a “defective” NOI does not necessarily stop a foreclosing plaintiff from proceeding with foreclosure. In US Bank Nat l Ass n v. Guillaume, 208 N.J. 380 (2011), the New Jersey Court indicated that dismissal of the foreclosure complaint is not the only remedy where the Plaintiff sends a “defective” NOI. Cases since Guillaume have only further supported this concept. It is now accepted New Jersey law that a foreclosing plaintiff may “cure” a defective NOI during the course of the foreclosure case.
II. Foreclosure Complaint
A. Relief Sought
A Foreclosure Complaint is filed with the New Jersey state court where a Plaintiff is asking that the Court authorize the plaintiff to recover the property. The foreclosure complaint is filed in the Chancery Division of Superior Court of New Jersey, and is filed in the County where the property is located.
A Foreclosure Complaint does not seek to collect money damages from the Defendants. If a Plaintiff wants to seek to recover money damages, they must proceed after the completion of the foreclosure in a “deficiency proceeding”. A “deficiency” is the difference between the value of the home and the amount owed on the mortgage.
When we originally reviewed this topic, we noted that “for reasons beyond the scope of this outline, foreclosing mortgagees rarely seek a deficiency judgment when foreclosing on a mortgage secured by the debtor’s home.” This has certainly proven to be true. Over the last ten (10) years, we have rarely seen a Plaintiff pursue a deficiency judgment after recovering a property.
B. Parties in foreclosure complaint
Foreclosure Complaints must be served on any party who has a “legal interest” in the Property. The Complaint will name as defendants various other individuals who the Plaintiff believes may have a legal interest in the property. This can include a spouse, tenant or other party who may hold a lien against the property.
We are regularly contacted by foreclosure defendants who ask a very simple question: Why am I a defendant in this complaint? First, due to New Jersey’s laws on “marital rights”, any spouse of the owner is named as a defendant. This is true whether the spouse is named on the deed, mortgage or any other documents.
Often the Plaintiff also names the “spouse of” the owner without actually stating a name. In many cases, the owner is not even married but a “spouse” is named.
C. SERVICE OF COMPLAINT
The Foreclosure Complaint is generally served by “personal service” . This means that someone hands a Summons and a copy of the foreclosure complaint to the defendant named. Personal service typically takes place at the property address. Personal service is controlled by NJ Court Rule 4:4-4.
But New Jersey’s Court Rules on “personal service” do not require that a summons and complaint be handed to a defendant. Many of our clients are shocked to learn that NJ Court Rules allow personal service to include service on anyone who lives in the household with the defendant and is 14 years or older.
We have seen countless cases where our clients truthfully tell us that they “never received” a summons and complaint only to learn during our initial consultation that there is a record filed with the Court showing that the document was handed to their teenage child. For those with teenagers, the idea that they would be responsible for receiving a document which might lead to the loss of their home is understandably disturbing!
In other cases, service may also take place by mail or other means if the plaintiff can establish that personal service of the summons and complaint was not possible.
III. Answer to the Foreclosure Complaint
A defendant in a foreclosure proceeding has thirty-five (35) days from the service of the Complaint to file a Contesting Answer to the Foreclosure Complaint. Foreclosure cases follow different rules when it comes to filing an answer to a complaint.
A Contesting Answer must contest the Plaintiff’s legal right to foreclose on the mortgage. Some of the more common statements we have seen in answers that do not meet the legal requirement to be deemed contesting are:I really want to keep my home and I am attempting to work something out with the bank.
- I have applied for a Loan Modification and waiting for an answer.
- I had a prior Loan Modification and the bank is not responding to me.
- I am trying to sell my house and need more time.
IV. Uncontested Foreclosure and Entry of Default
An “uncontested” foreclosure is one where the the Court finds that there is no legal impediment to the Plaintiff obtaining the Relief requested in the Complaint.
There are two (2) ways a New Jersey foreclosure may be deemed “uncontested”. The first is where no contesting answer to the Foreclosure Complaint is filed. There, the Plaintiff will file a Request to Enter Default against the defendants certifying that they served the parties and there has been no responsive Answer filed.
The second way a foreclosure may be deemed uncontested occurs after a contesting answer is filed. After a contesting answer is filed, the Court will schedule a trial to determine if the plaintiff is legally entitled to foreclose. If the plaintiff is successful prior to, or at the time of the trial, the foreclosure is then deemed “uncontested”.
