Todd Murphy

June 30, 2015 by Todd Murphy

Can I Strip A Second Mortgage In A Chapter 13 Bankruptcy?

If there is no equity in your home after the first mortgage, you may be able to “Strip” a second mortgage lien and treat just like any other unsecured lien like a credit card and pay little or nothing on that debt.

Back in the hey-day of toxic mortgage lending 2005, 2006, and 2007, it was all-to-common to sell a homeowner two loans at once: a first mortgage loan and a second mortgage loan. Often, when combined, the total value of the loans was as much as or sometimes even greater than the value of the purchase price of the home. Of course today, those home values are not at all what they used to be and the homeowner is stuck with a pair of loans that exceeds the value of the home and may for many years to come.

The Second Mortgage Makes it Harder To Get A Loan Modification.

When in a foreclosure situation, the second loan coupled with the fact that the combined loan value far exceeds the home value, exacerbates the situation and makes it much more difficult to obtain a loan modification. With this excessive debt couple to the property by the liens, lenders are reluctant to offer a loan modification. Lenders view the situation as one where the home owner is just going to default again after a loan modification due to the excessive debt on the property.

Things Change if The Second Mortgage Is Removed.

It becomes more attractive to a lender in making a decision to grant a loan modification if the second loan is eliminated. Both from the point of view of eliminating a lien on the property but also freeing up cash flow for the homeowner and making it easier to pay the first mortgage loan once it is modified.

How Can The Second Mortgage Be eliminated?

In bankruptcy, although we talk about eliminating the second mortgage, what is really going on is that we are converting a secured debt to an unsecured debt. This is known as “stripping” the lien. When a debt is converted to unsecured, it is then treated just like a credit card debt or other unsecured debt and often very little or sometimes nothing is paid to that debt during the course of the chapter 13 repayment plan. When we strip a second mortgage, we remove the lien from the property and convert the loan to unsecured and pay little or nothing on that debt.

The Benefits of Stripping A Second Mortgage Lien.

Once the second lien is stripped, two thing happen: first, the monthly payment that was required to pay the second mortgage loan is now greatly reduced freeing up cash flow to pay the first mortgage which is the priority in saving the home. The other benefit comes when the home is sold, the amount of money that is required to pay-off liens against the property is now reduced which may allow a home owner to sell a home when otherwise, she could not.

Consider the Benefit of Lien Stripping in a Chapter 13.

In considering whether or not to use a chapter 13 bankruptcy as a tool to resolve a foreclosure and obtain a loan modification when there is a second loan involved and the home is underwater as to the first loan, consider the benefits of the lien stripping when making your decisions.

June 30, 2015 by Todd Murphy

Why Can’t I Get A Principal Reduction?

Principal Reduction Is The Answer To Fixing The Foreclosure Crisis: Why Can’y I Get A Principal Reduction For My Home?

Principal reduction is the holy grail of loan modification: why is it so elusive? For years now, President Obama has been demanding that home loan lenders reduce principal for homes that are worth less than what is owed to the bank and, for the most part, the big banks have ignored him.

Referred to as “underwater,” loans that have a principal balance higher than the value of the home are causing home owners many problems. Homeowners whose homes are underwater are stuck, not being to sell the home and not being able to get a principal reduction in a loan modification. If they do save the home from foreclosure with a chapter 13 bankruptcy or a loan modification, why would they want to pay on a loan that is valued significantly higher than what the home is worth? If they do save the home, they may have to wait years before the value of the home rises and the principal balance on the loan is paid down enough to be able to sell the home later. And, if they do save the home, they may be paying a much higher monthly payment than they could be if they rented a similar home or if, after rebuilding credit, buying a new home.

So, why don’t lenders provide principal reductions and why can’t the government force them to do it?

A Washington Post article from as far back as 2012 tells the story of the fight. “The fight over principal reduction has stirred passions since the earliest days of the financial crisis. Consumer advocates and some economists have argued that it is the only way to finally end the housing crisis and bolster economic growth — by freeing borrowers of excessive mortgage debt. But many conservatives have resisted the idea, arguing that it would represent an unfair bailout for undeserving homeowners.”

Treasury Secretary Timothy F. Geithner chastised DeMarco, the then director of FHFA for his decision, even as he acknowledged DeMarco’s right to forbid principal reduction in his role as independent regulator for Fannie and Freddie.

“Five years into the housing crisis, millions of homeowners are still struggling to stay in their homes and the legacy of the crisis continues to weigh on the market,” Geithner wrote. “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.”

