Short Sale vs Foreclosure: The Facts

When trying to decide between a short sale and foreclosure, sometimes it’s easier for homeowners to just throw in the towel and let the agent do the work. It is important to seek legal advice from a professional before making a decision, but allowing the bank to have complete control may not be the wisest decision. By becoming more informed about short sale vs. foreclosure, you will be able to make a more confident and educated decision regarding your home.

Process of Foreclosure

A foreclosure occurs when a lender takes ownership of the property and removes the borrower. This occurs when the borrower cannot make the mortgage payments on a consistent basis. Foreclosures can be done through a real estate agent or sold at an auction. The lender can then sell the foreclosed property and collect and recover the unpaid mortgage balance.

This process begins when the lender doesn’t make the mortgage payment for three to six months. The lender will notify the borrower of foreclosure and the reinstatement period, which allows the borrower time to resolve any disputes. The mortgage balance then needs to be paid off within three months, and if not, a notice of sale will be given to the homeowner.

Process of Short Sale

A short sale can be used as an alternative to a foreclosure because it bypasses the extra costs and fees for both parties involved, but it does require a large amount of paperwork. A short sale occurs when the homeowner cannot make mortgage payments and owes more than the current market value of the property. Lenders are often hesitant to accept short sale offers because the proceeds from selling the house often equate to less than the mortgage payment, which is known as a deficiency. Homeowners may still be obligated to pay these deficiencies even after a short sale agreement. The homeowner will put the house on the market and if he or she receives an offer, the bank also needs to approve it. The short sale process can take three to six months to closer. If a homeowner is experiencing hardship such as divorce, unemployment, family death, or job relocation, banks will be more likely to approve a short sale.

Effects on Credit Rating

Unfortunately, foreclosures can cause the borrower’s credit rating to decrease by 200 to 400 points and will remain on the report for seven years. On the other hand, short sale usually only causes a credit rating to fall 50 to 130 points and a credit report will state that the short sale was “settled,” “paid as agreed,” or “paid in less than full.”

Future Homeownership

After a home foreclosure, an individual can buy a house in five years with some restrictions, or in seven years with no restrictions. After a short sale, an individual may be able to buy a home immediately and the lender will not require the loan to be paid back.

Purchasing a Foreclosed or Short Sale Home

Typically, short sales home are better to buy than a foreclosed home because the property has been inhabited. The house and utilities have been maintained, but short sales can take a large amount of time to close. On the other hand, buying a foreclosed house is usually quicker and they are sold at lower prices.

For more info, whether you’re thinking about selling or buying a short sale/foreclosure, visit: https://www.veitengruberlaw.com/Real-Estate-Transactions/

              

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How to Sell Your Home Before Your Lender Forecloses

nj bankruptcy attorney

Many times here on our bankruptcy blog, we describe situations where homeowners want to save their homes. Filing for bankruptcy sets the Automatic Stay into motion, which in turn prevents a home from being foreclosed upon. The length of the bankruptcy case and the anticipated outcome of a discharge of debts allows those homeowners (who desire it) the ability to adjust their debt-to-income ratio enough to keep their home via reaffirmation.

However, sometimes, a financially distressed homeowner doesn’t want to save their home. They may wish to downsize or move into a more affordable geographical location. Foreclosure, then, is not their ideal outcome, because they’ll end up with no money from the sale of the home, their credit scores will drop, and they could end up owing a deficiency judgment.

In these situations, selling the home is the desired outcome.

What’s the problem, then? Just sell the house and get on with things, right? The dilemma arises when homeowners have fallen behind on their mortgage payments and their lender is threatening to foreclose before they have a chance to get the house listed on the market.

If you do not want to keep your current house, but you’re simply short on time due to the immediate threat of foreclosure and sheriff’s sale, you’re in luck. You came to the right place, because we can help gain you enough time to get your property sold to a proper buyer rather than through a foreclosure bidding auction.

Why not just let your home go to foreclosure sale? A sale’s a sale, right?

