If you fail to make your mortgage payments in New Jersey, the mortgage lender can foreclose on your property, but not without following specific procedures. New Jersey is a judicial foreclosure state, which means that if you default on your mortgage, the lender must go to court to foreclose your home.
The New Jersey Fair Foreclosure Act and other state and federal laws provide the rules lenders must follow before and during foreclosure.
If you don't make your mortgage payments, you will be considered in default. In the past, the mortgage lender typically started the foreclosure process when you had missed three or more payments but could initiate foreclosure proceedings after just one missed payment.
Again, if you default on your mortgage payments for your home in New Jersey, the foreclosure will be judicial. New Jersey law governs the process.
Under the New Jersey Fair Foreclosure Act, the lender must complete certain steps before filing a foreclosure complaint against you,
Before filing a complaint in foreclosure, the mortgage lender must send the homeowner, via registered or certified mail, return receipt requested, a Notice of Intention to Foreclose. The lender must send the notice at least 30 days but not more than 180 days before filing a complaint.
The notice notifies you that you are behind in your mortgage payments and gives you 30 days to cure the default. The law also requires that the following information be included in the notice:
If you can't cure the default and haven't been able to work something out with your mortgage lender within 30 days of receiving the Notice of Intent to Foreclose, the lender may then file a foreclosure complaint. The lender files the complaint with the Office of Foreclosure, which is a part of the Superior Court of New Jersey.
The Office of Foreclosure handles the foreclosure unless you file an answer to the complaint. In that situation, the foreclosure is sent to a judge in your county. The complaint must set forth all of the facts that would give the mortgage lender (called the "plaintiff" in the complaint) the legal right to foreclose.
After filing the complaint, the lender must personally serve you with the summons and complaint. You'll be called the "defendant" in the complaint.
The lender may also send you a copy of the summons and complaint by regular and certified mail. If the lender can't personally serve you, it can request permission from the court to serve you by publication, meaning you will no longer receive notices directly. Instead, the lender will publish all notices in your local newspaper.
When you get the summons and complaint, you will again receive information about New Jersey's foreclosure mediation program. If you want to participate in the mediation program, you generally must make your request within 60 days of the date you received the complaint. (N.J. Stat. § 2A:50-77).
If you don't request mediation within that 60-day time period, you will not be permitted to participate absent "exceptional circumstances." The mediation program doesn't stop the foreclosure process from continuing.
A law in 2019 (NJ A-664) made New Jersey's mediation program permanent.
You have 35 days from the date you are served with the summons and complaint in which to file an answer. An "answer" is the formal legal document that you prepare in response to the complaint.
In your answer, you admit to the allegations in the complaint that are true and deny those you believe are false. You also set forth any defenses to the foreclosure and state why you believe the plaintiff doesn't have a valid case.
You must file your answer with the Office of Foreclosure, which then reviews it to determine if it is a contesting or non-contesting answer. The type of answer you file will determine how your case will proceed.
Contesting answer. If your answer opposes the foreclosure and sets forth valid defenses to the complaint, the Office of Foreclosure will transfer your case to the superior court in the county where the property is located, and your case will be assigned to a judge. Once your case has been transferred, a trial date will be scheduled.
At the trial, the lender will try to convince the court that it does have the legal right to foreclose. You, however, will try to convince the court that the mortgage lender doesn't have the right to foreclose on the property for the reasons you described in your answer.
Non-contesting answer. If you admit to all of the lender's allegations, your case won't be transferred to a judge in your county.
In cases where no answer is filed or if an answer is determined to be non-contested, the mortgage lender can ask the court for entry of default. The lender can do so after 35 days have elapsed since you received service of the summons and complaint. If you don't respond to the request for entry of default, the lender can then ask the court to enter final judgment.
However, 14 days before filing a request for entry of final judgment, the mortgage lender must send you a notice offering a final chance to cure the default. If you can cure the default, you must respond via certified or registered mail, return receipt requested, with a good faith estimate within ten days of receiving the notice. You will then be given 45 days from the date of the letter to cure the default. (N.J. Stat. § 2A:50-58).
If you can't cure the default, and the court grants final judgment to the mortgage lender, the court will issue a writ of execution ordering the sheriff to sell your house at a public auction. You will get a notice telling you when your home will be scheduled for sale.
When your home is scheduled for a sheriff's sale, you can request a two-week delay of the sale, provided you pay a fee. The postponement is temporary only. If you want additional postponements of the sale, you must file a written request with the court. A court order with a new date for the sale is required, even if the mortgage lender agrees to the postponement.
New Jersey law requires the sheriff to conduct the foreclosure sale within 150 days of the sheriff's receipt of a writ of execution. (N.J. Stat. § 2A:50-64).
Also, under a 2019 law, the sheriff or other officer conducting a foreclosure sale may make up to five adjournments, two at the request of the lender, two at the request of the debtor, and one if both the lender and debtor agree to an adjournment. (N.J. Stat. § 2A:17-36).
After your property is sold, the New Jersey Court Rules give you ten days to file a motion objecting to the sale. (New Jersey Court Rule 4:65-5). You may redeem the home during these ten days. You can also redeem up until the court issues an order confirming the sale if objections are filed under the rule. (See Hardyston Nat. Bank v. Tartamella, 56 N.J. 508 (1970)).
If the lender gets a deficiency judgment (see below), you get six months after the entry of the deficiency judgment to redeem. (N.J. Stat. § 2A:50-4). But you lose this right to redeem if you file an answer to the deficiency judgment lawsuit to dispute the deficiency amount. (N.J. Stat. § 2A:50-5).
If you don't redeem, the proceeds from the sale will be paid to the mortgage lender for the amount owed. If the property sells for more than the amount owed on the mortgage (and other liens), the difference will be paid to you.
But if the house sells for less than what is owed on the mortgage, in New Jersey, the lender can sue you and get a judgment for the additional amount owed. (N.J. Stat. § 2A:50-2). This judgment is called a "deficiency judgment."
To get a deficiency judgment after a New Jersey foreclosure, the lender must file its separate lawsuit within three months from the foreclosure sale date or, if confirmation of the sale is required, from the date of the confirmation of the sale. (N.J. Stat. §§ 2A:50-1 through 2A:50-2.1).
The deed to the property will be transferred to the new owner two weeks from the date of sale.
In 2019, the statute of limitations for most residential mortgage foreclosure actions was reduced from 20 years to six years from the date the debtor defaulted. (See NJ A-5001, N.J. Stat. § 2A:50-56.1).
If you're facing a foreclosure in New Jersey and want information about different ways to fight the foreclosure in court or avoid foreclosure with a loss mitigation option, like a loan modification, consider talking to a local foreclosure attorney.
A HUD-approved housing counselor is also an excellent resource for information about ways to avoid a foreclosure.