ASSEMBLY, No. 3497

STATE OF NEW JERSEY

215th LEGISLATURE

 

INTRODUCED DECEMBER 3, 2012

 


 

Sponsored by:

Assemblyman  HERB CONAWAY, JR.

District 7 (Burlington)

 

 

 

 

SYNOPSIS

     Revises residential property mortgage foreclosure process; requires documentation of right to foreclose and consultation on foreclosure alternatives; provides expedited process for foreclosing abandoned properties.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning foreclosure of residential properties and amending and supplementing P.L.1995, c.244.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    Section 3 of P.L.1995, c.244 (C.2A:50-55) is amended to read as follows:

     3.    As used in this act:

     "Deed in lieu of foreclosure" means a voluntary, knowing and uncoerced conveyance by the residential mortgage debtor to the residential mortgage lender of all claim, interest and estate in the property subject to the mortgage.  In order for a conveyance to be voluntary, the debtor shall have received notice of, and been fully apprised of the debtor's rights as specified in section 4 of this act.  For purposes of this act, "voluntarily surrendered" has the same meaning as "deed in lieu of foreclosure."

     "Immediate family" means the debtor, the debtor's spouse, or the mother, father, sister, brother or child of the debtor or debtor's spouse.

     “Loan modification” means the waiver, modification or variation of any material term of a residential mortgage loan, that changes the interest, forbears or forgives the payment of principal or interest, or extends the final maturity date of the loan.

     “Loss mitigation option” means an alternative to foreclosure, including a loan modification, a deed in lieu of foreclosure, and a short sale.

     "Non-residential mortgage" means a mortgage, security interest or the like which is not a residential mortgage.  If a mortgage document includes separate tracts or properties, those portions of the mortgage document covering the non-residential tracts or properties shall be a non-residential mortgage.

     "Obligation" means a promissory note, bond or other similar evidence of a duty to pay.

     "Office" means the Office of Foreclosure within the Administrative Office of the Courts.

     "Residential mortgage" means a mortgage, security interest or the like, in which the security is a residential property such as a house, real property or condominium, which is occupied, or is to be occupied, by the debtor, who is a natural person, or a member of the debtor's immediate family, as that person's residence.  This act shall apply to all residential mortgages wherever made, which have as their security such a residence in the State of New Jersey, provided that the real property which is the subject of the mortgage shall not have more than four dwelling units, one of which shall be, or is planned to be, occupied by the debtor or a member of the debtor's immediate family as the debtor's or member's residence at the time the loan is originated.

     "Residential mortgage debtor" or "debtor" means any person shown on the record of the residential mortgage lender as being obligated to pay the obligation secured by the residential mortgage.

     "Residential mortgage lender" or "lender" means any person, corporation, or other entity which makes or holds a residential mortgage, and any person, corporation or other entity to which such residential mortgage is assigned.

     “Servicer” means the person, corporation or other entity responsible for servicing a residential mortgage loan, including a residential mortgage lender who makes or holds a loan if the lender also services the loan.

     “Servicing” means managing the mortgage loan account on a daily basis, including collecting and crediting periodic loan payments, managing escrow accounts, or enforcing the terms of the mortgage or note.

     “Short sale” means the sale of real property in which the lender or servicer agrees to release the lien that is secured by a residential mortgage on the property upon receipt of a lesser amount than is owed on the mortgage.

(cf: P.L.1995, c.244, s.3)

 

     2.    (New section)  a. A servicer that files and serves, pursuant to the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et al.), a summons and complaint of foreclosure on a residential mortgage loan, shall:

     (1) document, to the satisfaction of the court, that the servicer has the right to foreclose on the mortgage by providing copies of any mortgages, assignments of mortgages, mortgage notes, and any other appropriate documentation necessary to establish the servicer’s right to foreclose; and

     (2) provide at the same time as the summons and complaint, a written notice to the debtor, in clear and conspicuous language, that the servicer, upon receipt of a written request by the debtor for a loss mitigation option consultation within 45 days of the debtor’s receipt of the summons and complaint, will provide the debtor an opportunity for a consultation to assess the debtor’s financial situation and appropriate loss mitigation options.    

     b.    Upon request by a debtor for a loss mitigation option consultation the servicer shall, within 30 days of the receipt of the debtor’s request, establish a single point of contact and provide the debtor with one or more direct means for communication with the single point of contact.

     c.     The servicer shall:

