New Jersey Homeowner’s Legal Rights in Foreclosure
New Jersey is a foreclosure haven with approximately one in every three bank-owned homes. And while it may be tempting to give up and accept the fact that your home is now up for sale, remember that there may still be time to put an end to the process before it’s too late. Before you decide on the best course of action, you will have to consider the type of foreclosure that is going on.
There are three general types of foreclosure:
- Judicial foreclosure
- Non-judicial foreclosure
- Deed in lieu of foreclosure
Judicial foreclosures involve actions taken in state civil courts and can be either “judicial” (pertaining to a mortgage or lien) or “non-judicial” (a mortgage not backed by a lien). Non-judicial foreclosures involve actions taken outside of the courts in places such as public auctions. Deed in lieu of foreclosure, also known as a “DIL,” occurs when the mortgage company accepts the deed to your property in exchange for the amount you still owe.
The following is a list of some additional items that you should consider before deciding what course of action will be best for your situation. Common legal defenses against foreclosure can be classified into 3 categories: procedural, substantive, and equitable defenses.
- Procedural defenses occur when a homeowner claims that foreclosure procedures were not followed as they should have been, in an attempt to stop the foreclosure proceedings.
- Substantive defenses are arguments that challenge the legality or legitimacy of a mortgage. These defenses usually result in halting the foreclosure process.
- Equitable defenses are rare and occur when a homeowner can prove that the mortgage is invalid or when it appears to violate public policy.
Remember that it is your duty to preserve your home from foreclosure, even if you are behind on payments. If you have fallen behind on payments, then consider negotiating a loan modification or refinancing with your mortgage company.
Know Your Legal Rights in Foreclosure as a New Jersey Homeowner
Loss Mitigation Rights
No later than 36 days after your first missed payment, you should receive a call from your loan servicer to talk about loss mitigation. This should also occur no later than 36 days after any subsequent missed payments. The term “loss mitigation” may sound threatening, but the reality is that these calls are meant to help both you and the lender avoid the costly and troublesome process of foreclosure. In addition, your loan servicer is legally obligated to notify you in writing within 45 days of a missed payment about your loss mitigation options. These laws are in place to help ensure that your loan servicer cannot initiate foreclosure until 120 days have passed without payment.
Right to a Breach Letter
Usually, your mortgage contract will include a clause that requires your lender to send a written notice called a “breach letter” when you are in default.
This letter must include:
- Details about the default and its causes
- What you need to do to cure the default and reinstate the loan
- The date by which you must cure the default (usually at least 30 days from the date you receive the notice)
- Notice that failure to cure the default on time will lead to the sale of the property
To get out of default and avoid foreclosure, you will need to pay the full amount quoted in the letter by the due date, including any back interest, late fees, and penalties. Typically, this letter will arrive around the 90th day of delinquency to allow you to make the payment before 120 days have passed.
Notice of Foreclosure
You are entitled to a notice of foreclosure, whether it is a judicial foreclosure or a non-judicial foreclosure. In a judicial foreclosure–in other words, a foreclosure handled by the court system–you will receive a complaint and a summons to notify you that a foreclosure has begun.
In a non-judicial foreclosure, you should look out for two notices:
- Notice of Default (NOD)
- Notice of Sale (NOS)
NOD is to let you know that your loan is in default and your property may be put up for sale if you do not take action. NOS means that your property is being listed for sale or auction.
Right to Reinstate
In the state of New Jersey, homeowners have a right to cure their loan delinquency or default up until the date a final judgment of foreclosure is entered. This includes the right to de-accelerate — meaning to restore the loan to pre-default conditions — and reinstate the mortgage. Usually, reinstatement will require full payment of all delinquent payments which triggered the foreclosure process or reaching an agreement with your lender.
Right of Redemption
In NJ, homeowners have the right of redemption — that is, to buy back their home after Sheriff’s Sale — up to 10 days after the house or property has been sold and up until the court issues an order confirming the sale.
Right to Foreclosure Mediation
New Jersey homeowners have the right to request foreclosure mediation during the foreclosure process up to 60 days after the initial summons and complaint have been served. After this point, you will need to file a motion in the county where the foreclosure is filed and will only receive mediation if a court order is issued confirming it.
Right to Challenge Foreclosure
In New Jersey, you have the right to challenge the foreclosure amount due as quoted by your lender. This is a good approach if you think your loan servicer may have made a mistake in the amount quoted or may have broken the law. However, if you initiate a lawsuit challenging the amount due, you may lose your right to redeem after the property is sold, so be careful when pursuing this option.
Right to a Surplus
If your foreclosed property sells for more than what you owe on it, you are entitled to the surplus funds. In NJ, you have to file a form to claim these funds and you will need to pay less than $100 to redeem it.
Fair Debt Collection Practices Act Validation Letter
The Fair Debt Collection Practices Act (FDCPA) mandates the method and frequency of how you are contacted by third-party debt collectors. FDCPA only applies to judicial foreclosures, not non-judicial foreclosures. If FDCPA applies to your mortgage, you must receive a FDCPA validation notice from your mortgage servicer which includes:
- How much you owe, including interest, late charges, attorney fees, and other charges
- The name of the creditor
- A statement that explains that, unless you dispute the validity of the debt within 30 days of receiving the letter, the debt will be assumed to be valid
- A statement that, if you notify the debt collector in writing within the 30-day period to dispute the debt, the debt collector will get written verification of the debt and send you a copy
- A statement that the debt collector will provide you with the name and address of the original creditor, if it’s different from the current one, if you request it within the 30-day period
- An FDCPA validation letter may be combined with a breach letter
Are you a New Jersey homeowner facing foreclosure?
Contact us today for assistance avoiding foreclosure, selecting foreclosure options, contacting lenders, and more.