The Fight Continues.

In 2014, the fight continued with Elizabeth Warren taking on Mel Watt, who most had hoped would bring fresh thinking to the FHFA when he took over the position, wanted to know why the director of the Federal Housing Finance Agency (FHFA) has not acted sooner to help “underwater” homeowners who owe more on their mortgages than their homes are worth, leaving them vulnerable to foreclosure.

Mel Watt, the director, said he has been trying to figure out whether there is a way to responsibly help struggling underwater borrowers by reducing the size of their loans, a type of relief known as “principal reduction.” But he said the issue is a tough one, “perhaps the most” difficult he has faced since becoming the overseer of the mortgage giants Fannie Mae and Freddie Mac in January. See Washington Post article November 2014.

Sen. Elizabeth Warren (D-Mass.) challenged him. “You’ve been in office for nearly a year now,” she said, “and you haven’t helped a single family, not even one, by agreeing to a principal reduction, so I want to know why this hasn’t been a priority for you.”

The short but heated exchange is the latest sparring over an issue that’s been a political hot potato since the housing market unraveled and home prices plunged. Millions of homeowners saw the equity in their homes vanish, and they could not refinance or sell their way out of trouble. Some lost their homes to foreclosure.

The Failed Programs.

There are a number of failed programs that home owners continue to ask about, for example Making Home Affordable and

Home Affordable Modification Program but these programs are nothing but shells of desperation.

Scams Abound.

Many telemarking representatives like to use the hope of principal reduction as a way to get you to pay their high fees – telling you they have excellent relationships with lenders and they can get you a principal reduction. But don’t be fooled. A principal reduction is next to impossible to get.

But hope continues.

Principal reduction is what is necessary to solve the home foreclosure crisis. Not offering principal reduction is irresponsible on the part of lenders and hurting not only the homeowners that need a principal reduction but hurting the housing market in general by not using the tool of principal reduction to break the hold on low prices that continues to stress housing markets.

June 28, 2015 by Todd Murphy

How to Stop or Adjourn A Sheriff Sale in New Jersey

A Home Owner Is Entitled To Two Adjournments of A Sheriff Sale Simply By Requesting One and Paying A Small Fee to The Sheriff’s Office. Here’s How to Stop or Adjourn A Sheriff Sale.

Scroll down to get an easy-to-use form to stop your sheriff sale right now.

It takes a long time in New Jersey to foreclosure on a home in New Jersey but ultimately, if the loan can’t be worked-out and brought current through a loan modification or a bankruptcy, most foreclosure cases end at a Sheriff sale.

You may find you need to stop or adjourn a sheriff sale to get more time to work-out a foreclosure or sell your house.

You are entitled to two adjournments for any or no reason. But only two.

An adjournment is lawyer-speak for temporarily stopping and postponing a court action or hearing, in this case, a sheriff sale.

In a New Jersey foreclosure case once the plaintiff (your mortgage lender) has obtained final judgment, a sheriff sale may be scheduled.

The sheriff sale may be adjourned (postponed) by either the lender’s attorney or by you the homeowner.

Prior to 2019, the plaintiff was entitled to adjourn a Sheriff sale as may times as it wanted to for any or no reason but this rule was updated and now the attorney for the lender can only adjourn twice. You, the defendant (the home owner), have always been limited to two adjournments for any or no reason for two weeks each, however, also in 2019, the two weeks was updated to 30 days for each adjournment.

You have two 30-day adjournments available to. But once they have been used, they are gone forever.

This law was updated on April 29, 2019 and goes into effect on July 30 2019 changing the two week adjournments to 30-day adjournments – See the full article here on this and other foreclosure laws that have been amended in New Jersey.

In March 2020, Governor Murphy signed an executive order staying all evictions indefinitely.

Moratoriums Lifted November 2021.

In March 2020, Governor Murphy signed an executive order staying all evictions, and therefore sheriff sales, indefinitely for the COVID pandemic. As of November 2021, the moratorium has been lifted and sheriff sales are now again permitted.

As of January 2022, we have been overwhelmed with calls to adjourn or otherwise stop sheriff sales.

How Do I Get My Two Adjournments?

I have found over the years that all of the 21 County Sheriff offices across the State are staffed by extremely helpful individuals who make getting an adjournment easy.

Each County has its own procedures and sets its own costs to request an adjournment but generally speaking, there is a small fee – usually $28 – to request an adjournment and it must be done in person (so you can pay the fee).

