In this segment, I will discuss the mortgage foreclosure process as a follow-up to an earlier overview concerning your available options when facing a foreclosure. I am focusing on the process in New Jersey, but most of these procedures are the same in New York.
The initial step taken by the lender is to notify you regarding the approaching 90 day default time limit. Such notice typically arrives once you have missed at least two months of mortgage payments. The mortgage servicer usually sends its notices in writing and may also call or email the borrower. If at all possible this is the time frame in which to do whatever one can to catch up on back payments because it becomes more difficult to get reinstated once you have fallen 90 days or more behind. At this point, reinstating the mortgage becomes more difficult because the lender typically forwards your account to their attorneys, which then causes the borrower to incur additional charges and legal fees. In addition, your bank will usually only accept payment for arrears owed in full. Therefore, those additional charges will greatly increase the amount that you must pay all at once. In fact, I have had clients who have sent the bank a partial payment as an attempt to cure the default, but the payments were usually returned. Unlike mortgage lenders, most other businesses are actually willing to accept partial payments for back payments owed with a promise to finish paying in full in the near future. However, most mortgage servicers still refuse to provide such accommodations.
Should the borrower not able to get current before the 90 days elapse, they will now have to deal with the law firm assigned the case. Such law firms tend to specialize in foreclosure prosecution and may be difficult to deal with. At this point, one should seek professional help either from a local government agency or from an attorney with experience in this area.
Courts all throughout the United States have been greatly burdened by the unprecedented number of foreclosures that have materialized in recent years. New Jersey has not been an exception to this turn of events. The foreclosure process must meet both state and federal law guidelines and as a result usually takes a long time to conclude. During this time period, it is wise to explore all the possibilities and options that I discussed in a previous section. The first thing that you will want to do is to fill out a Mediation Request Form.
Foreclosure mediation introduces a neutral third party to assist lenders and defaulting homeowners in reaching satisfactory resolution to their dispute. Mediation can result in homeowner-mortgagors staying in their homes and affords lenders the opportunity to avoid foreclosure costs and carrying charges and reduce the number of non-performing loans in their portfolio.
The New Jersey Superior Court’s Foreclosure Mediation Program is focused on encouraging homeowners to get professional help. To increase the likelihood that foreclosure mediation is successful, the homeowner will be required to provide financial information and documents. This assures that homeowners requesting mediation will arrive at the mediation session with relevant information.
Foreclosure mediation encourages lenders and loan servicers to identify alternatives to foreclosure and to be flexible in modifying loans in such a way that will benefit homeowners while protecting investors’ interests.
The mediation process is in essence the borrower’s chance to obtain a loan modification should they qualify for one. This process requires that the homeowner verify their current household income and requires the submission of documentation including tax returns, pay stubs, income and expense reports, profit and loss statements, and property appraisals. Additionally, the mortgage lender will invariably request during this process that the homeowner update their file and submit the latest relevant documentation. That is where the mediation process can get frustrating because the bank’s review process may seem never ending. This is why having a professional at your side to guide you through the modification process is very important.
Should foreclosure mediation not result in a favorable outcome, there exist other alternatives that may allow the homeowner to remain in their house. One such alternative is the ability to request that a Sheriff Foreclosure Sale be adjourned using the statutorily mandated two weeks adjournments of two weeks each. This additional time may prove valuable should additional time be needed to process a mortgage modification, a short sale or a deed-in-lieu of foreclosure transaction.
Further, the homeowner may obtain additional time to remain in their home by filing a judicial Motion referred to as an Order to Show Cause. In this Motion, the homeowner asks the Judge overseeing the matter for additional time based on any number of factors, such as an illness, recent financial changes or any other fact that the homeowner or their attorney may argue.
Should all efforts to save the house fail, the property will be auctioned off by the sheriff’s office to the highest bidder, absent the filing of a bankruptcy petition. The filing of a bankruptcy automatically puts a stay on all action against the petitioner’s assets, including their house.