FORECLOSURE DEFENSE - What is your goal?
You have received mail -- what looks like and says - Summons and Complaint.
If you, the homeowner, do not answer the papers served, the lender's law firm will file a request for judicial intervention. It is very important -- do not ignore the papers! (Please scroll down to read about settlement conferences.)
- You must answer. [An Answer is a paper filed in court and sent to the plaintiff by the defendant, admitting or denying the statements in the plaintiff's complaint, and briefly stating why the plaintiff's claims are incorrect and why the defendant is not responsible for the plaintiff's injury or loss.]
- In NY you have 20 - 30 days to answer depending how you were served. • 20 days - if the summons was given to you directly in your hand. • 30 days - if the summons was given to you any other way (for example by mail, left on your door, or left for you with someone over the age of 18 who lives in your home).
- In NJ you have 30 days to respond; (this link is a fill-in-the-blank form provided by the NJ Judiciary to assist you representing yourself in a foreclosure action - "How to File an Answer to a Foreclosure Complaint". This is known as "pro se" when you represent yourself.) This is a terrific link for New Jersey court answers. (Remember when you click on these links you will be directed out of this website.)
There are many legitimate reasons why borrowers may find themselves in default (loss of employment, sickness, death of a co-borrower, etc.). It is in the borrower's best interest to contact the institution servicing their mortgage and explain what the issue is before they are more than thirty days in default on a payment. It is strongly recommended that you notify the institution by sending it a certified letter (return receipt requested) to the appropriate area and then following it up with a telephone call. Most companies have specific units usually called "loss mitigation" that handle these types of matters.
KEEP ALL RECORDS OF COMMUNICATIONS.
The laws enacted are to protect primary home ownership. If your property is an investment, many of the saving protections are not applicable.
We recognize that many borrowers are either too embarrassed to take action or are unfamiliar with the options available. Here is some information to get you started:
VOCABULARY
Lender - entity that made the original loan to the borrower. They may not be continuing to service the loan. Sometimes the loan has been sold to an Investor.
Sometimes an Investor is the owner of the loan who is most likely not in the chain of title (the ownership line). Fanniemae, Freddiemac, and the FHA acting through HUD are the most common investors.
Servicer - entity who administers the loan. The servicer collects mortgage payments, pays taxes and insurance if there is an escrow account, takes care of customer service and is responsible for referring the foreclosure action to counsel (the law firm representing the servicer).
A servicer may be the original lender, the assignee of a mortgage holder or just administering the loan on behalf of an investor. The servicer is the entity from whom the borrower is receiving letters and notices.
Mortgagee - These days, most often this term refers to the entity that currently holds the mortgage of record, or is the assignee under an assignment of the mortgage that has been delivered but not yet recorded.
NPV - Net Present Value - On May 23, 2011, the government released a webtool to help you in the analysis of the NPV test (Net Present Value). You can click through to the page here - Check My NPV. The tool on this website is "designed to assist the homeowner in conducting a net present value (NPV) evaluation of their mortgage for the Home Affordable Modification Program (HAMP).
Keep in mind, not all mortgages are created equally and not all can qualify for the government programs such as HAMP.
Payment History - this is usually a complex document that details how the bank has calculated payments, interest, delinquencies, hazard insurance, real estate taxes as all part of your loan payments. This is a document that is important to request to review what has been charged. Ask to be provided with a "key" so that you can understand what they list.
LOAN MODIFICATIONS
As a borrower, you can request that the institution consider modifying the mortgage loan terms. An example would be the servicer allowing the borrower to refinance at no or low cost to obtain a lower interest (2% for example) in order to be able to continue making their monthly payments. (More information is available on the makinghomeaffordable.gov website.) But they are not required to offer you this option if the loan is not a Fannie Mae or Freddie Mac loan and many banks just simply refuse.
- You MUST be employed to be considered for a loan modification. HOWEVER-----
If you can not make any payment and believe that this can be rectified within a reasonable amount of time, you can request that the institution provide you with a period of forbearance. The law requires that if you are collecting unemployment, you can have a two to three month reprieve from payment. This would give you the opportunity to address the financial hardship and then begin making your regularly scheduled payments. Keep in mind that the lending institution would then apply the missed payments to either the end of the loan or to be due in full at a later date.
