In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. If you are a homeowner facing foreclosure in New Jersey, you may be eligible to participate in the state’s foreclosure mediation program. Read on to learn more about how the program works and how you can benefit from the process.
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
What is Foreclosure Mediation?
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
- the borrowers
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
- loan modification
- payment arrangement
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure.
(To get information about each of these options, see our Alternatives to Foreclosure area.)
New Jersey Foreclosure Mediation
New Jersey has established a mediation program to provide certain homeowners in foreclosure with the right to mediation. (Learn more about the New Jersey Foreclosure process.)
Eligibility for Foreclosure Mediation
New Jersey homeowners in foreclosure are eligible for mediation if the property is:
- an owner-occupied one to three family residential property, and
- is the borrower’s primary residence.
Mediation is available whether or not the borrower disputes the lender’s right to foreclose and may be requested within 60 days after the service of the summons and complaint. After 60 days, a motion indicating exceptional circumstances exist must be filed with the court and a judge will decide whether or not you may participate in the mediation program. If a sale is already scheduled, you need to file a mortion asking the court to stay (postpone) the sale.
How to Participate in New Jersey’s Mediation Program
To sign up for the foreclosure mediation program:
- First, call the toll free foreclosure mediation hotline at 1-888-989-5277 or you can go to www.judiciary.state.nj.us/civil/foreclosure/index.htm to find a link to an online mediation request form.
- Then, speak to one of the representatives about your eligibility for mediation.
How New Jersey’s Foreclosure Mediation Program Works
Once the court receives the Mediation Request Form and Foreclosure Mediation Financial Worksheet, the material will be distributed to court staff in the local courthouse and to the lender’s attorney. Then, the court will assign a mediator to your case and set a date for the mediation.
Who Must Attend Mediation
The following parties must attend the mediation:
- the mediator
- the homeowner
- the lender’s attorney, and
- a representative of the lender (who may participate by telephone).
Mediation's Affect on the Foreclosure Action
A mediation request does not stop the foreclosure action, however a sheriff’s sale cannot be conducted until the mediation is completed. Mediation will typically lengthen the foreclosure timeframe by 60-120 days.
Remember, if a sheriff’s sale has already been scheduled, you will need to file a motion requesting the court to postpone (or stay) the sheriff’s sale. A sample motion to stay the sheriff’s sale can be found on the New Jersey Judiciary’s web site at www.judiciary.state.nj.us. Click on “Forms”, then “Represent Yourself in Court (Pro Se), and “Notice of Motion to Stay Sheriff's Sale and Referral to Mediation”.
Cost to Participate in Mediation
There is no fee to participate in New Jersey’s foreclosure mediation program.
Homeowners in Bankruptcy
Homeowners in bankruptcy may now participate in New Jersey’s foreclosure mediation program without restriction. (Previously, homeowners with pending bankruptcy cases were required to complete the bankruptcy or obtain a relief from stay from the bankruptcy judge before they could participate in the program).
If the parties are able to reach an agreement to avoid foreclosure, the mediator will prepare a foreclosure mediation settlement memorandum and all parties will sign it. However, if an agreement cannot be reached, the foreclosure action will continue and a sheriff’s sale will take place.
Should You Participate in the Foreclosure Mediation Program?
Even though participating in New Jersey’s foreclosure mediation program does not guarantee that a foreclosure will be avoided, it doesn't hurt to participate in the program. The lender may be more likely to agree to a nonforeclosure solution during mediation than if you approach it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered.
For more information on New Jersey’s foreclosure mediation program, call toll free 1-888-989-5277 or go to www.judiciary.state.nj.us/civil/foreclosure. The foreclosure mediation hotline is open Monday through Friday, 8:00 a.m. to 6:00 p.m.