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New Jersey Fair Foreclosure Act

Fair Foreclosure ActNew Jersey Fair Foreclosure Act was adopted to provide homeowners with the ability to cure a defaulted mortgage.

Good Public Policy To Cure Defaults.

The Legislature, when enacting the Fair Foreclosure Act, found that it was good for New Jersey for homeowners to be given every opportunity to pay their home mortgages, and thus keep their homes; and that lenders will be benefited when residential mortgage borrowers cure their defaults and return defaulted residential mortgage loans to performing status.

The Act Applies to Residential Mortgages Only.

The Fair Foreclosure Act applies only to residential mortgage loans in which the property is owner-occupied and does not contain more than four units.  “Owner” can extend to the owner’s immediate family.

Notice of Intention To Foreclosure.

The first protection arises in the form of a Notice of Intent To Foreclosure which must be a written notice sent to the borrower 30 days prior to filing a Complaint and initiating a foreclosure action notifying the borrower that it has the right to cure and of the amount of the default and how to cure the default.

Statute of Limitations.

This provision has had much attention lately in a Bankruptcy Court case where Judge Kaplan found in In Re Washington that the date from which the statute of limitations is calculated in addition to what is stated in the Act can also be the date the entire loan was accelerated.  This typically occurs in the Complaint when it is filed which means the Complaint would have had to have been dismissed for some reason and then re-filed within six years from the date of the first Complaint (the acceleration date).  This may be a rare occurrence but may apply if your case was dismissed for lack of prosecution or due to the large settlement in 2012.

Otherwise, the statute of limitations runs six years from the date for the making of the last payment or the maturity date of the note. 36 years from the date of recording the mortgage and 20 years from the date which the borrower defaulted.

Curing Default.

This is the cornerstone of the Act and provides that at any time during the foreclosure action, up until the date of entry if final judgment, the borrower can cure the default.

Notice Prior to Entry of Final Judgment.

An additional notice notifying the borrower that it has the right to cure must be sent to the borrower 14 days prior to asking the court to enter final judgment.  The notice notifies the borrower that it has the right to cure and that if the borrower believes he or she can cure with 45 days, to notify the lender within 10 days of the notice.  If such a notice is sent to the lender, the lender cannot ask for final judgment until 46 days has past.

Reinstatement of Mortgage Relationship.

In the event the default is cured, the lender is required to restore the borrower to the same position it held proper to the default.  In other words, the borrower can continue to pay the mortgage payments under the terms that were in place on the day of default.

If Your Hone Is Abandoned.

The Act does provide some relief to lenders if the home is abandoned.  The time frames and additional notices can be avoided if the lender can show to the Court that the home is abandoned.

Foreclosure Time Frame.

The Fair Foreclosure Act, with the addition of the additional notices and protections creates and extended time-frame for residential foreclosure actions which at minimum are 169 days and at maximum 200 days.  This of course assumes the borrower is not represented by counsel and is allowing the case to proceed uncontested (either did not file an answer or filed an non-contesting answer).  It also assumes the lender does not delay in processing the case and that the Court is not backlogged.  Click this link for more detailed information on time frames for a residential foreclosure action in New Jersey.

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Can I Defeat A Foreclosure Case Past The Statute of Limitations in New Jersey

statute of limitations for foreclosure complaint in new jerseyA Recent New Jersey Bankruptcy Court Case May Allow You To Defeat a Foreclosure Case If Your Complaint Was Filed More Than Six Years After Your Loan Balance Was Accelerated.

People Have Asked: “Can I Defeat A Foreclosure Case Past The Statute of Limitations?

THIS ARTICLE HAS NOW BEEN UPDATED WITH THE PASSING OF ASSEMBLY BILL 5001 as of February 2019.  See the updated article here: https://toddmurphylaw.com/new-jersey-revises-statute-of-limitations-on-foreclosures/

The New York Times posted an article in November of 2014 reporting on an interesting case in the New Jersey bankruptcy court where a judge – reluctantly – barred a foreclosure action because the complaint was filed beyond the statute of limitations under New Jersey’s Fair Foreclosure Act.  See NY Times Article Here.

