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.

The Boat Has Left the Dock Before it Left the Dock

Posted by kevin on April 20, 2015 under Foreclosure Blog | Comments are off for this article

In the past week, I have received telephone calls from 5 homeowners whose homes were in foreclosure. 3 of the owners told me that they had received notice from the sheriff that a sale has been scheduled. In other words, final judgment had already been entered. I quoted them a fee, and when they picked themselves off the floor, I told them that the chances of overturning the judgment were slim and might not justify the expense involved.

If you have had the chance to read this blog (or other blogs dealing with foreclosures), you will know that in NJ, the courts have made it very difficult for borrowers to succeed in litigation. In 2011 just after pro borrower decisions, I was getting positive results in court on a regular basis. This made it easier to negotiate a settlement. One by one, however, defenses have been whittled down by the courts which has made litigation and settlement more difficult.

One of the first areas where the courts hit back at borrowers were in cases dealing with post judgment relief. What does that mean? Well, for the most part, it means that the borrower does not file an answer to the complaint, but waits until final judgment is entered before he or she hires an attorney to contest the foreclosure.

To set aside the final judgment, a borrower must file a motion to vacate the judgment. The test is that the borrower must show excusable neglect plus a meritorious defense. This a a pretty high standard, made even tougher by a series of unpublished decisions that came down from late 2011 to 2013 which further cut off access to the courts in post judgment situations. Add to the high standard to vacate and the tough case law, the penchant of many judges to give lenders more than one bite at the apple in opposing the motion to vacate. Your lawyer winds up writing 2 or more briefs and making as many appearances. And, after all that work, you lose about 90% of these motions on the trial level.

On a practical level, reviewing all the documents, drafting the initial papers, going to court and then writing supplemental briefs with two or more court appearances is time consuming and, thus, costly. It can easily run into $7500-9,000 worth of time. So, I tell clients unless you have that one in a thousand fact pattern, you are probably wasting your money.

So what do you do? If you are behind on your mortgage, you will get a letter of default from the servicer. Then, you will get a Notice of Intent to Foreclose along with the ‘we are your bank and we are here to help’ letter. That is the time that you hire an attorney. It gives you the best chance to get what you want, and it gives an experienced defense attorney the most flexibility in shaping a defense.