Actually, no. Very, very much NO. However, many homeowners who’ve found themselves face-to-face with a foreclosure don’t realize they can take action toward an end goal of selling their home even when the home is actively being foreclosed upon. That’s right – this is possible even if you’re behind on your mortgage payments – or not making them at all.

Homes that sell via foreclosure auction or “sheriff’s sale” (find out why it’s called that here) almost always sell for significantly less than their real time market value. That is the #1 reason that you should consider trying to list your home for sale before sheriff’s sale.

For those homeowners who know they cannot continue living and maintaining their current lifestyle (i.e. high mortgage payments and property taxes), the last thing needed is the possibility of a deficiency judgement.

A deficiency judgement isn’t the only reason to avoid foreclosure.

By beating your lender to the punch and selling your home before they have a chance to pull the rug out from under you, you gain the opportunity for a substantially higher sale price. This will guarantee that all of your missed payments, late fees and interest is paid back to your lender, causing a domino effect of good results:

  1. Your foreclosure will be dismissed.
  2. You may end up with some equity in your pocket.
  3. Other dischargeable debts can be eliminated or greatly reduced.

Filing for bankruptcy in New Jersey should be viewed as a valuable tool that can be used to right a financial situation gone awry. The key to getting all of your ducks in a row, however, is working with the right NJ bankruptcy attorney. Timing is everything; don’t delay making a move on what can potentially turn into a disaster. Take action now, and you can walk right into a story with a happy ending.

 

Bidding on a NJ Foreclosure Property: The Lowdown

NJ foreclosure

Buying a home at a NJ foreclosure sale (or sheriff’s sale, as they are commonly called) can be a fantastic way to score a property at below-market price. While there are some risks and pitfalls to be aware of when bidding at a foreclosure auction, if you’re well-informed, you’ll likely come out of the process happy and (hopefully) successful!

Naturally, the most obvious advantage of purchasing a home via sheriff’s sale is the low price you’re likely to pay. Foreclosure sales are a great way to gain ownership of a rental property or a home you intend to “flip.” Homes that are being auctioned at a New Jersey foreclosure sale have been through the judicial foreclosure process that our state requires, and the lender has been permitted by the court to move forward with selling via auction.

How can I find out about upcoming NJ foreclosure sales?

This is one of the best parts about buying a foreclosed property in New Jersey. Sheriff’s sales are required to be advertised for a minimum of 30 days. You can find listings of upcoming sheriff’s sales in local newspapers for each county. Many jurisdictions also have sheriff’s sale listings online on their county court website.

How does a sheriff’s sale work?

In New Jersey, foreclosure auctions are controlled or led by the sheriff’s department of the property’s county. All local county rules must be followed, however, there are several general rules that are consistent across all counties, according to NJ law.

  1. NJ foreclosure properties up for sale must be sold subject to the first mortgage held on the property. This information can usually be found within the property’s first lien.
  2. Any NJ foreclosure sale will also be subject to any/all local state or federal liens on the property.

Because of the above information, all bidders at NJ sheriff’s sales would be remiss to fail to run a complete title search on the property in question before even considering bidding. Failure to do so could land you with a property that is deeply encumbered by multiple liens, for which you will be 100% responsible.

In New Jersey, foreclosure sales usually start with the lender being given an opportunity to open the bidding. Most lenders will start with a $100 bid. Bidding on the property continues via voice auction between all of the interested parties present at the auction.

The usual course of a NJ sheriff’s sale/auction continues with bidding the price of the property higher and higher until a highest bidder remains. If you are the lucky bidder, you will be required to pay a 20% deposit of your bid price.

Upon conclusion of the bidding, the sale is considered to have ended. However, the end of the sale triggers what is known as the Redemption Period. This is a ten day period during which the original owner (who was foreclosed upon) is allowed to “redeem” the property. This can only be done if the original owner can completely pay off the foreclosure judgement amount, including any additional fees and costs (and potential liens).

At the end of the Redemption Period, if the original homeowner does not choose to redeem the home, you will be given a sheriff’s sale deed. When you receive this deed, it is expected that you will make full payment of the balance of your successful auction bid. You’ll also have to handle any fines that accrued relating to the property, after which you will be able to officially transfer the title from the former owner to yourself!