     (1) through the single point of contact, make reasonable and good faith efforts consistent with industry standards and the provisions of this section to provide a loss mitigation option consultation and engage in appropriate loss mitigation options; and

     (2) ensure that the single point of contact shall be responsible for and have sufficient authority to perform all of the following functions with respect to a loss mitigation option consultation:

     (a) communicate the process by which a debtor may apply for an available loss mitigation option and the deadlines for any required submissions of applications or documentation to be considered for the option;

     (b) coordinate receipt of all applications and documentation associated with an available loss mitigation option and notify the debtor of any missing items necessary for consideration for the option;

     (c) maintain access to sufficient current information and appropriate personnel  as necessary to timely, accurately, and adequately inform the debtor on an ongoing basis of the current status of a loss mitigation option for which the debtor is being considered;

     (d) ensure that a debtor is considered for all loss mitigation options administered by the servicer; and

     (e) maintain access to individuals with the ability and authority to approve loss mitigation options, suspend foreclosure proceedings, or dismiss foreclosure complaints, as appropriate.

     d.    All efforts to advance any foreclosure proceedings filed by the servicer against the debtor shall be suspended until the servicer’s completion of the requirements of subsections b. and c. of this section or for a greater time period as may be agreed upon by the servicer and the debtor.

     e.     A motion by a servicer seeking a final judgment of foreclosure, pursuant to R.4:64-1 et seq. of the Rules Governing the Courts of the State of New Jersey, in a foreclosure action in which a debtor has requested a loss mitigation option consultation in accordance with the provisions of this section, shall not be accepted by the court unless it is accompanied by an affidavit by the servicer stating that the servicer has complied with all of the following:

     (1) provided all appropriate documentation to the satisfaction of the court that the servicer has the right to foreclose on the mortgage;

     (2) contacted the debtor, or has attempted with due diligence to contact the debtor, for a loss mitigation option consultation consistent with the provisions of this section;

     (3) made reasonable and good faith efforts, consistent with industry standards and the provisions of this section, to provide a loss mitigation option consultation and engage in appropriate loss mitigation options; and        

     (4) otherwise substantially complied with the provisions of this section.

     f.     of the servicer and debtor to participate in the Judiciary’s Foreclosure Mediation Program or any other form of mediation or settlement discussion, or enter into an agreement as a result of that mediation or settlement discussion.

 

     3.    (New section) a.  For the purposes of this section, "vacant and abandoned" residential property means residential real estate with respect to which the lender proves, by clear and convincing evidence, that the mortgaged real estate is vacant and has been abandoned.  Real property shall be deemed "vacant and abandoned" if the court finds that the mortgaged property is not occupied by a debtor, or a tenant under by a lease agreement entered into prior to the service of a notice of intention to commence foreclosure pursuant to section 4 of the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-56), and at least two of the following conditions exist:

     (1)   overgrown or neglected vegetation;

     (2)   the accumulation of newspapers, circulars, flyers or mail on the property;

     (3)   disconnected gas, electric, or water utility services to the property;

     (4)   the accumulation of hazardous, noxious, or unhealthy substances or materials on the property;

     (5)   the accumulation of junk, litter, trash or debris on the property;

     (6)   the absence of window treatments such as blinds, curtains or shutters;

     (7)   the absence of furnishings and personal items;

     (8)   statements of neighbors, delivery persons, or government employees indicating that the residence is vacant and abandoned;

     (9)   windows or entrances to the property that are boarded up or closed off or multiple window panes that are damaged, broken and unrepaired;

     (10)   doors to the property that are smashed through, broken off, unhinged, or continuously unlocked;

     (11) a risk to the health, safety or welfare of the public, or any adjoining or adjacent property owners, exists due to acts of vandalism, loitering, criminal conduct, or the physical destruction or deterioration of the property;

     (12) an uncorrected violation of a municipal building, housing, or similar code during the preceding year, or an order by municipal authorities declaring the property to be unfit for occupancy and to remain vacant and unoccupied;

     (13) the lender or other authorized party has secured or winterized the property due to the property being deemed vacant and unprotected or in danger of freezing;

     (14) a written statement issued by any debtor expressing the clear intent of all debtors to abandon the property;

     (15) any other reasonable indicia of abandonment.

     b.    For the purposes of this section, a residential property shall not be considered "vacant and abandoned" if, on the property there is:

     (1)   an unoccupied building which is undergoing construction, renovation, or rehabilitation that is proceeding diligently to completion, and the building is in compliance with all applicable ordinances, codes, regulations, and statutes;

     (2)   a building occupied on a seasonal basis, but otherwise secure; or

     (3)   a building that is secure, but is the subject of a probate action, action to quiet title, or other ownership dispute.

     c.     In addition to the residential mortgage foreclosure procedures set out in the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et al.), a summary action to foreclose a mortgage debt secured by residential property that is vacant and abandoned may be brought by a lender in the Superior Court of New Jersey.  In addition, a lender may, at any time after filing a foreclosure action, file with the court, in accordance with the Rules Governing the Courts of the State of New Jersey, an application to proceed in a summary manner because the residential property that is the subject of the foreclosure action is believed to be "vacant and abandoned"; provided, however, that this section shall not apply to a foreclosure of a timeshare interest secured by a mortgage.

     d.    (1) In addition to the service of process required by the Rules Governing the Courts of the State of New Jersey, a lender shall establish, for the entry of a residential foreclosure judgment through a summary action pursuant to this section, that a process server has made two unsuccessful attempts to serve the debtor or occupant at the residential property, which attempts must be at least 72 hours apart, and during different times of the day, either before noon, between noon and 6 P.M., or between 6 P.M. and 10 P.M.

     (2)   In addition to any notices required to be served by law or the Rules Governing the Courts of the State of New Jersey, a lender shall, with any order to show cause served as original service of process or a motion to proceed summarily, serve a notice that the lender is seeking, on the return date of the order to show cause, or on the date fixed by the court, to proceed summarily for entry of a residential foreclosure judgment because the property is vacant and abandoned.

     (3)   Notwithstanding the procedure for serving a notice to cure required by section 6 of the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-58), a lender filing a summary action for entry of a residential mortgage foreclosure judgment under this section shall serve the debtor with a notice to cure with the order to show cause served as original service of process. When a lender makes application to proceed summarily because a property is vacant and abandoned, a notice to cure shall be served with the order fixing the date for the matter to proceed summarily.

     e.     (1) The court may enter a final residential mortgage foreclosure judgment pursuant to this section upon a finding that:

     (a) by clear and convincing evidence, the residential property is vacant and abandoned as defined under subsection a. of this section; and

     (b) a review of the pleadings and documents filed with the court, as required by the Rules Governing the Courts of the State of New Jersey, supports the entry of a final residential mortgage foreclosure judgment.

     (2)   A final residential mortgage foreclosure judgment under this section shall not be entered if the court finds that:

     (a)   the property is not vacant or abandoned; or

     (b)   the debtor or any other defendant has filed an answer, appearance, or other written objection that is not withdrawn and the defenses or objection asserted provide cause to preclude the entry of a final residential mortgage foreclosure judgment.

     f.     If a final residential mortgage foreclosure judgment under this section is not entered on the original or adjourned return date of an order to show cause or the date fixed by the court to proceed summarily, the court may direct that the foreclosure action continue on the normal track for residential mortgage foreclosure actions for properties that are not vacant and abandoned and the notice to cure served with the order to show cause or the order fixing that date for the matter to proceed summarily shall be of no effect.

     g.     All actions brought to foreclose on real property pursuant to this section shall proceed in accordance with the Rules Governing the Courts of the State of New Jersey.

     h.     Nothing in this section is intended to supersede or limit other procedures adopted by the court to resolve residential mortgage foreclosure actions, including, but not limited to, the Judiciary’s Foreclosure Mediation Program or any other form of mediation.

     i.      Nothing in this section shall be construed to affect the rights of a tenant to possession of a leasehold interest pursuant to the Anti-Eviction Act, P.L.1974, c.49 (C.2A:18-61.1 et seq.), the "New Jersey Foreclosure Fairness Act," P.L.2009, c.296 (C.2A:50-69 et seq.), or any other applicable law.

     j.     Notwithstanding paragraph (3) of subsection a. of section 12 of P.L.1995 c.244 (C.2A:50-64) to the contrary, if the court makes a finding in the foreclosure judgment that the property is vacant and abandoned, the sheriff shall sell the property within 75 days of the sheriff’s receipt of any writ of execution issued by the court. If it becomes apparent that the sheriff cannot comply with the provisions of this subsection, the foreclosing plaintiff may apply to the court for an order appointing a Special Master or judicial agent to hold the foreclosure sale.