If you and the institution can not agree on a specific type of loan modification or if your request for forbearance is denied you should immediately contact legal counsel for assistance.
- In New Jersey, when selecting an attorney, be sure to obtain the services of someone who has experience dealing with foreclosure cases and understands your rights pursuant to the Fair Foreclosure Act (NJSA 2A:50-53 et. Seq.) This act states that a creditor must give the debtor thirty (30) days notice before commencing a foreclosure action and provide the possible availability of financial assistance by State, Federal or nonprofit organizations.
IMPORTANTLY --
The ways to protect
your home from foreclosure include mediation, housing counseling, and
bankruptcy IF you are working and can show income.
Bankruptcy may be especially helpful if you have more than
one mortgage on the property or if you own a multi-family residence.
Sometimes you may be able to eliminate (strip off) second mortgages such
as a home equity loan in bankruptcy or the 20 part of an 80-20 purchase
money loan. You can file bankruptcy at any time, but it is critical to file prior to a Sheriff's Sale, or you will lose the
right to cure the default. (More on bankruptcy can be read on our site.)
- In New York State --- you have the option of a mandatory settlement conference, according to Civil Practice Law and Rules § 3408: Mandatory Settlement Conference in Residential Foreclosure Actions (2010) - You must request a settlement conference within sixty (60) days of receiving the foreclosure notice.
- In New Jersey --- you have the option of foreclosure mediation.
So What Happens if there has been a Sheriff's Sale? Can I get my home back?
You will still have the legal right to redeem the property in New Jersey as long as you file within the 10-day redemption period.
- New Jersey has a statutory right of redemption, which allows a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs. There is a time limit of only ten (10) days to undertake such redemption after the foreclosure sale.
- Are deficiency judgments permitted in New Jersey?
Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. This means that the borrower still owes the lender for the difference between what the property sold for at auction and the amount of the original loan. - New Jersey however has a “Fair Market Credit” doctrine set forth under N.J.S.A 2A:50-3 which is a safeguard against low or minimal bids which may give rise to a windfall in the event of a deficiency proceeding. Under this doctrine the defaulting borrower is given credit for the fair market value of the property regardless of what the bid at the foreclosure sale was. This is however an affirmative defense which must be raised in a deficiency proceeding. Deficiency actions must be brought within three (3) months of the foreclosure sale.
PRELIMINARY WORK -- When you meet with your lawyer:
- bring the Summons and Complaint
- all correspondence from lender/servicer (for example, coupon booklets, collection letters)
- all records that show the last payment (check and checkbook ledger)
- IMPORTANTLY: complete a workout form that shows your financial situation. This information is very useful to the attorney in corresponding to the servicer or law firm working the foreclosure. This is the fill-in financial form that New Jersey offers.
- you will execute an authorization so the bank can discuss the loan with your attorney. Most often processors will require written authorization, not just verbal,before they will speak to any third party.
The most important question of all - what is your goal?
Only with the goal in mind can your attorney assist you. Usually loss mitigation is the most effective course of action - but then sometimes bankruptcy is the best decision. We are here to help guide you through the process and what might be the best solution for you.
For your assistance in New York State, the administrative court website has valuable information and additional resources for you.
The law keeps evolving. This United States Foreclosure Law link is provided to you which is a continual update of foreclosure laws throughout the country.
For more information and to make complaints about your bank, please visit the Office of the Comptroller's Office of the Currency (OCC) website for foreclosures.
What about a deed-in-lieu of foreclosure? More banks are offering this alternative. This is an option where there is only one mortgage or loan on the property. For example, Bank of America calls this their "cash for keys" program. Be aware that these are NEGOTIABLE deals and often you will need an attorney to assist you. Why? Read carefully when you will receive the "cash". BoA does not say in their documents when you will receive the money, however, they will own your home. Be careful.
Fannie Mae launched in August 2010 a website with foreclosure information and this link directs you to their information on the programs -- deed-in-lieu and deed-for-lease.
What statutes govern New Jersey foreclosures?
- The laws that govern New Jersey foreclosures are found in N.J.S.A. 2A:50-1 et. seq.
