Can I Reinstate My Mortgage?

Posted by kevin on September 7, 2017 under Foreclosure Blog | Comments are off for this article

Many times, borrowers served with a foreclosure complaint have asked, ‘if we are only $18,000 behind on the Note, how can the bank take the position that $500,000 is due?’ The answer is two-fold. First, in a foreclosure, the borrowers are not being sued for what is called a “money judgment”. The object of the foreclosure is to sell the collateral (your home) and pay off the loan. What gives the the lender the right to sell your home? That leads to the second point. Your Note and Mortgage give the lender the right to sell the collateral to pay off the loan. Moreover, the Note and Mortgage give the lender the right to accelerate the loan upon a default. That means even if you are late even one payment and that triggers a default, the entire amount of $500,000 is due at the option of the lender.

Is there anyway to de-accelerate the Note and Mortgage? Well, if your Note and Mortgage give you the right to reinstate, then you have an out. Otherwise, in the “old days”, you were basically at the mercy for your lender. It was the lender’s decision to de-accelerate the mortgage. If the lender consented, they usually tacked conditions on the consent in the form of payments of late fees, penalties and collection costs which sometimes seemed exorbitant under the circumstances.

In New Jersey, that all changed in 1995 with the passage of the Fair Foreclosure Act. That law applies to any residential mortgage, and gives the debtor the right at any time up to the entry of final judgment in a typical foreclosure to cure the default, and de-accelerate and reinstate the mortgage by paying the amounts due as set forth in the statute. The term “residential mortgage” clearly applies to your home. But it also applies to dwelling of up to 4 units one of which is occupied by the debtor of members of his/her family. In addition, the term residential mortgage can apply to a vacation home.

How much must you pay prior to the entry of final judgment? The law says all sums which would have been due in the absence of default. That means all principal, interest and escrow payments that you missed. In addition, the debtor is responsible to pay all late charges, court costs and attorneys fees permitted in foreclosure matters by the New Jersey Court Rules. Payment must be in the form of cash, cashier’s check or certified check. Although not specifically mentioned, a wire transfer into an account designated by the lender should satisfy the condition.

As with any statute, there are terms which are not exactly clear. So, besides the statute, borrowers may have to look at court opinions dealing with the statute. However, the short answer to our question is that under the right circumstances, borrowers have a right to reinstate a residential mortgage in New Jersey.