Loans, Mortgage Forgiveness, and Other Options to Stop Foreclosure in New Jersey

The United States housing market is still far from healthy, with many families struggling to stay afloat in a tumultuous economy. Home foreclosures are on the rise in New Jersey, and many people are finding themselves in danger of losing their homes. Foreclosure is always a last resort for any homeowner – so it’s good news that most homeowners can find relief by contacting their lender about one of the programs below. Read on for information on loans to stop foreclosure, mortgage forgiveness options, and more.

Options to Avoid Foreclosure in New Jersey

Short Sale (REO)

During pre-foreclosure stage, house can be sold through short sale.

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Renovation Loan

Includes purchase price and cost for renovating into one loan.

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FHA Loan

If you have low credit, an FHA loan might be able to help you.

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Home Equity Lines

A home equity line is a credit line that can be extended up to 85% of home equity.

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Hard Money Loans

Hard money loans are a last resort used by borrowers that are not eligible for traditional mortgages.

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Mortgage Forgiveness

There are programs available for those who have had their home foreclosed upon.

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Principal Reduction

With this option, the amount owed on your mortgage can be reduced if you make additional payments beyond your regular mortgage payments.

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Avoiding Foreclosure in New Jersey

As soon as you realize you can’t pay your mortgage, it’s time to take action to avoid foreclosure. Luckily, there are dozens of government-sponsored, state-sponsored, and private options to help homeowners rescue their investment.

The Making Home Affordable Program (MHA) is a joint effort by the federal government and major lenders to help struggling homeowners in danger of foreclosure. It is a “forbearance” program that helps borrowers lower their monthly mortgage payment. The loan servicer that owns the mortgage will have an obligation to modify or forbear the loan. Reach out to your lender directly to see if you may qualify for this program.

Mortgage Assistance for Military Personnel
The Service Members Civil Relief Act (SCRA) offers mortgage relief and foreclosure protection to members of the United States armed forces. This law provides a broad range of protections, and it differs depending on whether a person is in active service and how long they are away from their home. If you’ve recently been deployed abroad, but still have your mortgage, this program will help you rescue your home from foreclosure.

The SCRA also guarantees that military personnel are not required to sell their homes before retirement in order to qualify for VA healthcare benefits.

Homelessness Prevention Program
The Homelessness Prevention Program (HPP) offers assistance to New Jerseyans who are in danger of becoming homeless as a result of foreclosure, eviction, domestic violence, economic hardship, and inadequate affordable housing.

HPP does not provide emergency assistance such as food stamps or shelter. Rather HPP matches qualified homeowners with funds that can be used for rental assistance or mortgage and property tax payments; assists qualified renters with funds for rental assistance; helps families avert homelessness by making rent or mortgage payments, and assists individuals with economic hardships to maintain their homes.

Alternatives to a Foreclosure in New Jersey

If you do not qualify for any of the aforementioned options, you can still stop foreclosure by choosing one of these avenues.

Partial Claim
If you have mortgage insurance, you may be able to initiate a partial claim with your mortgage insurance company to have them pay out the amount of the policy minus any deductible you may have. In this scenario, you will need to call your mortgage insurance provider and ask them for permission to make a partial claim. If they agree, they may require that you send in documentation beforehand, so be sure you have your paperwork ready before giving them a call.

Straight Modification
A straight modification lowers the interest rate and payments on your mortgage without increasing the length of the loan. This type of modification generally requires some extra paperwork and a financial analysis. The benefit of a straight modification is that you get more value for your monthly payment, which will help you cover expenses like food and shelter.

Permanent Hardship
If you know that you will not be able to pay your mortgage any time in the near future, you may qualify for a permanent hardship program. Depending on your financial circumstances, this program may allow you to pay back what you owe with an interest-free period, a lower monthly payment, or a deferred payment plan. This is usually a last resort and should only be considered once other options have been exhausted.

In general, mortgage hardship programs are only available for mortgages that are either more than 80% of the market value or for loans in excess of $250000.

