At this time, New Jersey is the only state that requires a mortgage company to submit to mediation to resolve a mortgage foreclosure action. Mediation is a face to face negation between the homeowner and the mortgage company’s representative regarding a loan modification or other resolution regarding the mortgage and property. After the mortgage company files a foreclosure action with the court, the homeowner may file the appropriate documents with the state to commence the mediation process. Also, the homeowner may file with the court a stay of sheriff’s sale for the purpose of pursuing foreclosure mediation.
A homeowner may apply to meet with a housing counselor, who assists them with their budget and the mediation process. The mediation application documents may be obtained on the New Jersey Judiciary website. The mediation is held at the individual’s county courthouse. The attendees of the mediation are the debtors, mortgage company’s lawyer, the mediator, and possibly the debtors’ lawyer and the housing counselor. The mediator is an unbiased state employer, whose job is to facilitate a resolution.
The homeowner may wish to enter into a loan modification for the individuals that wish to keep their homes or a different settlement for people who wish to surrender their house. Typically, a loan modification will be negotiated through the H.A.M.P. guidelines, An individual who wishes to surrender their house or is unable to modify their loan may dispose of the property by way of, “deed in lieu of foreclosure”, “cash for keys” or “short sale”.
Deed in Lieu of Foreclosure is an agreement by which the homeowner agrees to convey ownership of the real estate to the mortgage company, which will typically forgive the debt. This resolution allows the mortgage company to save time and money by stopping the foreclosure action. The mortgage company may not agree to forgive all of the debt. This type of resolution is not often used.
Cash for Keys is an agreement between the mortgage company and homeowner, whereby the homeowner agrees to convey ownership of the real estate for a cash settlement. This resolution also permits the mortgage company from pursuing the foreclosure action. This scenario is not used very often.
The most widely used resolution for individuals who wish to surrender their real estate is a short sale. An individual will not be able to sell their real estate if the sale’s value is less than the mortgage payoff. Some people refer to this as owning a property that is under water. A short sale is an agreement whereby the mortgage company agrees to reduce the mortgage lien to an amount that permits the homeowner to sell the property. Typically, the mortgage company will forgive the balance due on the mortgage.
In brief, the HAMP loan modification guidelines are as follows:
- single family owner occupied house;
- primary residence;
- 1 unit dwelling equal or less than $729,750;
- target debt to income ratio is 31% (This calculation compares the monthly mortgage payment to the homeowners’ gross income. Typically a debt to income ratio between 31% and 41% is acceptable).
Please note that there are a number of other criteria, including, but not limited to the equity of the house.
For more information, visit the New Jersey Mediation Program website.
Consulting a Bankruptcy Lawyer in New Jersey
If you are facing foreclosure or are considering filling for bankruptcy in New Jersey, you should consult with an attorney. The experienced New Jersey bankruptcy lawyers at The Law Offices of Robert Manchel have been helping families through the bankruptcy process and stoping foreclosures on their homes in New Jersey for 18 years. For a free consultation, call us today at 866-503-5655.