The New Jersey Foreclosure Fairness Act
by Rosemarie Diamond
On January 17, 2010, New Jersey’s outgoing governor signed the New Jersey Foreclosure Fairness Act.
The act amends the Mortgage Stabilization and Relief Act and introduces new notice requirements for communicating with tenants during, and after, a foreclosure action or deed-in-lieu of foreclosure.
The Mortgage Stabilization and Relief Act was amended to delay the sending of the municipal notice until after the foreclosure action is filed; and, the requirement to include a copy of the notice of intention to foreclose has been eliminated. The municipal notice must now be sent within ten days of serving the complaint. The notice may include two contacts: one for complaints as to the condition of the property, and one contact, in New Jersey, for accepting service of process. The amendment addressed concerns that sending notices prior to foreclosure violated the Fair Debt Collection Practices Act. It also mirrors the procedures most servicers have already established. This provision went into effect on January 27, 2010.
Effective February 16, 2010, the servicer’s obligation to maintain abandoned or vacant property begins after a foreclosure complaint is filed. Previously, the obligation began when a notice of intention to foreclose was sent to the borrower.
By February 26, 2010, lenders were required to send a complete list of all properties in foreclosure in each municipality to the appropriate municipal clerk. This provision will update each municipality’s records as to contact information for maintenance issues if the property is abandoned or vacant.
The quarterly reporting requirements will be phased out as soon as the Administrative Office of the Court can collect statistical data electronically at the time foreclosure complaints are filed. The electronic filing system is scheduled to commence on July 1, 2010. It is not known if the new reporting process will begin at the start of electronic filing, or at a later time.
By far, the most troubling provisions in the act are the new strict requirements for notifying tenants of their rights before, and after, the sheriff’s sale or completion of a deed-in-lieu of foreclosure, and the strict procedures for negotiating relocation assistance with tenants during or after foreclosure. Failure to comply with any of the new requirements can lead to civil or criminal liability under existing law, and the imposition of fines.
The law requires a good faith effort to determine the identity of tenants; and, the new owner must send a notice of tenants’ rights within ten days of the transfer of title, by certified and regular mail and by posting on the door of each rental unit. The new requirements will create new costs for servicers and lenders. This provision was effective February 16, 2010.
When negotiating relocation assistance, a lender may only make a bona fide monetary offer to the tenant. The tenant has five business days, from the date the offer is received, to accept or reject the offer. Acceptance of the offer must be in writing, and include an affirmative acknowledgment of the date of receipt of the offer and an understanding that the tenant had a five-day review period to accept or reject the offer. Since the statute does not define “bona fide monetary offer,” it is unclear if a waiver of rent would meet the definition.
The statute strictly prohibits either a foreclosing lender or an REO owner from pressuring the tenant to accept an offer to vacate the property. The prohibited actions include, but are not limited to, mischaracterizing the tenant’s rights under the Anti-Eviction Act, implying the tenant is obligated to accept the owner’s offer, implying consequences for not accepting the offer, suspending utility service, failing to maintain the property, or increasing the rent above what is legally permitted.
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