If a foreclosure is uncontested, this does not end the proceedings. Defendants still have legal rights to prevent a foreclosure judgment from being entered and seek options to keep, sell or otherwise protect their rights in the property. It is very common that we may represent defendants after default in various ways to protect the property either through negotiations during the foreclosure, loan modification, or through a subsequent Bankruptcy filing.
V. Foreclosure Judgment
Once a foreclosure is uncontested, the Plaintiff will then seek to obtain a Final Judgment. A plaintiff is required to send a notice to the property owner of their right to cure the default. This is an important step in the legal process because a defendant loses their legal “right” to reinstate the mortgage after entry of the Final Judgment.
Under the NJ Fair Foreclosure Act, the Notice of Intent to Enter Final Judgment is meant to give the owner notice and an opportunity to cure. It is not uncommon for a bank to accept a reinstatement after final judgment is entered. This is an important difference between a “right” – something that the law guarantees – and an option – something that is not legally guaranteed or protected. As explained below, filing a Chapter 13 Bankruptcy case after Final Judgment is entered will still allow the homeowner to propose to cure or reinstate the mortgage over a period of up to 60 months.
The timelines under the New Jersey Fair Foreclosure Act for a plaintiff to file the Motion after the Notice of Intent to Enter Final Judgment are somewhat complicated.
When the plaintiff files a Motion to Enter Final Judgment, a copy is served on the defendants. Often homeowners receive their copy of the Motion before it is filed with the Court. This is due to the requirement that the New Jersey Office of Foreclosure review the Motion before it can be marked as “filed”. Once filed, the defendant has ten (10) days to file an objection to the entry of final judgment.
VI. The Sheriff’s Sale
a. Notice of the sale
When a final judgment in foreclosure is entered, the Court also enters a Writ of Execution – a legal instruction to the county sheriff to schedule a Sheriff’s Sale. In most cases, if a sheriff’s sale is conducted, the property owner loses their ownership in the property.
In New Jersey foreclosures involving residential property, under New Jersey Court Rules, the sheriff’s sale must be noticed in several ways.
- The County Sheriff must post a Notice of Sheriff sale at the property as well as at the county sheriff’s office.
- Under New Jersey Statute, the Sheriff Sale date must be published local newspapers in the county in which the sale is to be conducted for four (4) consecutive weeks. Obviously, with the decline in the number of “local newspapers” and the rise of online information, this requirement is one which may be changed in the future.
- The plaintiff must send a written notice of the sale at least fourteen (14) days prior to the sale date.
B. Adjournment of Sheriff sale
The homeowner is entitled to request adjournments of the sheriff’s sale from the Sheriff. An adjournment is a delay or rescheduling of the sale date. The New Jersey statute on adjournments of Sheriff’s sales was significantly amended effective July 2019.
Now, a homeowner may request two (2) adjournments of up to 30 days each. The plaintiff may also request two (2) such adjournments and the parties can agree to a “fifth” total adjournment. Where a homeowner seeks the adjournment, they must do so in writing and pay any required fee – typically $28.
If a homeowner seeks more than two (2) adjournments – or the bank and the homeowner agree to more than one (1) together – they must obtain a court order by filing a motion to stay (or adjourn) the sheriff’s sale. Another option may be to file a bankruptcy case before the sheriff’s sale is held.
C. Sheriff’s sale
If a sheriff’s sale is held, the homeowner loses his or her “ownership” of the property. A bankruptcy case must be filed before a sheriff’s sale is held to protect the owner’s right to “cure arrears” or otherwise address the default on the mortgage. Since 2007, New Jersey federal and state courts have reaffirmed the application of the Third Circuit’s holding in In Re: Connors, 497 F.3d 314 (3d Cir. 2007).
The owner is not without rights after the sale is held but these rights are significantly limited. A homeowner may, within ten (10) days after the sale, “redeem” the property by paying off the full amount on the foreclosure judgment, plus costs of sale.
Within this same ten (10) day period after the sale, the owner may also file an objection by motion to the validity of the sheriff sale. The standard to object to an overturn a sheriff sale after it is conducted is not easily met and should not be considered without consultation with an experienced New Jersey Foreclosure attorney.
Much like our original post, this information is not intended to provide any legal advice to anyone who may be facing foreclosure in New Jersey but instead offers general information only. These and many other changes in the law and options for those facing foreclosure show the importance of consulting with an attorney who has expertise and experience in these and other related areas. The first step anyone facing the potential loss of their home is to take advantage of a free case evaluation from an experienced attorney.
Caution: Legal Information Is Not Legal Advice.