New Jersey Passes Sweeping Reforms to the Residential Mortgage Foreclosure Process
On April 29, 2019, Governor Murphy signed a package of bills into law relating to the residential foreclosure process. These bills represent a sweeping reform to how lenders must prosecute residential foreclosures going forward. The bills include:
- A664: This bill, effective November 1, imposes a new, $155 mediation-related fee to be paid by the lender upon the commencement of any residential foreclosure action. $60 will go to the Foreclosure Mediation Program and $95 will go to “reimburse trained foreclosure prevention and default mitigation counselors for their services[.]”
- A4997: This bill, entitled the “Mortgage Servicers Licensing Act” and effective July 29, imposes a requirement that the Commissioner of Banking and Insurance must issue a mortgage servicer license to an applicant if the Commissioner finds that the applicant demonstrates “financial responsibility,” shown by the applicant’s most recent audited financial statements and by such other information and documents as the Commissioner may require by regulation. The bill also permits the Commissioner to order that any person who has been found to have knowingly violated the Act and caused financial harm to consumers, be barred from acting as a residential mortgage servicer, residential mortgage lender, residential mortgage broker, or mortgage loan originator. A violation of this final order shall be considered a crime of the third degree. A violation of the Act would include the failure to comply with the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. § 2601, et seq., and the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. Additionally, a violation of any federal law or regulation shall be deemed a violation of the Act and a basis upon which the commissioner may take enforcement.
- A4999: This bill imposes a new requirement that a creditor that files a residential foreclosure complaint shall provide the full name and contact information for any person or entity retained by the creditor or a representative of the creditor to be responsible for any care, maintenance, security or upkeep of the property. The creditor filing the summons and complaint in an action to foreclose shall be responsible for the care, maintenance, security and upkeep of the exterior of the vacant and abandoned residential property, and if located out-of-state, shall be responsible for appointing an in-state representative or agent to act for the foreclosing creditor. It will be effective July 29 and apply to residential foreclosures commenced on or after that date.
- A5001: This bill, effective immediately, revises the statute of limitations for residential foreclosure actions. Under the prior statute, an action must be brought by the earliest of (i) 6 years from the maturity date; (ii) 36 years from the date of recording (or if the mortgage was not recorded, the date of execution) so long as the repayment period under the mortgage does not exceed 30 years; or (iii) 20 years from the date of default. N.J.S.A. 2A:50-56.1. Now, the 20-year period from the date of default has been reduced to 6 years for mortgages executed on or after this statute’s effective date.
- A5002: This bill amends the Condominium Act, effective immediately. The bill clarifies that the association shall have a lien on each unit for any unpaid assessment duly made by the association for a share of common expenses, and upon proper notice to the appropriate unit owner, the lien may include late fees, fines, expenses and reasonable attorney’s fees imposed or incurred in the collection of the unpaid assessment, even if it is not explicitly authorized by the master deed or bylaws of the association. Additionally, the bill expands the duration of super-priority condominium liens (previously limited to five years), so that liens that are “cumulatively renewed on an annual basis” are exempt from this five-year expiration period.
- S3411: This bill, which takes effect August 1, requires that any residential foreclosure action be brought within 180 days of the sending of a notice of intention to foreclose; otherwise the lender must resend the notice. It also requires the lender to file an order to show cause to appoint a receiver if the subject property is a 2-4 family residential property, “is not properly maintained,” and meets the necessary conditions for receivership under the “Multifamily Housing Preservation and Receivership Act.” The lender also must include a statement in the notice of intention to foreclose stating this receivership requirement.
- S3413: This bill, effective May 28, increases the time period in which a sheriff, Special Master, or judicial agent is required to sell a vacant and abandoned property from 60 days to 90 days. It also amends requirements regarding the summary action process under the Fair Foreclosure Act, including (i) allowing statements of representatives of a common interest community association to indicate a residence is vacant or abandoned and (ii) allowing a lender to bring a summary process at any time after filing a foreclosure action.
- S3416: This bill, effective immediately, adds the requirement for residential mortgage lenders, when providing a notice of intention to the debtor to commence a mortgage foreclosure under the Fair Foreclosure Act, to include information in the notice advising the debtor that the lender is either licensed in accordance with the “New Jersey Residential Mortgage Lending Act,” or exempt from licensure under that act in accordance with applicable law. The amendments also clarify that the New Jersey Residential Mortgage Lending Act applies to certain out-of-state persons, including residential mortgage lenders, residential mortgage brokers, mortgage loan originators, and other persons involved in residential mortgage lending in the state.
- S3464: This bill, effective July 29, revises the foreclosure sale time requirement, stating that a sheriff must conduct a foreclosure sale within 150 days instead of within 120 days of the sheriff’s receipt of a writ of execution. Amendments also provide that a sheriff or other officer conducting a foreclosure sale may make up to 5 adjournments (no more than 30 calendar days for each adjournment), two at the request of the lender, two at the request of the debtor, and one if both the lender and debtor agree to an adjournment. The bill revises certain procedures for foreclosure sales, including the addition of language stating that the Office of Foreclosure may issue an order to appoint a Special Master to hold foreclosure sales for one or more properties within a vicinage. Language is also added stating the plaintiff’s attorney shall prepare and submit to the sheriff’s office a deed for the sheriff’s office to use for the mortgage premises.
For a copy of the statutes, please contact Michael O’Donnell at email@example.com, Michael Crowley at firstname.lastname@example.org, Sarah Heba-Escobar at email@example.com, or Dylan Goetsch at firstname.lastname@example.org.