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

Advertisements

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

How will a Foreclosure Affect my Security Clearance?

If you are employed by the federal government, either as a member of the military or as a civilian working as a contractor, you may hold or need to apply for federal security clearance. Those federal employees who work with classified information will need to hold a security clearance that will be classified as either confidential, secret or top secret.

When you are entrusted with classified government information, it is important that your employer knows that you can be trusted to act responsibly. Your background will be carefully monitored before and periodically throughout the duration of your employment. If there is nothing in your history to suggest that you are a threat to national security and financial information, you should have no problems with your security clearance.

Beyond needing to know that you demonstrate solid judgement skills that suggest you can keep classified information safe, the government will also look at your personal finances when it comes to granting a security clearance.

If you have a long, sordid history of not paying bills on time, falling behind on loans, and large piles of debt, the government will naturally wonder if you have the appropriate self-control required to safeguard classified information and to turn down potential bribes.

Many federal employees who need a security clearance to keep their jobs have become very nervous during this past decade of mortgage uncertainty. As foreclosure rates have soared all over the country since 2007, more and more military employees and contractors have had their security clearances called into question.

It’s important to know that simply having a home in foreclosure does not automatically mean you will lose your security clearance. In fact, if your foreclosure was caused by factors that are mostly out of your control, you have a better chance of keeping your clearance. Things like:

  • Relocating for work (especially when you were required to do so)
  • Divorce
  • Short sale (with interested buyers) that was cancelled by your lender in favor of foreclosure

…can all be causes of foreclosure that are controlled by outside forces that go beyond your ability to handle your finances.

Your employer will also want to know that you have been making efforts to right your current financial situation. If your past financial history is pretty clear of big mistakes, and you are working to get your foreclosure settled (and pay off any remaining amounts due), you will more than likely be able to keep your security clearance.

It is crucial, however, that you take very deliberate steps to ensure that your lender is satisfied at the end of your foreclosure so that nothing can come back to haunt you when it comes time for your next security clearance review.

If you think a foreclosure is in your foreseeable future, keep your adjudicator apprised of the situation every step of the way so that they have all of the information you have. Work with an experienced NJ attorney who specializes in foreclosure and real estate matters to ensure that your security clearance will remain intact.

Image credit: Cafe Credit

Can the Bank Repossess My NJ Foreclosed Home Before Evicting Me?

259068886_5f142c0a06_z

If your home has been through the NJ foreclosure process and the new owner has tried to take possession of the property before you have received formal eviction notice, it is important for you to know your rights.

Naturally, if you’ve made it all the way to the end of the foreclosure process in New Jersey, the fact that you’ll have to move soon should come as no surprise. With that being said, as the former owner of the home, it is within your rights to stay in the home until you have received proper notice of eviction.

After the Sheriff’s Sale of your home has occurred, the NJ County Sheriff must provide the bank/lender with the property deed within ten days. If the bank or lender was not the winning bidder at Sheriff’s Sale, the successful party who purchased the home will be the deed recipient. It is most often the mortgage company who ends up with the home since they are the ones who initiated the foreclosure process in the first place. Their reason for filing for foreclosure is so they can re-sell the home to recover part or all of mortgage loan that you (as the borrower) have failed to pay. Missed mortgage payments are what lead to foreclosure.

Upon receipt of the deed to the property, the mortgage company’s next step is to file a formal eviction motion in New Jersey State court. Without this official eviction (called a Writ of Possession in legal terms), you cannot be forced to leave the home even after it has been sold at foreclosure sale.

Is your mortgage company attempting to force you out of the home without a formal eviction? If you have yet to see an actual eviction notice affixed to your front door, you have almost certainly not been served with notice to vacate the premises. Any efforts on the part of the lender to forcibly kick you out without eviction paperwork is against the law in New Jersey.

We typically advise our foreclosure clients to be prepared with an alternate place to live as of the date of the Sheriff’s Sale. Forcing your mortgage company to evict you can look bad to your future landlords or lenders – potentially marking you as a “difficult” borrower or renter. However, it is within your rights to remain in the home until you have formally been evicted, and staying there can give you several months to save money because you won’t be paying a mortgage or rent payment. Weigh your options carefully before you decide whether to vacate willingly or stay put until the Sheriff removes you.

The bottom line is that, legally, your mortgage company (or new owners after Sheriff’s Sale) cannot take possession of the home until you have been formally served with an eviction notice. If your foreclosed home’s new owners are attempting to prematurely take possession of the property by locking you out, removing your personal items, or moving new tenants in while you aren’t home – you need to contact your New Jersey foreclosure attorney right away in order to preserve your rights.

Image credit: Andy Wright

Can a NJ Lender Foreclose for Late Payments Only?

5453256945_b20cd75db1_z

Like millions of Americans who own their own homes, your largest monthly bill is most certainly your mortgage payment. This is especially true if you’ve wrapped your property taxes in with your mortgage loan. Paying your mortgage each month can feel physically painful at times, especially if you have to write out all of those numbers on a paper check. OUCH.

Nonetheless, you obviously knew what you signed up for when you applied for your current mortgage, so its appearance each month doesn’t necessarily come as a surprise. Why, then, are so many Americans habitually late in paying for this particular loan?