You must have all of the information for the property and the sheriff sale listing and the docket number and Sheriff sale number and property address and the date of the sale and simply asking for the adjournment.

Some Sheriff offices have a simple form which you can fill-out and give to the Sheriff’s representative to request the adjournment.

We created an easy-to-use form for you.

So that you will have all of the necessary information with you when you arrive at the sheriff office, we created an easy-to-use form for you so you can get the sheriff sale adjourned quickly and easily.

Get your adjournment form here:

Submit your information here. The form will be emailed to you right away and can be used in every County in New Jersey.

Fill out my online form.

What Happens After I have Used My Two Adjournments?

Once you have taken your two adjournments, there are no more adjournments without asking a judge to intervene.

Motion to Stay A Sheriff Sale

If you have a very good reason, you may be able to ask a Judge by formally petitioning the Court and showing “good cause.”

For example, if you have a contract to sell your house and there will be enough money from the sale to pay-off the lender and some left over for you because you have equity in your house, that may be “good cause.”

If it becomes necessary to request and adjournment beyond the two 2-week adjournments, a formal request to the Court , known as a “motion” can be made but it must be for good cause.

This is something better done by a lawyer and typically can be a little costly. This additional adjournment is at the discretion of the judge and is only going to be granted for a very valid reason.

Homes Have Increased In Value Over the Last Year Creating Equity.

If your home can be sold for more than what you owe the lender, you may have equity in your property that you can’t afford to lose.

During this past year, home prices have soared in many towns in New Jersey creating equity that did not exist before.

Sell Your Home To Save Your Equity.

The recent increase in home values has provided an alternative to foreclosure that hasn’t existed in the past several years.

If your home can be sold at a price that can pay-off the loan and leave you with some money after closing, the option of perhaps selling your home may be a good option for you.

Get time to sell the house but only if you really have a legitimate contract.

There are many investors who are looking for properties to purchase and flip.

You may be approached by a real estate agent or investor on the eve of a sheriff sale offering to purchase your home. If so, you may need our help to review the contract quickly.

If you have a signed contract and can show a judge that your buyer has the funds to close and your lender will be paid in full and you will come out with some money too, the judge may adjourn the sherif sale to provide you and the buyer the time to get the house sold.

If you are approached by a buyer at the last minute, contact us right away to review the contract and petition the court for more time.

We can help you either save your house from foreclosure or to help you get more time to sell your house to save your equity.

June 27, 2015 by Todd Murphy

Stop A Sheriff Sale – Save Your Home

If you want to save your home from a Sheriff sale, there are number of strategies you can employ – it’s not too late.

Don’t be concerned that its the last minute. You may have been trying for months or longer to get a loan modification or maybe you gave up months ago but now you’re faced with the prospect of having your home sold out from under you by the Sheriff. Here’s what you need to know to survive.

How To Stop The Sale.

There are two methods of stopping the sale before it happens:

1. Adjournments – the lender (plaintiff) or homeowner (defendant) may ask the court to stop or adjourn the sale temporarily for any or no reason. But, the homeowner can only ask twice and each time the sale can only be adjourned for two weeks. The plaintiff or lender can ask as many times as he or she wants. In certain limited situations, the homeowner can ask the court for a further adjournment but it will only be granted for good cause such as there is a sale pending or you are about to be approved for a loan modification.

2. Bankruptcy – this is a powerful tool to (a) stop the Sheriff sale and (b) to bring your mortgage loan current which ultimately saves your home form foreclosure.

Once The Sale is Stopped, How To get Caught Up On Your Missed Payments.

Once the sale has been stopped, it’s time to get working on a loan modification. A loan modification is what most people want and in most cases is the best way to resolve a foreclosure. If its not possible to get a loan modification in the short time you have after you have stopped a Sheriff sale, and we didn’t use bankruptcy to stop a Sheriff sale, then bankruptcy can help to (1) stop the sale after the adjournment runs out, (2) get more time to get a loan modification, (3) use the bankruptcy court’s loss mitigation program to get a loan modification, or (4) get current on the loan without a loan modification.

Can You Get A Loan Modification?

Even though you may have tried and failed or given up hope months ago, and even though the Sheriff sale is about to happen, it still may be possible to get a loan modification to permanently cure your foreclosure case.

The Basic Issue To Be Resolved.

