The #1 Mistake NJ Homeowners Make: Not Defending Against a Foreclosure
Defending against a foreclosure action is critical to asserting your rights or potential counterclaims, and to improve your chances of obtaining a favorable result such as a loan modification. Even if you don't plan to keep your home, foreclosure defense will protect your family and ensure that you have as much time as possible in your home.
Knowing the foreclosure process in New Jersey will help you understand why foreclosure defense is useful and important.
The Foreclosure Process in NJ
The first step that happens in a typical foreclosure is called a "Default". This is the point at which you first miss making your mortgage payment. There can be many reasons for this, from job loss, family hardship, illness, natural disaster or another reason. No matter how a payment was missed, it is considered a "default" in the mortgage agreement by the lender.
After a default occurs, a Notice of Intent to Foreclose is sent to the borrowers. This is a notice that the lender is required to send out pursuant to New Jersey Law. This notice must contain certain information.
After a brief waiting period following a Notice of Intent, the foreclosing lender files a Foreclosure Complaint in the Superior Court of the county in which the property is located. This is the initiation of a lawsuit by the lender. Along with the Complaint, a Lis Pendens is filed with county clerk where the property is located. You generally will not know that a complaint has been filed until he or she has been served, which happens next.
The Foreclosure Complaint is typically served via a process server. Generally, the bank must effectuate "personal service" of the complaint, through delivery in person to you or a household member. If the bank cannot find you, they will usually be able to use "substitute" service, such as service through publication in a newspaper. Therefore, it is not advisable to try to avoid service, because if you did not receive a complaint in hand, it is still possible that a complaint was filed and that your foreclosure case has already begun.
Once the Complaint is served on the homeowner (who is the "Defendant"), there is time allotted for to file an "Answer" in response. It is absolutely critical to file an Answer. Obtaining counsel to represent you at this stage will help ensure that they can assist you with filing an effective Answer.
If no Answer is filed, Entry of Default (not the same as "Default" mentioned earlier) is made with the Court. Entry of Default simply means that no Answer was filed in time, and allows the bank to proceed with apply for a final judgment. If entry of default has occurred, there may still be an opportunity to vacate the default and have an answer filed. In New Jersey, this typically requires you to show that you have a meritorious defense and have not engaged in contumacious (meaning "stubbornly disobedient") conduct.
If default is not vacated, next, a notice to cure is issued, giving time for the homeowner to cure the arrears.
If no cure is made, an application for Final Judgement is made by the bank which sets the amount owed. In New Jersey, this application is sent to the central Foreclosure Unit of the Court in Trenton. The foreclosure unit reviews the applications and, if they meet the requirements of the court, allows them to be entered by a Judge.
At this point a Final Judgement in entered and Writ of Execution Issued. The Writ of Execution instructs the county sheriff to sell the property at a Sheriff Sale.
The timing of when a Sheriff Sale is scheduled can vary greatly between counties and depending on the number of sheriff sales that are waiting to be held. If no action is taken to stop the process, a Sheriff Sale eventually occurs, with either a 3rd party purchasing the property or the bank taking the property.
Following Sheriff Sale, and payment by the 3rd party bidder, the Sheriff issues a deed to the new owner. The new owner then will take steps to complete an eviction or ejectment of the occupants of the property.
What You Can Do
During the process outlined above, there are a number of things that can be done to defend against the foreclosure. Even if keeping the property is not the ultimate goal, taking these steps can prolong the process and give you and your family more time in the property. Given how high the cost of living in New Jersey is, whether it be rent or a mortgage payment, extra time in the property is very valuable.
First and foremost, answering the complaint in court is critical. In your answer, you can assert applicable counterclaims and defenses.
The quality of the answer filed matters, as a well-pled answer will catch the attention of the lender and often result in the case being referred to a more sophisticated law firm.
The result of a good quality answer is that you can be in a better position to assert your defenses which helps improves the chances of getting a better loan modification offer to resolve the foreclosure.
After an answer is filed and the case is officially a "contested matter", responding to discovery and any notices that are received is also essential to maintaining the fight in the litigation. This can include opposing motions or even filing motions where appropriate and necessary, such as where the bank has not responded to discovery requests.
If efforts to resolve the matter through loan modification or a short sale are meeting resistance from the bank, the fact that your case is a "contested matter" means that there is a Judge supervising the case and someone to whom issues can be brought up. This is especially helpful in cases where a bank is giving the homeowner the runaround, which unfortunately is not all that uncommon. Even if a case has progressed to a sheriff sale being scheduled, it is still possible to apply to the court to explain problems with communicating with the bank. This can often stop/delay the foreclosure to ensure that a modification review can proceed before it is too late.
Lastly, when other debts are an issue or all other avenues have been exhausted, an appropriate bankruptcy should be considered. The Bankruptcy will put the foreclosure on hold and may afford additional opportunities to resolve the matter through modification or other means. Depending on the nature of your debts, financial situation, and goals with the property, a Chapter 7, 13, or 11 option may be appropriate.
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