The answer to that is simple. A large percentage of homeowners in this country are living paycheck to paycheck – earning just enough money every month to fulfill their financial obligations. This leads to tense moments when there simply aren’t sufficient funds in the bank to make the huge mortgage payment without fear of bouncing a check.

Nobody wants to bounce a check – we all know that. The hassle combined with added fees from your bank AND your lender mean that bouncing a check is an extremely costly mistake. Instead of potentially writing a check that can’t be cashed, many homeowners simply wait until their bank account has enough money to fulfill the mortgage payment. Sometimes this means the mortgage payment gets sent in a few days (or weeks) late.

The question here, is: Can a lender foreclose on a homeowner if they are chronically late with their mortgage payment? To clarify, we’re talking about a borrower who hasn’t actually missed any payments and technically isn’t “behind” on their mortgage – only slightly late with nearly every payment.

The short answer is that almost no lender will move toward foreclosure if the borrower isn’t actually behind on payments. That’s not to say it has never happened, but if it has, it’s exceedingly rare. In most cases, lenders don’t send out ‘Intent to Foreclose’ notices until a borrower has missed 3 full mortgage payments. Some lenders will threaten foreclosure after one missed payment, but as long as you can bring the mortgage current, they back down.

What can happen to you if you consistently pay your mortgage (or any other monthly bills) late is that your credit score can drop. Even though you may avoid foreclosure, late payments are often reported to credit reporting agencies, and each late payment will ding your score a few points. If you’re late every month for a year, your score may have dropped over 100 points.

If you’re currently struggling to pay your mortgage in a timely manner, there are some things you can do. First, check your credit score to see how much damage you’ve done. That gives you a good starting point. Next, get in touch with your lender and tell them why you’re having trouble paying on time. You may benefit from changing the time of month that your payments are due, paying online, or paying via telephone when your bank account is primed and ready.

If none of the above options is enough to alleviate your tardiness, you may benefit from applying for a NJ loan modification. You can apply for one on your own, but many times a real estate attorney can negotiate with your lender much more effectively, working to extend the life of the loan, reduce the principal amount due, erase late fees, and maybe even lower the interest rate on the loan. One or a combination of these modifications can make paying your mortgage on time much more manageable.

 

Image credit: John Lloyd

Second Mortgages After Foreclosure: Who Pays?

8355122374_66d0fdf491_z

What is a second mortgage?

Oftentimes, when applying for a home loan, first time home buyers don’t have enough money to make a substantial down payment. Typically, lenders don’t like to grant loans for more than 80% of the price of a home. Lending so much money to a borrower is risky, so banks who do so will require that the buyers purchase private mortgage insurance (PMI). Mortgage insurance is expensive, so borrowers try to avoid it by applying for two separate mortgage loans. The first loan granted is usually for a maximum of 80% of the purchase price, while the second mortgage covers the remaining cost of the home – typically around 20%.

Who can get a second mortgage?

In order to be approved for a second mortgage (also referred to as an 80/20 loan), you must have a very good credit rating. Because you won’t be making any down payment, you are a higher risk to your lenders. A high credit score (above 700) puts lenders at ease, knowing that you have a solid credit history.

What happens to a second mortgage after foreclosure?

Even well-qualified buyers can experience foreclosure. As they say, “Life happens,” and a variety of factors may cause you to become unable to continue making your monthly mortgage payments even if you had great credit when you bought your home. For example, you may have experienced:

  • Divorce
  • Chronic illness
  • Accident or injury that permanently reduced your earning potential
  • Job loss
  • Unforeseen expenses (death or disability of a close relative, job transfer, etc)

Upon foreclosure of your home, your primary mortgage lender (80%) will sell your home at Sheriff’s Sale/Foreclosure Sale in order to recoup at least some of the money you borrowed but were unable to repay. Any sale proceeds that exceed what you owed your primary lender will be used to pay back your second mortgage lender.

Home sold at foreclosure sale almost always sell for less than they are worth. This means that second mortgage lenders often don’t see any proceeds from foreclosure sales. The second lender is left holding the (empty) bag, as the saying goes.

Will I have to repay the second mortgage if the foreclosure sale price is below market value?

Naturally, this is a pressing question for homeowners who’ve lost their homes to foreclosure. No one decides to go through foreclosure because they have plenty of money floating around. If you’ve lost a home to foreclosure, you’re understandably concerned about the potential of a deficiency judgment.

A deficiency judgment is a legal action that a lender can take against you for the amount of money they lost when your home was sold at Sheriff’s Sale. Many lenders will write off the loss due to the cost and hassle of mounting a legal action. However, some lenders do indeed pursue a lawsuit against defaulted borrowers whose homes were sold at foreclosure for less than the amount still owed.

How can I repay my second mortgage? I’m already in financial distress!

If your second mortgage lender has threatened you with legal action unless you pay up, you need to be proactive by retaining counsel. You can file for bankruptcy, which will automatically prohibit ALL of your creditors from attempting to collect money from you. Your NJ bankruptcy attorney can also take other action to settle your second mortgage debt if you wish to avoid chapter 7 bankruptcy.

Image credit: Chris Potter