Mortgage Foreclosure Mediation In New Jersey
The only state in the U.S. that requires a mortgage company to submit to mediation in order to resolve a mortgage foreclosure action is New Jersey. Mediation is defined as face to face negotiation between the homeowner and the mortgage company’s representative in regard to a loan modification or other resolution involving the mortgage loan and property. The homeowner is able to file the appropriate documents with the state to commence the mediation process after the mortgage company files a foreclosure action with the court.
A homeowner can also apply for a meeting with a housing counselor. This is a person who will assist them with their budget and the mediation process. The mediation documents may be obtained on the New Jersey Judiciary website. The mediation will be held at the individual’s county courthouse. The parties that will be in attendance are the debtors, mortgage company’s attorney, the mediator, possibly the debtors’ attorney and the housing counselor. The mediator is an unbiased state employee, and their job is to facilitate a resolution.
The homeowner has a few options during the mediation. They may wish to enter into a loan modification should they wish to keep their home. The other option is the homeowner may enter into a different settlement should they desire to surrender their home. Normal circumstances constitute that a loan modification will be negotiated through the H.A.M.P. guidelines. Should the individual choose to surrender their home or they are unable to modify their loan may dispose of the property by way of, “deed in lieu of foreclosure,” “cash for keys” or “short sale”. These different processes are explained in more detail in the following content.
Deed in Lieu of Foreclosure will typically allow the debt to be forgiven. This agreement is entered where the homeowner agrees to surrender ownership of the real estate to the mortgage company. This allows the mortgage company to save time and money by stopping the foreclosure action. The mortgage company does not have to agree to forgive all of the debt; this type of resolution is not often used.
Cash for Keys is also a scenario that is very seldom used. This is an agreement whereby the homeowner agrees to surrender ownership of the real estate for a cash settlement. This resolution also allows the company to cease from pursuing the foreclosure action.
The most commonly used resolution for individuals who wish to surrender their real estate is a short sale. A property will not be allowed to be sold should the value of the real estate be less than the mortgage payoff amount. This is most commonly referred to as owning a property that is “upside down” or “under water”. A short sale is when the mortgage company agrees to reduce the mortgage lien to an amount that permits the homeowner to sell the property. In most scenarios, the mortgage company will forgive the balance due on the mortgage payoff amount.
A brief over view of the HAMP loan modification guidelines are as follows:
- Single family owner occupied home
- Primary Residence
- One unit dwelling equal or less than $729,750
- The target debt to income ratio is 31% (This calculation compares the monthly mortgage payment to the homeowners’ gross income. Under some circumstances, a debt to income ratio between 31% and 41% is acceptable).
Also understand, there are a number of other criteria, including, but not limited to the equity of the home.
For more information, please visit the New Jersey Mediation Program website.
Consulting a Bankruptcy Attorney in New Jersey
If you are facing foreclosure or are considering filing for bankruptcy in the state of 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 the the bankruptcy process and aiding in stopping foreclosure on client homes in New Jersey for 18 years. For a free consultation please contact us today toll-free at 866-503-5655.