Foreclosure is the action of taking possession of a mortgaged property when the mortgagor (borrower) fails to keep up with their mortgage payments. The collateral is ultimately put up for sale by the creditor. Foreclosures vary from state-to-state and can be initiated either judicially or non-judicially. To be non-judicial, there must be a clause in the mortgage that provides for sale of the property in the event of default. In a non-judicial foreclosure, the lender will complete the foreclosure without the court system. In a judicial foreclosure, a civil lawsuit is filed against the borrower to obtain a court order to foreclose. Judicial foreclosures eventually end with the property being sold at a sheriff sale to the highest bidder. New Jersey is a judicial state.
Early Stages of Foreclosure
From the first missed mortgage payment, a borrower has a little more than ninety (90) days until the bank initiates the foreclosure process. This is usually referred to by lenders as “pre-foreclosure.” In New Jersey, the bank must notify the borrower by certified mail thirty (30) days before it initiates any action against the borrower. N.J.S.A. 2A:50-56. This notice will tell the borrower what they can do to “cure” the default – usually having to pay the bank everything owed. This is called a Notice of Intent to Foreclose or “NOI” for short. The bank will sometimes serve the borrower with subsequent NOIs before a lawsuit is actually filed.
Once the NOI is served, and the requisite time period has passed, the bank will file a complaint for sale of the property based on the default. Unlike an automobile delinquency wherein a creditor is allowed to repossess the collateral, a defaulted mortgage loan must weave through the state court system before the borrower loses the collateral. The borrower will receive a certified, and regular mail, copy of the complaint. The borrower has 35 days to answer the complaint. If the borrower does not file an answer, the lender will file a request to enter default based on the non-answer. This solidifies that the bank is correct in its claim.
Next the case will move to the Office of Foreclosure for administrative processing. In New Jersey, the General Equity judge will review the case to ensure that all the necessary paperwork and evidence is present and complete and will then enter judgment in favor of the bank if no answer has been filed. The judgment gives the bank the right to sell the property at a sheriff’s sale to raise the amount of money due on the mortgage loan. It usually takes at least a month for a case to go through this administrative process.
If an answer contesting the complaint is filed, the case will move to the General Equity judge in the county in which the property is located. The defendant-borrower will have an opportunity to explain the defenses and present evidence in support. The bank will have an opportunity to respond accordingly and assert their right to foreclose. This process can take several months, depending on the court’s schedule. This process can involve extensive discovery exchanged by both parties. If the court rules against the borrower, a judgment in favor of the bank will be entered. The judgment gives the bank the right to sell the property.
The End of Foreclosure: Sheriff Sale
After the bank obtains final judgment, there are a few steps that the bank must take. First, the borrower will be served by the sheriff’s office, advising of the date and time of the proposed sale. The sale date will be at least thirty (30) days from service. The bank must advertise the sale, weekly, for four weeks in a local newspaper. This is what gives the borrower a minimum of another month after the entry of judgment, and prior to the sale. A borrower may have even more time due to the large backlog of foreclosures and the schedule of the sheriff’s office which may not be able to list the property right away.
The homeowner has the right to adjourn the sheriff sale for up to an additional four weeks. See, N.J.S.A. 2A:50-64(a)(2) and N.J.S.A. 2A:17-36. These are called statutory adjournments since they are provided by New Jersey state law. Every sheriff’s office deals with adjournments differently. Some offices allow all the four weeks to be requested by the homeowner all at once, whereas other offices only allow the sale to be adjourned in two-week increments. There is a nominal fee that the borrower is responsible for paying to obtain the adjournment.
After these statutory adjournments, any additional requests for an adjournment of the sale needs to be completed by filing an Order to Show Cause (“OTSC”). An OTSC is required to be filed in order to stay the sale, and a showing of good cause is required. The Vicinage Judge will become involved if the mortgagor (borrower) requests further adjournments (after statutory adjournments) or if there is an objection post-sale. These objections must be made within ten (10) days after sale occurs. This period is known as the redemption period. R.4:65-5. See also, East Jersey S&L v. Shatto, 226 N.J.Super. 473 (Ch.Div. 1987). The Vicinage Judge will then hold a hearing on the request for further adjournment or objection to the sale. If the Vicinage Judge approves the sale, an Order of Confirmation of the Sale should be entered ordering the Sheriff to deliver deed to successful purchaser. See, Hardyston Nat’l Bank v. Tartamella, 56 N.J. 508 (1970).
Once the sale is completed the borrower no longer has a right to the property after the redemption period has expired. If a borrower remains in the property after this time, they are subject to an eviction proceeding which would be filed by the new property owner (or the lender if they are the highest bidder). There is an exception if the sold property is not inhabited by the mortgagor. Tenants in the property who have a valid lease may be protected from eviction, pursuant to the New Jersey Anti Eviction Act, N.J.S.A. 2A:18-61.1 et seq.
Help From a New Jersey Foreclosure Attorney
If you are seeking representation to defend to prosecute a foreclosure action, retaining a competent New Jersey foreclosure attorney is crucial. The foreclosure process can be complicated and hiring an attorney who specializes in this area is important. If you are unsure of your rights, please give us a call for a free consultation. We have office locations in Wayne, Hoboken, Newark, and Hackensack.