NJ Foreclosure Sale: What is an Arm’s Length Transaction?

When a piece of real property is scheduled for NJ foreclosure sale (also known as and commonly referred to as the Sheriff’s Sale), an interested buyer, investor or “house hunter” may reach out directly to the homeowner. Even when a homeowner’s property is in foreclosure with the Sheriff’s Sale scheduled, they (the owner) have the legal right to attempt to sell the home.

A home that is in NJ foreclosure is likely to sell at Sheriff’s Sale for substantially less than its real value. This can end with the original homeowner owing the lender the difference between how much they still owed on their mortgage loan and the foreclosure sale price. This is called a deficiency, and although lenders do not always pursue a deficiency judgement from the court, sellers should know that it is always a possibility.

Armed with information about a potential deficiency judgement, a homeowner going through the foreclosure process is smart to attempt to find a buyer before the Sheriff’s Sale date. In fact, should the homeowner find an “arm’s length” buyer prior to the foreclosure sale, it’s good news all around. The lender doesn’t have to move forward with their sale, which saves them time and money, and of course, the original homeowner may very well receive a better offer outside of a Sheriff’s Sale. Lastly, the new buyer can feel good about purchasing a foreclosure property before it is up for public sale, eliminating the competition.

What is an Arm’s Length Transaction?

When a homeowner’s lender moves forward with foreclosure, the homeowner still retains ownership and the ability to sell the property before the Sheriff’s Sale, but there are several stipulations in order to guarantee that a seller in this situation can only sell to a party who is considered an Arm’s Length buyer.

For a transaction like this to be considered fair, New Jersey real estate laws state that both the buyer and the seller must not be in any kind of relationship that is closer than “arm’s length.” The following are examples of relationships that are not arm’s length, and therefore would not be ideal buyers before the Sheriff’s Sale:

  • Family members
  • Close friends
  • Employer/employee
  • Parent company/subsidiary
  • Trust/beneficiary

As long as the homeowner is negotiating with someone who is not acting in the homeowner’s best interest (for example, a parent buying the home below market value only to allow their child, the seller, to keep living there), the end result of a transaction prior to foreclosure sale is typically a good idea.

An Arm’s Length Transaction must involve two parties who are independently acting for their own self-interest. Also, the best and fairest deal that is close to the home’s market value should ultimately be the goal of this type of transaction.

Is it Illegal to Participate in a Non-Arm’s Length Transaction?

While it is not necessarily illegal to sell to a non-arm’s length buyer, when a homeowner is already immersed in the foreclosure process, it is advisable to follow the recommendations of an experienced NJ foreclosure/real estate attorney. Ask your attorney to hook you up with a reputable tax professional as well, because transferring property to a non-arm’s length buyer comes with additional tax implications.

Learn more about your rights during foreclosure!

 

NJ Foreclosure Redemption: Explained

If you have recently “lost” your home to New Jersey foreclosure, you may be wondering if there is anything you can do to get your home back before it is sold at auction. In fact, there are some very effective, tried and true methods that can be used to prevent your lender from proceeding with the Sheriff’s Sale – as long as you take action before the sale has already commenced.

Unfortunately, many people who are in similar situations to yours live in denial for a long period of time before taking any action regarding their home’s foreclosure. Burying your head in the sand is common in times like these because this is such an undesirable life event that can be very hard to face. Most people dealing with foreclosure never intended to lose their home and can spend months hoping for a miracle.

This leads to homeowners who finally take action at the last minute (or very close to the last minute). While it is easy to panic if your home is scheduled for Sheriff’s Sale very soon, is not recommended. The same is true if your home has already been sold at Sheriff’s Sale.

Remaining calm is key. If you have not taken action before the date of your foreclosure sale, you have likely already experienced the start of the eviction process. After your home has been sold via foreclosure sale, your last Hail Mary option is to take advantage of the redemption period.

