Property Mortgage Laws in New Jersey

The State of New Jersey is commonly referred to as a lien theory state wherein the property is held as guarantee for the loan in question. The document through which the lien is placed on the property is referred to as a mortgage.

Lenders in New Jersey pursue a judicial foreclosure process that is followed through court. The court announces the final decision on the foreclosure. A publicly notified sale is then used to sell the property. The Superior Court has jurisdiction over foreclosures in New Jersey. A complaint, along with a lis pendens (a recorded document that provides public notice about the foreclosure on the property) needs to be filed in the Superior court. Foreclosures are handled by the foreclosure unit which is part of the Superior court.

LEGAL INSTRUMENTS

The legal documents are called the mortgage or the note, and a security agreement in cases of commercial transactions. On occasion, the security agreement is in combination with the mortgage document. To verify the loan and its repayment terms, which are included in the note, a mortgage has to be filed.

TIME PERIOD

With the schedule of the court in mind, it normally takes around 120 to 140 days for a foreclosure that is not contested, to come into effect. If the borrower wishes to contest the action, and if a delay or adjournment of the hearing is being sought; or if the borrower is filing for bankruptcy, the process can be delayed. The waiting time in New Jersey foreclosures is amongst the lengthiest. A defendant is given thirty five days for filing an answer for a foreclosure complaint, failing which, a default is entered. After entering default a plaintiff needs to wait for forty five days before the final ruling is entered, after which the issuing and delivery of a writ of execution to the sheriff can bring into effect the process of the foreclosure sale. A notice of a minimum of ten days must be given to the borrower in default before the sale of the foreclosure takes place.

RIGHT OF REDEMPTION

A statutory right of redemption can be made use of in New Jersey where a foreclosed property can be reclaimed by the borrower upon complete payment of the unpaid loan and costs. A period of ten days post the sale is given to carry out this redemption.

DEFICIENCY JUDGMENTS

If, at the public sale, a property is sold for less than the amount on the loan secured by the mortgage, the lender can get a deficiency judgment. This results in the borrower owing to the lender the difference of the original loan amount and what the property sells for at the auction. A Fair Market Credit policy (part of N.J.S.A 2A:50-3) exists in New Jersey. This works as a safeguard working against bids which are minimal or low and prevents windfalls that could occur during deficiency proceedings. Through this policy, the borrower in default receives credit for the property’s fair market value irrespective of the bid amount at the sale of foreclosure. This, however, is a positive defense, and should be raised during deficiency proceedings. A period of three months after the sale of foreclosure is available to bring about actions for deficiency.

STATUTES

Foreclosures in New Jersey are governed by laws that are part of N.J.S.A. 2A:50-1 et. seq.