Short Sale (REO)

During the pre-foreclosure stage, a house can be sold through a short sale (REO). A short sale occurs when the lender agrees to let the homeowner sell their home for an amount that is less than what they owe on their mortgage.

A short sale might occur in cases where the homeowner cannot afford their mortgage payments, while a foreclosure occurs when the lender initiates legal proceedings to force a homeowner to sell or surrender their property. Short sales are generally considered less expensive and more desirable than foreclosures because there will be no need for costly court proceedings or liens against your credit score (when done correctly).

Renovation Loan

A renovation loan is a short-term loan that is designed to allow homeowners to renovate their home and get more out of it. A renovation loan is not a long-term solution, but a short-term fund that may also help you rescue your mortgage in a time of crisis. This method includes purchase price and cost for renovating into one loan. You will need a good credit score of at least 620, but excellent credit and high-income borrowers can put down 5% of the purchase price. This kind of loan needs to be used within 12 months of purchase and the budget needs to be done by a licensed contractor.

Federal Housing Administration (FHA) Loan

An FHA loan can help you stop foreclosure by allowing you to refinance your debt at a more reasonable rate. With FHA, lenders are mandated to offer homeowners the same interest rates they would offer if the borrowers were not delinquent on their mortgage. They also have guidelines for what they can charge in late fees and non-residential penalties. So, with government assistance and eligibility based on your monthly income and credit score, it’s worth looking into whether or not you’re interested in an FHA loan to avoid foreclosure or are facing mortgage default now. Minimum credit score is 500 for 10% minimum down payment, and 580 or higher is needed for a minimum down payment of 3.5%.

Home Equity Lines

A home equity line is a type of home equity loan that is used for short-term financing. It is a form of consumer credit that is used to rapidly purchase goods that can be quickly paid for with a lump sum, or for refinancing debt. The amount of the loan can vary depending on the borrower’s personal situation. Home equity lines are typically 2-5 years long and are very affordable, with interest rates as low as 1% – 3%. The loan amount can also be increased if the buyer needs to borrow more to avoid foreclosure, or has bad credit which makes them unable to qualify for other types of loans.

The cons of this option are that it is not ideal for long term and has higher interest rates, however this loan can stop foreclosure if acquired before the foreclosure process has concluded.

Hard Money Loans for Real Estate Investments

Hard money loans are often used by real estate investors to purchase a property that would not qualify for a conventional mortgage due to insufficient funds or less than perfect credit. These types of loan typically have higher interest rates and fees than traditional home mortgage loans, but they do not require any down payment from the borrower. Hard money lenders can fund 100% of the purchase price on a property, unlike traditional home mortgage lenders which typically offer 60-70%. They are typically used to help property owners that need cash, but can’t qualify for a conventional mortgage loan at a rate that’s favorable enough to consider.

Mortgage Forgiveness

Mortgage forgiveness is a term that is used to cover situations where the borrower no longer qualifies for a mortgage. This may be because they have fallen behind on their mortgage payments, or because they have gotten a job that no longer qualifies them for the house in question. Another cause is that the property has been sold for less than what was originally owed, which usually happens with foreclosures and short sales.

The mortgages are either paid off in full or the amount owed is reduced to zero. This happens in a variety of ways. The most common is for the bank to take over the borrowers’ remaining debt as a forbearance or loan modification, but this option is not always open to borrowers. In some cases, such as short sales, the bank simply forgives it all. Forgiveness can also occur by having the loan declared illegal under bankruptcy law.

Principal Reduction

Your lender may offer partial principal reduction as an option to help you pay off your home. What does this mean for you? It means that instead of the full amount owed, your lender will reduce some or all of your monthly mortgage payment. This may help you pay off your loan faster by reducing the interest on what you paid towards it.


Preventing foreclosure is achievable for almost any New Jersey homeowner with many loan options, forgiveness plans, and workarounds available. Please reach out to the team at NJ Foreclosure Rescue if you need assistance with preventing foreclosure and/or exploring the options you have available to you.

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