In the State of New Jersey, the foreclosure redemption period is an extremely small window of time during which you may still be able to save your home. The New Jersey foreclosure redemption time-frame is 10 days. Therefore, you have 10 days after your home has been sold at Sheriff’s Sale to redeem the property and take back ownership.

It should be noted that there are no exceptions made during the NJ foreclosure redemption period. If you do not take action within the 10 days immediately following the foreclosure sale, you will have lost the last opportunity to buy back your home.

In NJ, homeowners who are attempting to redeem, or buy back, their previously owned home after it has been sold at a foreclosure sale, must refinance or pay the outstanding balance on their mortgage in full.

Insider Info: Because New Jersey is a judicial foreclosure state, lenders are required to file a lawsuit when they proceed with foreclosing on a home. The entire foreclosure process must be documented within the New Jersey court system. This gives some New Jersey homeowners a second opportunity to buy back their foreclosed homes, but only if their lender files a deficiency judgment after the Sheriff’s Sale.

If your lender files a deficiency judgment after your home sells at foreclosure sale, your New Jersey foreclosure defense attorney can help you bring action for redemption within six months after your lender has filed for deficiency judgment. This is a feat designated for experienced foreclosure and real estate attorneys and should not be attempted with a less-experienced professional.

To learn how to buy back your home via redemption after deficiency judgment, ask your NJ attorney ASAP.

If your home has been sold at a New Jersey Sheriff Sale and you’re interested in redeeming either during the 10 day redemption period or after a deficiency judgment – you must contact an experienced New Jersey foreclosure defense attorney TODAY.

Take action now before your chance to redeem your home truly passes. Be sure to ask your attorney about the new Senate proposal regarding NJ foreclosure stays to find out if it can be of help in your unique situation.

Image: “Keys.” by Linus Bohman – licensed under CC 2.0

What to Look for in a New Jersey Foreclosure Defense Attorney

If you’ve received a foreclosure notice from your lender, you probably feel the panic rising – especially if you ultimately want to keep your home. Perhaps you have just started falling behind on your mortgage – you haven’t entered foreclosure yet but know it’s a real possibility in the relatively near future. In the worst case scenario – your home’s foreclosure sale (Sheriff’s Sale) is mere weeks away; you were in denial until today, but now you want to know if you have any options this late in the game.

No matter which of the above scenarios best fits the situation you’ve landed in, if foreclosure is in your life and you’d really rather it not be – you need help. Saving a home from foreclosure isn’t a DIY project unless you’ve somehow miraculously come into a large sum of money and can bring your mortgage current. Even this may not be effective if your foreclosure sale has already been scheduled.

What type of professional should you be looking for? The truth of the matter is, most people don’t know where to turn when it comes to foreclosure. It’s not a situation anyone envisions for themselves when they first set out on the path to becoming homeowners, so it isn’t a subject area that most happy homeowners give much thought to.

Unfortunately, even the best laid plans sometimes run afoul. When you’re looking at a future foreclosure, whether it’s just a possibility or if your home’s Sheriff Sale has been listed in the local newspaper already – you need a foreclosure defense attorney. Naturally, the earlier in the process you are when you reach out for help, the better. However, the best NJ foreclosure defense attorneys will tell you, “It’s never too late to save your home.”

Can just any NJ foreclosure defense lawyer help you save your home? The important takeaway here is that not all attorneys are created equally. As you launch your search for the right NJ attorney to help you keep your house – look for these qualities:

Foreclosure experience – You want an attorney who specializes in saving homes. Foreclosure should make up a substantial portion of his practice and he should have a significant number of foreclosure defense cases under his belt. Avoid an attorney who “dabbles” in foreclosure (when he has the time).

Also handles bankruptcies and loan modifications – As you move through the foreclosure process (whether your desired outcome is saving your home or not), you may decide to file for bankruptcy or apply for a loan modification in order to make your finances more manageable. If your foreclosure defense attorney also handles these areas, you’ve gotten a three-for-one deal!

Success rate – Ask your attorney for statistics about his foreclosure defense cases. Sure, he takes on foreclosures, but how well does he handle his cases? Find out his success rate before retaining his services.

