Recently Passed New Jersey Foreclosure Fairness Act Effective January 26, 2010 and February 16, 2010

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The State of New Jersey recently (on January 17, 2010) passed the New Jersey Foreclosure Fairness Act (the “Act”) which will effect how foreclosures cases are handled in the State of New Jersey.  The Act becomes effective February 16, 2010, however, certain notice requirements become effective January 26, 2010 as noted below.

 

RESIDENTIAL UNITS WITH TENANTS
A person who takes title to a residential property containing tenants by way of a sheriff’s sale or deed in lieu of foreclosure, must provide notice no later than ten (10) business days after the sale, to any tenants of the property informing them that ownership has changed hands and that the tenants are not required to vacate the premises. 


This notice must be served by the new owner on the tenants by regular and certified mail, must be in both English and Spanish, must contain contact information to whom future rent is due and include a basic explanation of the tenant’s rights under the “Anti-Eviction Act”.  There is a particular form of notice required that the Department of Community Affairs will make  available on its website in a printable English and Spanish format that may be used.  (see www.state.nj.us/dca/ search Foreclosure Fairness Act)


The notice must also be posted prominently on the front door of each tenant’s unit. If the property contains ten (10) or more units, the new owner must post the notice in a common area of each residential building or structure on the property.


A similar notice with some additional information is also required if a summons and complaint or initial communication by a foreclosing creditor who seeks the tenant to vacate prior to the transfer of the property.


There must be no communication meant to persuade the tenant to vacate the premises except by way of a bona fide monetary offer, which must be in a made in a specific manner, and from which the tenant would have five (5) business days from receipt of the offer to accept and vacate or reject the offer.  Acceptance must be in writing.  No person or person’s agent may (1) make any misrepresentations of the rights of the tenant under the “Anti-Eviction Act” in order to induce the tenant to vacate the property; (2) state actions the owner may take against the tenant or imply the tenant is obligated to accept the offer; or, (3) any other form of harassment, such as failure to maintain the premises or rent increase in violation of municipal rent control or rent increase in violation of the Anti-Eviction Act or any other State, Federal or Municipal ordinance.


Any violation of the notice requirements or treatment of the tenants may result in triple damages or damages in the amount of $2,000.00 per violation plus attorney’s fees and costs.  Further civil or criminal actions may also be commenced against the creditor who violates this Act.


NOTICE REQUIREMENTS EFFECTIVE JANUARY 27, 2010
This Act requires that creditors serving foreclosures summons and complaints on residential property must within ten (10) days of service of the summons and complaint, notify the municipal clerk where the property is located. This will also affect any foreclosures filed  30 days before  February 16, 2010 which must also be reported to the respective municipal clerks.  The creditor must also notify the municipality if the owner of a residential property vacates or abandons a property on which a foreclosure action has been initiated. There is also a requirement to specify in the Foreclosure Complaint and notify the municipal Clerk with specified Act defined details if the property being foreclosed is an “Affordable Housing” unit. This notice must also be supplied to the municipal clerk within 10 days of the summons and complaint’s service.


After such notice if such property is found to be a nuisance or in violation of any applicable State or local code, the municipality must notify the creditor, whose responsibility it will be to correct the nuisance or violation. If the municipality expends public funds to abate a nuisance or correct a violation the municipality shall have the same recourse against the creditor as it would have against the “title owner”.


FORECLOSURE REPORTING REQUIREMENTS
Any creditor that initiates a mortgage foreclosure action in the Superior Court of New Jersey must report to the Department of Banking and Insurance, on a quarterly basis and in a specific format (organized by municipality), information about the number of mortgage foreclosures initiated by the creditor.


FORBEARANCE PERIOD FOR HIGH RISK MORTGAGE FORCLOSURES
If a foreclosure action is filed subject to the Fair Foreclosure Act, on a “high risk” mortgage loan, must grant the borrower a six (6) month forbearance upon request of the borrower to permit the borrower  to pursue a work out, loan modification or refinance. 


A “high risk loan” includes those loans that are interest only with a future reset rate; has a reset mortgage interest rate that increases the interest rate; contains payment option plan or “pick a payment” plan; contains a negative amortization schedule; is a subprime loan; contains an enforceable prepayment penalty; or, is a high cost home loan as defined by the New Jersey Home Ownership Security Act A subprime loan would include a consumer transaction secured by the consumer’s principal dwelling if it carries a rate of interest that exceeds the average prime offer rate as of the date the interest is set by 1.5 or more percentage points for loans secured by a first lien or 3.5 percentage points for loans secured by a subordinate lien. .


During this six (6) month period, the interest rate on the subject mortgage can not increase and the creditor may take no further action to pursue foreclosure. Notice of the forbearance right must be served with the summons and complaint.  If the borrow requests such a forbearance, it shall begin upon receipt of the borrower’s request. 


The forbearance notice must be include whether the loan is eligible to receive forbearance, that the borrower has the right to request forbearance no later than thirty (30) days after receipt of the summons and complaint; contact information as to where to send the request and that upon receipt of the request, the creditor shall inform the court to place a six (6) month stay on the foreclosure action. Once the forbearance period begins the borrower and creditor must participate in the foreclosure mediation process.


Should the borrower vacate the property anytime during the forbearance period, the forbearance period shall end. The forbearance right will only be effective until February 16, 2012 at which time this right shall expire.

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