 

     4.    This act shall take effect on the 60th day following enactment.

STATEMENT

 

     This bill revises New Jersey’s “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et al.), to: (1) require residential mortgage loan servicers to document that the servicer has the right to foreclose on the mortgage and to offer consultations on alternatives to mortgage foreclosure under certain circumstances; and (2) provide an expedited process for foreclosing abandoned properties.

     While the “Fair Foreclosure Act” currently requires lenders to adhere to certain homeowner protection practices during the foreclosure process, this bill expands homeowner protections by placing certain responsibilities on both lenders and servicers, as defined in the bill, since servicers more typically manage mortgage loan accounts on a daily basis on behalf of lenders.  

     The bill requires a servicer who files a summons and complaint of foreclosure on a residential mortgage loan to: (1) document, to the satisfaction of the court, that the servicer has the right to foreclose on the mortgage by providing copies of any mortgages, assignments of mortgages, mortgage notes, and any other appropriate documentation necessary to establish the servicer’s right to foreclose; and (2) provide at the same time as the summons and complaint, a written notice to the debtor that the servicer, upon receipt of a written request by the debtor for a loss mitigation option consultation within 45 days of the debtor’s receipt of the summons and complaint, will provide the debtor with an opportunity for a consultation to assess the debtor’s financial situation and appropriate loss mitigation options.  The bill defines “loss mitigation option” to mean an alternative to foreclosure, including a loan modification, a deed in lieu of foreclosure, and a short sale.

     Upon request by a debtor for a loss mitigation option consultation the servicer shall, within 30 days of the receipt of the debtor’s request, establish a single point of contact for the debtor.

     The bill also requires the servicer to: (1) through the single point of contact, make reasonable and good faith efforts, consistent with industry standards, to provide a loss mitigation option consultation and engage in appropriate loss mitigation options; and (2) ensure that the single point of contact shall be responsible for and have sufficient authority to perform certain functions with respect to a loss mitigation option consultation, including ensuring that the debtor is considered for all loss mitigation options administered by the servicer.

     In addition, the bill requires that all efforts to advance any foreclosure proceedings filed by the servicer against the debtor shall be suspended until the servicer’s completion of the bill’s requirements relating to establishing a single point of contact, providing a loss mitigation option consultation, and engaging in loss mitigation options, or for a greater time period as may be agreed upon by the servicer and the debtor.

     A motion by a servicer seeking a final judgment of foreclosure in a foreclosure action in which a debtor has requested a loss mitigation option consultation shall not be accepted by the court unless it is accompanied by an affidavit by the servicer stating that the servicer has complied with all of the following: (1) provided all appropriate documentation to the satisfaction of the court that the servicer has the right to foreclose on the mortgage; (2) contacted the debtor, or has attempted with due diligence to contact the debtor, for a loss mitigation option consultation; (3) made reasonable and good faith efforts to provide a loss mitigation option consultation and engage in appropriate loss mitigation options; and (4) otherwise substantially complied with the provisions of section 2 of the bill.

     The bill also authorizes lenders to bring summary actions in New Jersey Superior Court to foreclose mortgages on vacant and abandoned residential property. To secure entry of a foreclosure judgment, the bill requires a lender to follow certain procedures in addition to those set out in the “Fair Foreclosure Act” and the Rules Governing the Courts of the State of New Jersey.  The court may enter a final residential mortgage foreclosure judgment under the bill if it finds, by clear and convincing evidence, that the residential property is vacant and abandoned and that a review of the pleadings and documents filed with the court supports the entry of a final judgment. The bill precludes a court from entering a final residential mortgage foreclosure judgment if the court finds that the property is not vacant or abandoned, or the debtor or any other defendant has filed an answer, appearance or other written objection asserting defenses or objections that preclude the court from entering final judgment.  The bill states that this new summary action is not intended to supersede or limit other procedures adopted by the court to resolve residential mortgage foreclosure actions, including, but not limited to, the Judiciary’s Foreclosure Mediation Program or any other form of mediation.  The bill provides that the summary action provided for in the bill shall not be construed to affect the rights of a tenant to possession of a leasehold interest pursuant to the Anti-Eviction Act, P.L.1974, c.49 (C.2A:18-61.1 et seq.), the “New Jersey Fair Foreclosure Fairness Act,” P.L.2009, c.296 (C.2A:50-69 et seq.), or any other applicable law.