Schedule a consultation with your potential attorney before finalizing your decision. Along with the above qualities, you’ll get a vibe when you first meet with him – be sure that your personality jives with his. Pay close attention to how he presents himself. Does he make a lot of eye contact with you? Is he distracted during your meeting or is his focus solely on your case?

Behind any good NJ attorney is a legal team. You’ll be working with your attorney AND his legal assistants. Take the time to speak with the staff while you’re in the office for your consultation. The right foreclosure defense team will make it clear that they care about your case, and about you as a person.

Image by perzonseo – licensed under CC 2.0

 

NJ Senate Bill 1593: A Proposed 6 Month Foreclosure Stay

Because the number of New Jersey foreclosures continues to rise even as we are now reaching the mid-point of 2017, the NJ Senate and Assembly have proposed new legislation with the goal of generating positive change for underwater New Jersey homeowners.

Senate Bill 1593 proposes that a six month stay of foreclosure proceedings shall be implemented in New Jersey if such action is agreeable to the homeowner and lender. The bill also proposes that the court can impose the six month stay if it has been determined that it would be possible for credit counseling and/or negotiations to occur during the six months that would potentially eliminate the need for a foreclosure.

Homeowners who are offered a reasonable and feasible mortgage loan modification by their lenders prior to beginning foreclosure proceedings will not be eligible for the six month stay. If an acceptable loan modification agreement is reached between the parties during the six months, the forbearance will be lifted and mortgage payments will resume. Additionally, if at any time during the six month forbearance, the homeowner moves out of the residence or advises their lender in writing that they have no intention of participating in the formal foreclosure mediation program (required during the six month stay), the stay will be lifted immediately and foreclosure proceedings will commence.

This legislation is an attempt by the Senate Committee along with the Urban Affairs Committee to drastically reduce the overall number of NJ foreclosures that continue to plague the Garden State a full decade after the Mortgage Crisis that began in 2007. While most states’ real estate markets have bounced back, several states are still struggling with high foreclosure rates.

In addition to NJ, the following states still have excessively high foreclosure numbers as of May 2017: Florida, Nevada, Oklahoma, Illinois, Maryland and Delaware. New Jersey tops the list with a foreclosure rate of one in every 515 residential housing units. Delaware, in second place, has a foreclosure rate of one in every 753 housing units. As you can see, New Jersey is the clear “winner” by a landslide.

In fact, the country’s two most foreclosure-stricken cities are also in New Jersey, with #1 being Atlantic City and #2 being Trenton. Jersey’s neighbor across the bridge, Philadelphia isn’t far behind, coming in at #5 even though Pennsylvania’s overall foreclosure rates are down.

New Jersey’s continued inability to pull out of what can now only be described as a foreclosure emergency has led to damaging effects like neighborhood blight, which greatly reduces property values. This, in turn, leads to more homeowners who are ‘underwater’ (owing more money on their mortgage than their home is actually worth), which then leads to more foreclosures. The cycle seems unending in NJ, and drastic measures are needed to put a stop to the deleterious effects on the state’s economy. We have high hopes that New Jersey will be able to come out ahead of foreclosure, and this bill is one giant step in the right direction.

 

New Jersey Foreclosure: Frequently Asked Questions

In a New Jersey foreclosure sale, your home will be sold in an auction-type setting. The sale will be publicly announced and will be open for anyone to attend. Since New Jersey is a judicial foreclosure state, the local sheriff will typically lead the auction. If the sheriff cannot conduct your sale, another public official will do so.

Everyone who attends the foreclosure sale is able to place bids in order to buy your former home. As in all auctions, “to the highest bidder go the spoils.” The spoils in this case refers to your mortgaged home.

So: you stopped paying your mortgage payment. For a variety of reasons, people sometimes do this. Maybe you ran into temporary (or permanent) financial trouble because you: lost a job, got divorced, fell ill, made some poor money choices – the potential reasons are endless. Regardless of how you ended up in foreclosure, it’s probably not something you hoped would happen to you one day.

