In order to stop foreclosure proceedings in New Jersey, troubled homeowners need to understand the applicable federal laws, state statutes, and individual lender practices relevant to their primary residence. In New Jersey, a piece of real estate property is the underlying security attached to a mortgage, which is the exclusive method of lending and security when it comes to financing residential real estate. Furthermore, the state of New Jersey uses judicial foreclosure as the exclusive means of foreclosure, which does offer homeowners some additional legal recourse and time to stop an impending foreclosure, which would otherwise not be available in a state practicing non-judicial foreclosure. In any foreclosure prevention action, seeking the counsel of an attorney, alongside the assistance of a counselor with the Department of Housing and Urban Development, is essential.
Preventing Foreclosure through Lender Loss Mitigation Programs
Oftentimes, lenders have loss mitigation departments tasked with preventing foreclosure on existing properties attached to mortgage loans in default or danger of entering default. If available, a homeowner should consult with the applicable department offered by their lender, which may be able offer one or all of the following options to stop foreclosure, including:
- Offers of refinancing, which will put a homeowner into an entirely new mortgage agreement, which if done properly, will be able to reduce rates, principal amount owed, and offer a fixed rate, which may make payments more manageable for a struggling homeowner
- Adjustments to existing loan agreements, which may include any number of adjustments to an outstanding mortgage, such as switching rate type, adjusting rates, or other measures
- Forbearance periods, which if approved by a lender, will allow a homeowner to miss or make partial payments for a set period of months, with the unpaid money being repaid later in the life of the mortgage
Seeking Available Federal Assistance for Homeowners
For starters, the best free resource of information concerning foreclosure prevention would be the counselors offered by the federal government through local offices of the US Department of Housing and Urban Development. These counselors can advise homeowners on their rights under federal and state specific foreclosure statutes, as well as determine if any government assistance programs may be applicable to a given case. Some of the more notable federal foreclosure relief and prevention acts, which vary in levels of eligibility, include:
- The Mortgage Forgiveness Debt Relief Act of 2007, which was extended through 2012 with the passing of Emergency Economic Stabilization Act of 2008, allows certain eligible individuals that have discharged debt related to mortgages forgiveness on the previously taxable income status of this debt forgiveness
- The Homeowner Affordability and Stability Plan, which contains certain allotments for eligible homeowners to reduce their existing mortgage rates and monthly payments via refinancing options
- The Hope for Homeowners Act, which provides FHA backed fixed rate, thirty-year mortgages to certain homeowners struggling with variable rate mortgages
Again, not all homeowners will be eligible for the aforementioned programs, nor will these programs necessarily be of assistance in a given homeowner’s case, but after consulting with legal counsel, an individual can determine if there are any applicable federal relief programs to help them stop foreclosure of their home.
Preventing Foreclosure through Short Sale or Deed in Lieu of Foreclosure
Two additional foreclosure prevention options, which will not allow a homeowner to remain in their home, are short sale and deed in lieu of foreclosure. Again, communicating and working with your lender is the only possible method of facilitating these options, which should probably include the use of an attorney, as well.
- Short sale, which allows a homeowner to sell their home to a third party buyer for a given price, which may or may not cover the entire amount owed on an outstanding mortgage. In essence, the money short is then forgiven by a lender, in a prearranged short sale deal. This method requires, more often than not, that a homeowner have an interested buyer ready at the time of proposing any short sale terms
- Deed in lieu of foreclosure, which allows a homeowner to turn over the deed to their home to a lender in exchange for cancelling all outstanding mortgage debts. The comparable appraisal value of a home and the amount owed on a given mortgage debt are factors that may influence the ability of a homeowner to do this
Using Bankruptcy as a Means of Preventing Foreclosure
More applicable to cases involving other debt obligations as well, both Chapter 7 and Chapter 13 bankruptcy may offer foreclosure relief for troubled homeowners. The ability to file bankruptcy, however, is subject to a means test and other considerations, but the following chapters of bankruptcy could afford eligible homeowners the following options:
- Under Chapter 7 federal exemptions, a homeowner can retain primary residences up to the value of $18,450. Under exemptions for Chapter 7, there is no relevant homestead exemption. Without really a beneficial homestead exemption applicable in New Jersey, another option would be to use automatic stay as a means of recouping some money, while seeking another place of residence or considering other options.
- Under Chapter 13, reorganizing may promote the opportunity to reduce the overall amount owed on a given mortgage obligation, while retaining the asset. Additionally, with consumers laden with other debts, the consolidation, reduction, and forgiveness of other debts may facilitate the chance to remain in one’s primary residence.
Any bankruptcy filing will have radical short-term and long-term effects, and will require the counsel of attorney practicing bankruptcy law.
Understand Your Rights and Get Legal Help to Stop a Foreclosure in New Jersey
Any foreclosure prevention strategy requires concentrated effort to gather and use all applicable administrative and legal information available to one’s benefit. This will entail a homeowner to be in contact with at least their lender, an attorney, and most likely, a federal housing counselor, in order to make informed and constructive decisions. By retaining legal counsel, homeowners can ensure their ability to have a direct and informed ally in their battle to save their home.