The Arrears – The problem you are facing is that there a number of missed payments and the lender won’t just let you start paying again. Once three payments have been missed, the loan is declared in default and the only way to be able to start paying again is to catch-up on the missed payments. These missed payments are part of what is called the arrears. Any real estate taxes or insurance that may have been paid by the lender and any legal fees and late fees are added together with the missed payments to make up all of the arrears. The arrears have to be paid before the lender will allow you to start making regular monthly payments again.

How to Pay The Arrears – There are essentially three ways to pay the arrears: (1) pay the total arrears in a lump sum, (2) with a loan modification, have the arrears added to the principal balance of the loan, or (3) pay the arrears in 60 equal monthly payments in a chapter 13 bankruptcy plan.

The Tools We Use.

Loan modification – in a loan modification, the arrears are added to the principal balance of the loan and a new amortization schedule is calculated usually based on 30 years and often with a new interest rate. For loans with high interest rates, this helps lower the monthly payment as does extending the term to 30 years and sometime longer. This is the ideal result.

Chapter 13 Bankruptcy – this is essentially a repayment plan that is used to pay the arrears over 60 equal monthly payments. Then, in addition to making these 60 monthly payments, at the same time, you start paying your current monthly mortgage payment. This double payment – so to speak – is what can be tough for many people, that’s why the loan modification is the best route if possible. An additional benefit to the chapter 13 bankruptcy is that in certain circumstances, we may be able to eliminate a second mortgage loan. Also, if you have excessive consumer debt from credit cards, or if you have other debt from medical or other unplanned expenses, these debts can be handled with a chapter 13 bankruptcy.

Consider All of Your Options – Take Action.

As you can see there are a number of ins-and-outs to resolving a foreclosure. This article only scratches the surface but I hope you can see there is help waiting for you if you take action. Don’t be discouraged if there is a Sheriff sale pending. We can stop a Sheriff sale and resolve your foreclosure even though its the last minute.

Get my free Consumer Guide to Saving Your Home From A Sheriff Sale.

June 27, 2015 by Todd Murphy

When Do I Have To Move After A Sheriff Sale in New Jersey?

If your home has been sold or is about to be sold, you must move – but read on.

You will have to move after a Sheriff Sale. When the time finally comes after you have tried everything you could try to save your home and your home is sold at a Sheriff Sale in New Jersey, the home is no longer yours and its time to think about moving. The ownership interest in the home is actually transferred by the Sheriff to the new buyer and you are required to move out of your home right away. But, there are still a couple of last minute strategies you might want to consider to stay in your home a little longer.

You Have 10 More Days.

There is a slight delay, though, after the sale. In New Jersey, there is something known as a 10-day right of redemption for the home owner. This gives the homeowner the right to pay-off the loan and prevent the home from being sold if it can be done within the 10 days after the sale. In some cases, a home owner might be able to borrow money from a friend or family member or get a hard-money loan. Therefore, the law provides for 10 days after the sale to do “redeem” your home. If not, as is usually the case, then, and only then, does the Sheriff transfer the property to the new owner.

For most people, then, that means you have an additional 10 days after the sale before you have to move.

What If You Can’t Move Right Away?

Even after the 10-day period, some people just can’t move after a Sheriff sale, at least not right away. Maybe you don’t have the money. Maybe you have nowhere to go. Maybe you or a family member is sick or disabled making it harder to move. There are many reasons. If that’s you, what should you do? Here are a couple of options:

Cash For Keys – Often the new owner will send a representative to your home to talk to about moving. An experienced foreclosure sale buyer knows that it may be hard for you to move and that it could be costly and time consuming to evict you. Therefore, a smart owner will offer you the necessary cash you need to move in exchange for you moving out right away or within a short period of time. Its common for a representative of the new owner to offer you $5000 if you move out in 30 days or $3000 if you move out in 60 days (see below to see why this is smart for them and how you can gain leverage to get money to move).

Make them Evict You – There is a 90-day period before eviction following a sheriff sale. Approximately 60 days after the sheriff sale, you will receive a final notice with a date set for eviction. If you can’t move before that date, you can go to the sheriff’s office and ask for a hearing where you can tell your story to the judge and ask for more time. You may get a couple of weeks or a couple of months. If you still can’t move on the extended eviction date, you can go before the judge again and ask for even more time. There are many extenuating circumstances that judges will consider in such cases: particularly for elderly home owners or for home owners with children. Now you know why its smart for the new owner to offer you cash for keys!

Having your home sold at a Sheriff sale is tough on even the strongest family but, as you can see from the information above, there are some last-minute things you an do to get more time before you move after a Sheriff sale. Even after the sale to stay in your home just a little longer.

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