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Concerns Raised Over NJ Foreclosure Law

New Jersey's ""Mortgage Stabilization and Relief Act"":http://www.njleg.state.nj.us/2008/Bills/S2000/1599_R2.PDF (MSRA), also know as S1599, became effective April 1, 2009. The legislation imposes additional requirements on lenders trying to foreclose, and it allocates $40 million to fund two state mortgage relief programs.
The first allows distressed homeowners to lower their monthly payments with a non-amortizing second mortgage and a government subsidy up to $25,000. The second program enables homeowners facing foreclosure to enter into lease-purchase agreements with select nonprofits and public entities so they can remain in their homes as tenants until they are able to buy back the property.
Lawmakers intended the measure to reduce the magnitude of the foreclosure crisis in the Garden State, but a local default law firm explained that the Office of Foreclosure, where all New Jersey foreclosures are filed; the foreclosure bar; several New Jersey foreclosure judges; and the court clerk have all raised concerns about the new lender requirements outlined by MSRA.
""Goldbeck McCafferty & McKeever"":http://www.goldbecklaw.com/, which has represented secured creditors in the state of New Jersey for over 17 years, says the three parts of the law that have caused the most concern and require amendment are: foreclosure reporting obligations, the six-month forbearance period for high-risk loans, and service of Notice of Intent to Foreclose.
MSRA requires lenders to submit quarterly reports to the New Jersey Department of Banking and Insurance on the number of foreclosures they have filed. The report is to be on a specific form, but to date, the banking department has not made the document available.
Secondly, the six-month forbearance period applies only to high-risk loans, as defined in the legislation. But Kristina G. Murtha, Esq., with Goldbeck McCafferty & McKeever, says this provision has caused a lot of confusion because the language is unclear in some places.
Murtha explained in a memo to the firm's lender clients that legislation (S2720) is currently pending that would not only provide clarification, but make some positive substantive changes, such as making the forbearance period an opt-in action upon written request from the borrower, rather than mandatory for all loans that qualify as high-risk. However, until S2720 is passed, loans must continue to be reviewed to see if they are defined as high-risk under MSRA. And Murtha said the clerk has advised that the court is so far behind, that filings made on or after April 1, will not be processed until mid-June.
The New Jersey law also requires a lender serving a Notice of Intent to Foreclose, to serve a copy to the municipal clerk. According to Goldbeck McCafferty & McKeever, there is concern that this stipulation is a possible violation of the Fair Debt Collection Practices Act (FDCPA) and other federal privacy protection laws because of the content of the notices. New legislation (S2777) is currently awaiting a vote in the New Jersey Senate that would change the requirement to a notice that a foreclosure complaint has been filed and could be sent via email.
Goldbeck McCafferty & McKeever explained that MSRA also makes the foreclosing mortgagee liable for code violations if the property is vacant, even before sheriff’s sale and passing of title. The firm said it appears the intent of this part of the law is to provide notice to the municipality of the contact at the lender where violation notices can be sent. Therefore, the firm says, until S2720 passes, the general consensus is that a lender would not be found to be in breach if it simply provided the local code enforcement officer with the contact person for violations on the property.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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