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New Jersey Enacts Nine Bills Affecting Residential Foreclosure Process

Posted By USFN, Wednesday, July 17, 2019
Updated: Monday, July 15, 2019

Rosemarie Diamond
Phelan Hallinan Diamond & Jones, PC
USFN Member (FL, GA, NJ, PA)



In late 2018, the New Jersey Judiciary released a report from its Special Committee on Residential Foreclosure. The report contained specific proposals for revising state statutes and court rules to improve the foreclosure process. In response to the Committee’s report, the legislature passed, and Governor Murphy enacted, nine bills affecting the residential foreclosure process.  Signed on April 29, 2019, some of the bills went into effect immediately, with all taking effect by November 1, 2019.

The most immediate impact for lenders is a series of new disclosure requirements for the Notice of Intention to Foreclose (“NOI”) that takes effect between April and November of 2019. As of April 29, 2019, the lender identified in the NOI must disclose whether it is licensed under the New Jersey Residential Mortgage Lending Act (“NJRMLA”) or if it is exempt. The “lender” in the NOI is the intended plaintiff in the foreclosure action, entitled to enforce the note, and the assignee of the mortgage. By August 1, 2019, the NOI must disclose that the borrower has a right to housing counseling at no cost through the court’s foreclosure mediation program and if the mortgaged property meets certain conditions set forth in the statute, the lender must then seek appointment of a rent receiver. And, by November 1, 2019, the NOI must disclose that if the lender initiates foreclosure, the borrower has the option to participate in the foreclosure mediation program. This disclosure must be in English and Spanish. The Court has communicated an expectation that the entire mediation application be provided with the NOI. The mediation application does include an English/Spanish disclosure, but all application forms are written as if the foreclosure action had already been filed, which may confuse borrowers. 

Another critical change to the NOI is the creation of an expiration period.  Effective August 1, 2019, once an NOI is sent the lender has 180 days to file the foreclosure complaint. If the lender fails to meet the deadline a new NOI must be sent and the cure period, which is 30 days, for the borrower must be allowed to run before the complaint is filed. The statute does not contain any exceptions or tolling language.

The legislature shortened the 20-year statute of limitations relating to the date of default. The time frame is now six years from the date of default for mortgages originated on or after April 29, 2019. Also, effective August 1, 2019, the Court may reinstate a foreclosure complaint dismissed without prejudice no more than three times. One caveat to this rule is that if the dismissal was caused by the lender’s obligation to comply with federal laws or regulations then the related reinstatement of the complaint will not count toward the maximum number of allowable reinstatements.

The legislature also codified the Court’s foreclosure mediation program. Much of the structure and process will remain the same, but borrowers will be required to meet with a certified housing counselor and submit a certification of participation. If they do not participate in counseling they cannot participate in mediation. Lenders who fail to mediate in good faith will be subject to civil penalties of up to $1,000 and other sanctions, including the borrower’s attorney’s fees. Also, lenders must be prepared to evaluate borrowers for most loss mitigation options including loan modification, loan workout, refinancing agreement, short sale, deed in lieu of foreclosure, and any agreement leading to the dismissal of the foreclosure action. The mediation program will be funded through a $155 increase in the cost to file a foreclosure complaint.

The sheriff’s sale process is also undergoing significant changes. The sheriff will have 150 days to schedule a sale. This is up from 120 days.  Also, the sale can only be postponed five times without a court order. Postponements will be allocated - two for the borrower, two for the lender, and one that the parties can mutually request. Postponements are lengthened from 14 days to 30 days. Lender’s counsel will be responsible to prepare and provide the Sheriff’s Deed to the sheriff within ten days of the sale. The sheriff has two weeks to deliver the deed, provided the bid has been paid.

The legislature also expanded the requirements for municipal notices. Contact information must be (1) sent to the municipal clerk and chief executive of the municipality, (2) filed with the foreclosure complaint, and (3) recorded with the Lis Pendens. If any of the information in the notice changes, the lender has ten days to mail, file, and record the new notice. The notice must include full names, addresses, and telephone numbers for representatives responsible for receiving complaints and code violations and the full name and contact information for anyone retained by the lender for care, maintenance, security, and upkeep of a vacant and abandoned property. The notice must also contain the telephone number of an in-state representative who can be contacted if the property becomes vacant and abandoned.

The limited lien priority previously provided only to condominium associations has been expanded to all common ownership communities except cooperative corporations.  A qualifying limited priority lien is now cumulative, renewable annually for five years, and no longer subject to expiration after five years. Community associations must provide a unit owner or a purchaser of the unit with a certificate of the amount due within ten days of receiving a request. Any person who relies on the certificate, other than the owner, will be liable only for the amounts on the certificate.  

The legislature created the Residential Mortgage Servicing Act, authorizing the Department of Banking and Insurance (DOBI) to oversee the licensing and registration of mortgage servicers.  There are exemptions to the Act as well as civil and criminal penalties for failure to comply.

Lastly, the legislature changed certain aspects of the expedited foreclosure process enacted in 2008. The changes do not require lenders to expedite foreclosure, but if a lender chooses to do so and the Sheriff cannot expedite the sale then the lender must file a motion requesting appointment of a special master.  Also, if the lender requests a properly supported, expedited foreclosure post-judgment, then the Court must enter an order expediting the foreclosure and cannot require a hearing if the motion is uncontested.

As the industry sorts through the many changes enacted by the New Jersey legislature, it is recommended lenders and their counsel work together to adjust statute of limitations management, timeline reporting, and approvals for new procedures and the associated fees and costs. Over the course of the next year the full effects of the changes will emerge, and we will all gain a better understanding of the long term impact on residential foreclosure process.

 

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