No one goes around saying, “I hope I get foreclosed on at least once in my lifetime!” Because foreclosure something you didn’t wish for – you probably don’t know what to expect. As a general rule, we don’t sit around thinking about things that we don’t plan to experience. Therefore, now that you have found yourself smack dab in the middle of a foreclosure, chances are that you have some questions.

We’ve covered a lot of foreclosure sub-topics here on our blog. Today’s foreclosure question we’d like to answer for you is:

“Who gets the money from the foreclosure sale?”

The normal course of a foreclosure auction is that the bidding remains rather low and the final, winning bid is often less than the house is actually worth. In fact, many times foreclosed homes are sold for less than the original mortgagor still owes the bank. There are, of course, exceptions.

Here is a breakdown of what will happen to the proceeds from your foreclosure sale, who receives payment, and in what order:

  • The first person/entity to be paid from the foreclosure sale proceeds is the New Jersey lender who granted you the loan for the mortgage in the first place. The bank or mortgage company needs to recover as much money as possible because you didn’t repay them like you originally agreed. A small portion of the proceeds will also go toward settling the cost of having the foreclosure auction.
  • If there is still money left after the sale is paid for and the lender has fully recovered the amount they are owed, any secondary lenders (2nd or 3rd mortgage granters) will receive the full amount you borrowed (perhaps for a home equity loan) or as much as possible.
  • After the above parties have received payment in full is the only time you, as the mortagor, will be entitled to receive any money from your foreclosure sale. Keep in mind: you are not likely to receive much, if any, money from a foreclosure sale because foreclosed homes don’t typically sell for as much as they would in a traditional real estate transaction.

In fact, you may even owe money when all is said and done. If the winning foreclosure bidder pays less than you still owe on the property, your lender will suffer a loss. This discrepancy is known as a deficiency balance. As the mortgagor, you can legally be held accountable for this amount.

You can learn more about NJ foreclosure procedures, get the answers to common foreclosure FAQs, and find out how a foreclosure will affect your life on our NJ law blog. We can also help you save your home via foreclosure defense, if that is your ultimate goal.

NJ Mortgage Help for Single Parents

Going through a separation and divorce is never easy, but the complication level increases when you add children to the mix. Establishing a stable family life for your kids is something every good parent strives to do, and divorce can throw a wrench into even the best laid plans.

Supporting the expenses required as a newly single parent is a daunting task as you attempt to maintain as much constancy and normalcy for your children as possible. To that end, the marital/family home is most often where divorced parents elect for their children to remain living.

With that being said, finances don’t always stretch far enough for one parent on their own to pay the mortgage on that family home, along with all other monthly expenses. If both parents are able to pitch in financially to keep the children and one parent in the home, the chances of losing the home are lower. However, the threat of foreclosure for recently divorced single parents is real, and although frightening, it is not something that will go away if you ignore it.

If you are a single parent fighting to keep the home your children have thus far grown up in, you may be overwhelmed by the responsibility of making that monthly mortgage payment on your own. Missed payments are common after significant life events like job loss, illness, death, and, you guessed it – divorce.

The bank will never throw me out since I have young children, right?

Unfortunately, too many people simply give banks and lenders a lot more credit than they deserve. Your bank does not care if you have children, an elderly parent, three sick dogs and a chronic illness – their bottom line is money. You may think, “But there are people working at that bank; surely there is someone there with enough empathy to see that I am struggling.”

While that may be true – of course there are kind people working in banks and lending institutions – they must follow the instructions they are given by their superiors. A mortgage loan that is not being paid on time or at all WILL be sent into foreclosure by the lender. The question is not “If” but “When.”

How can I keep the bank from foreclosing? I just need a little more time!

The best move you can make if you’re in a similar situation is to take action before your home is foreclosed upon by your lender. You may qualify for a loan modification or refinancing. A New Jersey foreclosure and bankruptcy attorney should be the next person you call. Not many attorneys specialize in both areas, so it is important that you work to find a certified NJ attorney who has the experience you need.

