Dubiln Packard

foreclosure

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New Jersey Foreclosure Activity Still High in 2014

foreclosure homeNew Jersey foreclosure activity still high in 2014 according to the latest information from RealtyTrak which tracks the foreclosure market nationwide.  In New Jersey foreclosure filings have picked-up compared with a year ago, but, it still takes more than 2 1/2 years for lenders to evict New Jersey homeowners who can’t pay their mortgages.

According to RealtyTrak, the number of homes in or at risk of foreclosure  in New Jersey rose 55 percent from September of a year ago to September 2013. Foreclosures were all but frozen for more than a year after questions arose about “robo-signing” – in which mortgage industry representatives signed legal documents without checking them. It has resumed in the wake of several legal settlements and court rulings.

Lawyers from New Jersey’s largest foreclosure law firms such as Fein Such and Zucker Goldberg, tell me they filed a very large number of foreclosure cases in September and October in efforts to get many cases that were stalled for months back on track for a Sheriff’s sale.

New Jersey’s foreclosure process is still the second-slowest in the nation, after New York. Other states have already gotten past the worst of the foreclosure crisis, and foreclosure filings dropped nationwide about 27 percent in September compared with a year earlier.

In the third quarter, Florida and Nevada continued to have the highest foreclosure rates.

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Second Mortgages

Second mortgages are treated differently than first mortgages in all circumstances.

In a sale or foreclosure, the first mortgage holder has priority, receiving proceeds of the sale up to the amount of the full remaining balance.

In a Chapter 13 bankruptcy, a second mortgage’s lien on the property can be stripped and the loan converted to unsecured debt, pooled together with other debts covered under the Chapter 13 payment plan. All of the debt in the pool is eliminated on completion of the plan, often with a small portion of the original balance having been paid.

In a Chapter 7 bankruptcy, if the home is kept via a homestead exemption, the lien remains on the property. This situation has been challenged, with a new precedent established in the 11th Circuit allowing a second mortgage to be stripped in a Chapter 7 filing. Judicial thinking seems to be moving in this direction – but in the meanwhile, if a house in New Jersey becomes unaffordable under current law, either filing Chapter 13 bankruptcy or selling it are the available options.

If the property is underwater and is sold or foreclosed upon, sale proceeds go to the first mortgage holder first and any outstanding tax liens second, making it unlikely that the second mortgage holder will recover any funds in the sale. The debt remains outstanding, and the holder of the second mortgage may sue. Since the second mortgage has become unsecured debt as a result of the foreclosure, deed in lieu or short sale, it can then be wiped in a Chapter 7 bankruptcy filing.

Hopefully precedent will soon be established in New Jersey affording Chapter 7 filers the same protections as Chapter 13 filers – but, until then, an unaffordable second mortgage can force a homeowner out of their home unless they can qualify for a Chapter 13 bankruptcy filing.

Todd Murphy Law has extensive experience dealing with Chapter 7 and Chapter 13 bankruptcies and extensive experience negotiating with creditors.

Call Todd Murphy Law today for a free consultation.