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New Jersey moratorium on homeowner foreclosures ends Monday. Here's what you need to know.
It can be difficult to discern all the options New Jersey, the federal government and mortgage lenders offered to protect struggling homeowners unable to pay their mortgage, property tax or utility bills during the coronavirus pandemic.
The key piece of advice for those who missed or think they may miss a mortgage payment: Talk to an attorney or a federal Housing and Urban Development certified counselor, who offer free legal and mediation services, even if you’ve already sought advice in the past.
“We get a lot of people telling us they tried to get a loan modification or help from their banks two years ago but were turned down, but there are a lot of new options now that didn’t exist even a year ago,” said Maryann Flanigan, chief counsel of disaster relief and foreclosure at the Legal Services of New Jersey. “In the last year, a bunch of really favorable new options opened up, because it doesn’t benefit the banks to see huge swaths of neighborhoods foreclosed.”
New Jerseyans can contact Legal Services at www.lsnjlawhotline.org or call 888-576-5529. To find a free housing counselor in your area, visit the New Jersey Housing and Mortgage Finance Agency website.
Housing counselors can help you talk with your lender, work on loan modification applications, assist you in applying for financial assistance, or walk you through various options to avoid foreclosure, such as selling your home, using a deed-in-lieu of foreclosure or negotiating a “cash-for-keys” deal.
“Property values have also skyrocketed in the past year,” Flanigan said. “There are probably a lot of people whose homes are now worth more than what they owe on the loan, when that wasn’t the case before the pandemic because of the equity they gained.”
What does the end of foreclosure moratorium mean?
While each homeowner’s situation and loan terms vary, certain key dates are approaching that mortgage holders should be aware of, particularly if they are at risk of foreclosure.The most immediate: New Jersey’s foreclosure moratorium ends on Nov. 15. But what exactly does that mean?
New Jersey’s foreclosure process can last a year and a half and contains many steps, court filings and opportunities to save your home. The state moratorium impacted homeowners in the final stage of the foreclosure process, and didn’t allow families to be physically removed from their properties starting March 19, 2020 if their home was sold at a sheriff’s sale.
“But it’s not that on Nov. 15, 2021 everyone will get kicked out — a sheriff is not just going to show up at your door and order you to leave,” Flanigan said. “Properties that were already sold will be the first to get notices of eviction, and there are opportunities to request more time from a judge.”
Lenders were still filing foreclosure actions during the pandemic, but at lesser volumes — 2019 saw more than 21,000 filings, but that dropped to 10,000 in 2020 and nearly 8,700 through Nov. 9, 2021.
And while there wasn’t a ban on sheriff sales, Flanigan said she didn’t see any for homes occupied by the owners, while sales on already abandoned properties did occur.
Meanwhile, recent federal regulations limit new foreclosure actions. Between Aug. 31, 2021 and Dec. 31, 2021, a lender can’t file a new action unless:
- No one lives in the property or
- The borrower did not respond to the lender’s messages or
- The borrower did not submit a complete loan application
If your lender filed an action and you didn’t meet any of the criteria, contact an attorney. You have 35 days to answer a foreclosure complaint and 60 days to request mediation.
What protections are available to me?
More than 150 banks, credit unions and loan servicers said they would offer customers at least a 90-day grace period on their mortgage payments and to reduce or suspend the bills they pay, under a deal Gov. Phil Murphy announced in March 2020, at the start of the pandemic.
The state Department of Banking and Insurance asked that banks add a homeowner's missed payments to the end of the loan, instead of asking for a lump sum after 90 days was up, but that was not mandatory. A bill making such a protection mandatory has languished in the Legislature.
Under the deal, institutions agreed to waive or refund late fees or other fees, such as those for withdrawing a certificate of deposit early. Banks can’t share with credit reporting agencies that you are taking forbearance.
According to the state, most programs will require your loan servicer to pay property taxes and insurance during forbearance, even if you don’t make a payment, but homeowners will be responsible for making up these payments. Contact your servicer to understand how it will handle these payments.
Homeowners should contact their lenders and understand what protections they are offering. Visit the Department of Banking and Insurance website to see if your financial institution signed on to Murphy’s deal. If your bank is not cooperating, you can file a complaint with the state online or by calling (609) 292-7272.
New Jersey homeowners with federally-backed mortgages who experienced hardship due to the pandemic have a right to mortgage forbearance for up to 180 days, and can request an additional 180 days on top of that under the federal CARES Act. You do not need to show proof of financial distress.
These homeowners could request an initial forbearance through Sept. 30, 2021, and lenders could not foreclose on loans backed by HUD, FHA, USDA, VA, Fannie Mae, or Freddie Mac until after July 31, 2021.
To check if you have a federally backed mortgage, visit https://www.usa.gov/mortgages. Nearly half of all mortgages across the country are owned by either Fannie Mae or Freddie Mac.
If you don’t know your loan servicer, visit https://www.mersinc.org/homeowners/mers-servicerid.
For most loans, there should not be additional fees, penalties or additional interest beyond scheduled amounts, according to the Consumer Financial Protection Bureau.
What should I ask my lender?
It’s important to know that forbearance is not automatic — you must talk to your lender and request a pause or reduction in payments.
Here are questions to ask when talking to your lender, from the CFPB:
- What options are available to help temporarily reduce or suspend my payments?
- Can I access forbearance, loan modification, or other mortgage relief options?
- When will you waive the late fees on my mortgage account?
- What should I do at the end of my forbearance period? When should I contact or expect to hear from my servicer before my forbearance ends?
- What are my payment options when forbearance ends?
- If your loan is not federally backed or insured, or is not backed by Fannie Mae or Freddie Mac, ask: What restrictions and requirements will apply at the end of the forbearance period?
- Will you charge interest on my unpaid mortgage payments during forbearance?
- What are my rights if you don’t grant me forbearance, and I disagree with your decision?
- Will you continue to pay my property taxes and insurance payments?
What are my options when exiting forbearance?
Four common options when ending a forbearance period include
- Repayment plan: You will pay a portion of what you owe to each month’s payment.
- Deferral or partial claim: You will tack your missed payments onto the end of your mortgage or place them in a “subordinate lien” that you repay when you refinance, sell or end your mortgage.
- Modification: You can work with your lender to reduce payments to an amount you can afford and your missed payments are added to the total amount you owe.
- Reinstatement (lump sum): You will be required to pay back all you missed at once at the end of the forbearance period.
For help in determining what option is right for you, contact a free HUD housing counselor. If an organization tells you it will help for a fee, it is likely a scam. Do not pay for foreclosure prevention services.
Is there aid I can apply for?
In March, the federal government allocated $325 million to New Jersey to set up a “Homeowner Assistance Fund,” but the agency administering the program, the New Jersey Housing and Mortgage Finance Agency, has not yet launched the application.
To sign up for email or text message updates on the fund, visit https://www.njhousing.gov/dca/hmfa/covid19/haf/.
If you are a landlord, you can apply for rental assistance through the state lottery at https://njdca.onlinepha.com/ or your local county or municipal program.
DCA also offers low income families help with utilities through the Low Income Home Energy Assistance Program. To apply, visit http://www.energyassistance.nj.gov/.