Why do I need a bankruptcy attorney? I’m not broke and I want to keep my home.

An experienced NJ attorney who handles both foreclosure defense and bankruptcy matters will be able to stall your foreclosure by using the Automatic Stay. This tactic can only be utilized if the debtor files for bankruptcy.

Even if filing for bankruptcy was not on your top ten list of things to accomplish in life, it is a means to an end that has helped a multitude of people in your exact situation before.

 

Image: “Mother’s Moment” by Leonid Mamchenkov – licensed under CC 2.0

Can I Receive Hurricane Sandy Forbearance if I Filed for Bankruptcy?

Homeowners in New Jersey and all along the Atlantic coast will be hard-pressed to ever forget Hurricane Sandy – a deadly “superstorm” that hit the eastern seaboard in October of 2012. Assessed as the second-costliest hurricane to ever hit the United States, estimates of Sandy’s damage (in the US alone) are approximately $72 billion. The only hurricane in US history to cause more damage was Hurricane Katrina.

New York and New Jersey were the hardest hit states, with gale force winds that reached 90 mph and heavy rain (up to 12 inches in some locations) which led to flooding and significant structural damage of homes, businesses, beaches, boardwalks, roads, and more. Power outages were widespread and lasted for weeks in some places. For the first time since 1888, the New York Stock Exchange closed (on October 29 and 30) due to weather. Even Halloween was postponed in New Jersey, much to the chagrin of kids across the state.

As we hyper-focus on the damage done by Hurricane Sandy to New Jersey alone, we know that nearly 400,000 homes suffered damage from the storm, many were without power for an extended period of time, and 37 people died.

Relief efforts to clean up and rebuild the damaged areas of New Jersey were impressive, and some (but not enough) federal aid monies were approved for the state. Some of that federal aid was disbursed extremely slowly which means the aftermath of Hurricane Sandy is still felt today, nearly five years after the storm.

Residents along the New Jersey shore sustained the most damage – both from flooding and high winds – to their homes and properties. The fact that five years has passed should mean that everyone in NJ has recovered from the storm; unfortunately that just isn’t the case. Although many people and organizations dedicated extraordinary man hours and donations toward the recovery effort, there are homeowners who still remain displaced and/or are facing foreclosure.

The good news is that Governor Christie recently signed a bill (S-2300, A-333) that will potentially offer some much needed help to those who are still struggling post-Sandy. The bill specifically grants Sandy victims with a mortgage forbearance period of up to three years. In order to receive the forbearance, homeowners must have been approved for help via the Reconstruction, Rehabilitation, Elevation and Mitigation Program OR the Low-to-Moderate Income Program.

Affected NJ homeowners struggled for years trying to rebuild their homes after Sandy. Without enough funds to make their homes habitable again, a multitude of these residents had to rent alternative housing. Paying rent while still paying the mortgage on their now damaged property pushed many homeowners into bankruptcy.

Many homeowners filed for the protection offered by the Automatic Stay in the hopes that funding would be released before their bankruptcy case was finalized. Not realizing how long it would take for federal relief funds to be released, their bankruptcy cases ended long ago, and many of the homeowners chose not to reaffirm their mortgages.

Now that bill S-2300, A-333 has been signed, those who filed for bankruptcy and didn’t reaffirm their mortgages are wondering if they still qualify for forbearance. The good news is that a lender may not require that a mortgage be reaffirmed in order for the mortgage holder to receive forbearance.

Homeowners who’ve filed for bankruptcy without reaffirming their mortgages may have to provide their lender with a letter acknowledging that the mortgage debt was discharged in bankruptcy. This protects lenders/creditors from worrying that they’ll be sued when they try to collect on the debt again.

It’s very possible that lenders will not feel comfortable discussing the matter directly with the homeowner. They don’t want to seem as though they are breaking bankruptcy law by attempting to collect on a discharged debt. In this case, borrowers should work with a bankruptcy or foreclosure attorney in New Jersey to negotiate with their lender on their behalf.

 

Image: “Crooked House” by Don McCullough – licensed under CC by 2.0