Assemblyman NEIL M. COHEN
District 20 (Union)
Provides statute of limitations for residential mortgage foreclosures.
CURRENT VERSION OF TEXT
An Act concerning certain mortgage foreclosures and supplementing P.L.1995, c.244 (C.2A:50-53 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey
1. An action to foreclose a residential mortgage shall not be commenced following the earliest of:
a. Five years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation executed contemporaneously with the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation, except that if the date fixed for the making of the last payment or the maturity date has been extended by a recorded instrument, the action to foreclose shall not be commenced after five years from the extended date under the terms of the recorded instrument;
b. Twenty-five years from the date of recording of the mortgage, or, if the mortgage is not recorded, 25 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 20 years; or
c. Twenty years from the date on which the debtor defaulted, which default has not been cured, as to any of the obligations or covenants contained in the mortgage or in the note, bond, or other obligation executed contemporaneously with the mortgage, except that if the date to perform any of the obligations or covenants has been extended by a recorded instrument, the action to foreclose shall not be commenced after 20 years from the date on which the default occurred under the terms of the recorded instrument.
2. This act shall take effect immediately.
This bill supplements the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.) by applying a statute of limitations to residential mortgage foreclosure actions. The bill is intended to address some of the problems caused by the presence on the record of residential mortgages which have been paid or which are otherwise unenforceable. These mortgages constitute clouds on title which may render real property titles unmarketable and delay real estate transactions.
The bill provides that a foreclosure action must be commenced by the earliest of: (1) five years from the date of maturity; (2) 25 years from the date of recording or execution, provided that the mortgage itself does not provide for a period of repayment in excess of 20 years; or (3) 20 years from the date of default by the debtor. Thus, the bill allows title examiners to determine that a mortgage which on its face has matured more than five years ago or which was recorded more than 25 years ago is not a cloud on title because an action can no longer be brought to foreclose it.
The bill also codifies the holding in Security National Partners Limited Partnership v. Mahler, 336 N.J. Super. 101 (App. Div. 2000), which applied a 20-year statute of limitations to a residential mortgage foreclosure action based on a default due to nonpayment. In its decision, the court noted that since there is no statute of limitations expressly applicable to mortgage foreclosures in these situations, courts have resorted to drawing analogies to adverse possession statutes which bar rights of entry onto land after 20 years. This bill would resolve the uncertainties surrounding this area of law by providing a specific statute of limitations of 20 years from the date of the default by the debtor.