Judge Kaplan in In Re Washington held that, “by application of N.J.S.A. § 2A:50-56.1(a) and (c), Specialized Loan Servicing was time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Specialized Loan Servicing’s proof of claim was subject to disallowance under 11 U.S.C. § 502(b)(1) and deemed unenforceable against the debtor or the debtor’s property under applicable state law. As a result, the lender’s claim was unsecured, and the underlying lien was deemed void pursuant to 11 U.S.C. § 506(a)(1) and (d).”

What Does the New Jersey Fair Foreclosure Act Say About Statutes of Limitations?

The statute reads:

“1. An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond or other obligations secured by the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation, except that if the date fixed for the making of the last payment of the maturity date has been extended by a written instrument the action to foreclose shall not be commenced after six years from the extended date under the terms of the written instrument.  N.J.S.A. § 2A:50-56.1(a) (emphasis added).

What Happened in the Bankruptcy Court Case?

In a Bankruptcy Court Case title In Re Washington, The home owner purchase a three-family house in February 2007 with a 30-year adjustable rate Mortgage and Note. In July 2007 the borrower defaulted on the Note and the foreclosure action was filed by the Lender in December 2007. The foreclosure Complaint accelerated the due date for all amounts owed on the loan as a result of the payment default. In July 2013 the foreclosure action was dismissed for lack of prosecution due to the Lender’s failure to produce certain documents to the Court. The Lender did not appeal the decision or commence another foreclosure action against the homeowner. Then, on March 12, 2014 the borrower filed for Bankruptcy and commenced an Adversary Proceeding against the Lender to render the loan wholly unenforceable.

Citing the New Jersey Statute of Limitations, the borrower argued that the six-year statute of limitations applicable to loans as per the Fair Foreclosure Act (see N.J.S.A. § 2A:50-56.1) barred the Lender from commencing an action due to the borrower’s default on the note taking the position that the six-year statute of limitation period had expired due to the default and acceleration of the maturity date that occurred when the foreclosure complaint was filed in 2007. Judge Kaplan held that the six-year statute of limitation period applied to the foreclosure action and the Lender failed to commence a foreclosure action within the six year period following the accelerated maturity date that occurred back in June 2007. Therefore, the Lender’s lien was void and no longer enforceable against the Debtor. As a result, the Lender’s proof of claim in the Bankruptcy case was also barred due to the underlying lien being unenforceable as a result of the decision.

Acceleration Was The Key Here.

Because the loan was accelerated, the date of the last payment became the date of acceleration.  That date, in this case was December 2007.  Even though the lender filed a case within the time frame originally, the case was dismissed for lack of prosecution causing the lender to have to start from the beginning and in so doing, the Complaint was then filed outside the six year date.

How will this case hold up in New Jersey State Court?

Its worth a try.  This is still a recent case and the concept is only just beginning to be litigated in New Jersey State Court.  So, more will be know as those cases come down.  The NJ State Court is not required to follow the Bankuptcy Court case but can use it for guidance.  This particular set of facts doesn’t come up often since most lenders don’t wait so long to file a foreclosure action, but if your complaint has come more than 6 years after the lender declared you in default, then it is worth a try to raise this as a defense when you answer your complaint.

What You Should Do If You Are Served With a Foreclosure Complaint in New Jersey?

Don’t just ignore the Complaint.  You only have 35 days to file an answer.  As soon as you receive the Complaint, contact an experienced New Jersey foreclosure attorney who can review your situation and advise of the next steps.  If the date on the Complaint is six years after your loan balance was accelerated, look at this possibility carefully, review the latest State Court case law and determine whether or not this is a valid defense for you.

Can I Defeat A Foreclosure Case Past The Statute of Limitations in New Jersey?  Well, maybe!

 

*Update: The bankruptcy court case In Re Washington was overturned on appeal in August of 2015. The United States District Court for the district of New Jersey reversed its decision and now, the debtor does not get a free home, the mortgage must be paid by the mortgager.

If you want to learn more about saving your home from foreclosure, click on the button below to get your Free Consumer Guide To Foreclosure.