The Rules of the Road From Notice of Intent to Foreclose to Foreclosure Judgment and Sheriff’s Sale
Mortgage foreclosure in New Jersey is a process composed of events over an extended period of time. These events and a brief explanation of their significance are outlined below. The outline can be useful legal information – however, it is important to understand it is not legal advice. Like an aerial view of a mountain which shows the great peaks and valleys, but does not disclose treacherous crevices which may swallow you or the condition of the snow pack which may at any moment bury you in an avalanche, this outline on New Jersey mortgage foreclosure procedure can be useful to those who understand its limitations and destructive to those who do not.
It cannot be emphasized too strongly that if you are a New Jersey property owner threatened by foreclosure, promptly consult an attorney who is experienced in New Jersey Foreclosure. 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
We are frequently contacted by homeowners who have been unable to make their mortgage payments and, as a result, received a document called a “Notice of Intent to Foreclose” from the mortgagee (bank or other entity that allegedly owns the mortgage).
The Notice of Intent is required by the New Jersey Fair Foreclosure Act, N.J.S.A. 2A:50-56. It must be served on a homeowner by the mortgagee at least thirty days (30) before the filing of a foreclosure complaint. It is intended to give a homeowner information about what must be done to bring the mortgage current.
The Notice 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.
II. Foreclosure Complaint
A Foreclosure Complaint asks the Court to allow the mortgagee to recover the property pursuant to the provisions of a mortgage instrument. 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. This is a very important difference when a home is worth less than is owed on the mortgage. Although the law provides a means by which the mortgagee can seek a money judgment against the homeowner for deficiency (the difference between the value of the home and the amount owed), 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.
Foreclosure Complaints must be served on any party who has a “legal interest” in the Property. The Complaint will often 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.
Q – My spouse does not own this property. Why were they served with a foreclosure complaint?
A – A common question raised by our clients is why a Foreclosure Complaint names the “husband of” or “wife of” the owner, where the owner is not married. In common parlance, this is referred to as “Mrs. Service.” An antiquated and likely sexist term, the phrase “Mrs. Service” relates to the Plaintiff’s requirement to serve Foreclosure Complaints on any party who has a legal interest in the property. Under the provisions of New Jersey Law, married persons have a “marital interest” owned by their spouse. Plaintiffs and their attorneys, in an abundance of caution and a desire to avoid procedural issues during the foreclosure proceeding, often name a spouse whether the Defendant owner is married or not.
III. Answer to the Foreclosure Complaint
The homeowner has thirty-five (35) days from the service of the Complaint to file a Contesting Answer to the Foreclosure Complaint. Unlike other lawsuits that are filed in the Civil Courts, a Contesting Answer in a Foreclosure Complaint can not simply dispute with vague and ambiguous denials the allegations in the Complaint. Some examples of “non-Contesting Answers” that will have no legal effect 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. Most foreclosures are “uncontested”. If no Contesting Answer to the Foreclosure Complaint is filed, the Plaintiff will proceed with a Request to Enter Default against the owner and other Defendants. This is a document in which the Plaintiff certifies that there has been no responsive Answer filed. Entry of Default will allow the Foreclosure to proceed “uncontested”.
Entry of Default does not prevent a homeowner from attempting to prevent a foreclosure judgment from being entered or preserving their rights to keep, sell or otherwise protect their rights. After Default, a homeowner may continue attempts through the foreclosure process, negotiations, or through a subsequent Bankruptcy filing.
V. Foreclosure Judgment
If a Default has been entered or if a Contesting Answer has been dismissed, the Plaintiff will then seek to obtain a “Final Judgment”. Before a Final Judgment of Foreclosure can be entered, a Notice must be sent to the property owner advising of their rights , and that if a Final Judgment is entered by the Court, the owners right to “Cure the Default” will be terminated.
Often homeowners receive from the Plaintiff’s attorney a copy of an Application to Enter Final Judgement, before it is filed with the Court. However, if and when the Application is ultimately filed with the Court, it is sent to the New Jersey Office of Foreclosure. The Office of Foreclosure then reviews the Application and, if it finds the Plaintiff has met the requirements of the Law, enters a Final Judgement.
This is an important step in the foreclosure process particularly for a homeowner who may have the ability to pay off their arrears before losing their home. We have had clients in the past who have been awaiting assistance from family members to resolve their outstanding Default.
Under New Jersey Law, if a Final Judgment is entered, the Plaintiff may refuse to accept even the full amount of the arrears that have accrued. The filing of a Chapter 13 Bankruptcy (or Chapter 11 Bankruptcy, if applicable) case prior to the Sheriff’s Sale will allow the property owner to “cure the default” through a 36 to 60 months repayment plan.
In the great majority of cases, after the entry of a the Final Foreclosure Judgment, the mortgagee will apply to the Chancery Court for a Writ of Execution which authorizes the Sheriff of the County in which the property is located to sell the property at a sheriff’s sale.
VI. The Sheriff’s Sale
Once the Final Judgment is entered and a Writ of Execution delivered by the Plaintiff to the Sheriff of the County, the Sheriff is required to schedule (and conduct) a Sheriff’s Sale of the Property. In residential foreclosures, the sale date must be advertised in a local newspaper for four (4) consecutive weeks. The homeowner must be given notice by the Plaintiff and the Sheriff of the sale date. The homeowner is entitled to request from the Sheriff, in writing with a modest $28 fee, a two-week adjournment of the sale. The owner has the right to two (2) of these “statutory adjournments” from the Sheriff. After that time, the sale can only be adjourned by consent of the Plaintiff, an Order of the Chancery Court, or the filing of a bankruptcy case.
If a sale is conducted, the homeowner loses his or her “ownership” of the property. This includes the right of an owner to file a bankruptcy case and propose to “cure arrears” or otherwise address the default on the mortgage. In a landmark decision in 2007, the Third Circuit Court of Appeals ruled that New Jersey Foreclosure Laws terminate any right of the owner in a bankruptcy case to propose such plans after the “gavel” at the sheriff’s sale has fallen. To read the full opinion of the Court, see In Re Connors.
The Connors Court also affirmed the homeowners state court rights and remedies after the sale. A New Jersey homeowner may, within 10 days after the sale, redeem the property (by paying off the full amount on the foreclosure judgment, plus costs of sale) or file a timely objection to the 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.
As stated above, this information is provided as an overview and outline of Mortgage Foreclosure in New Jersey and is not intended to provide advice or legal counsel to those facing a foreclosure. Unfortunately, through our extensive experience in representing property owners in New Jersey facing foreclosure, we have also met with far too many former owners who delayed seeking the advice and representation of an attorney. While the challenges and circumstances facing a homeowner may be complicated and difficult, our first advice is often quite simple. Immediately consult with a lawyer with experience in foreclosure defense, bankruptcy and all other options to learn your rights.
Caution: Legal Information Is Not Legal Advice.