The Great Recession has led to property foreclosures in numbers that were never expected by home owners. Expected or not, it is an issue that many homeowners are dealing with. Many homeowners hear about Loan modification on the news, through friends or through a potential scammer. In reality loan modifications are more myth than reality despite Federal efforts to endorse the practice. Many borrowers cannot withstand the underwriting of mortgage loans that should never have been made in the first place. The good news is that now there are legitimate forums to deal with mortgage modifications and other workouts with lenders. Both the New Jersey State Courts and New Jersey Bankruptcy Courts have procedures in place to deal with the foreclosure epidemic.
In fact State Court statistics show mortgage foreclosure filings rose from 20,253 in 2005 to a peak of 66,717 in 2009, dropping to 58,445 in 2010. The number fell dramatically since a moratorium last December to foreclosures by the six largest lenders because of abuses, with only 4,722 filings for the first six months of 2011. This number is sure to rise again now that lender have lifted moratorium on foreclosures. Since the inception of the state foreclosure mediation program in 2009, it is reported that 2,612 cases in the program have settled. Although the Bankruptcy Courts Loss Mitigation Program (LMP) is fairly new and there are no statistics to report as of yet, it sounds like a promising program.
All too often foreclosure scams and surplus scams are being carried out on New Jersey homeowners in this distressed housing economy. So what can you do to protect yourself from such scams? One way is to take part in the either the previously mentioned Court administered programs to ensure that there is judicial oversight for fairness. The Department of Banking and Insurance has issued warnings to put New Jersey homeowners on notice of potential scams involving “loss mitigation consulting,” “foreclosure prevention,” “mortgage loan modification,” and similar services.
In fact in New Jersey only certain licensed entities can actually modify mortgages which are licensed by the Department under the Debt Adjuster Act. Other entities, which are typically attorneys, are exempt from Debt Adjuster licensure, as set forth at N.J.S.A. 17:16G-1c(2).
Falling victim to a scam can harm you in many ways, i.e. the payment of exorbitant upfront fees for services available from a proper source for free or at minimal cost; loss of fees paid, with no services rendered, and/or no protection from financial loss under a surety bond (Debt Adjuster licensees are required to be bonded in the minimum amount of $50,000.);loss of precious time in the midst of a default or foreclosure process; loss of title to the home without any real benefit, under certain scams; and further damage to your credit profile. So it is important that you ask to see the license or deal with a licensed New Jersey attorney. When in doubt call the Department of Banking and Insurance or a local attorney!
Although, I previously mentioned the State Court’s Mortgage Mediation program this article will focus on the Bankruptcy Court’s newly formed Loss Mitigation Program. The Loss Mitigation Program (“LMP”) is as a forum for debtors and lenders to work on a resolution when a debtor’s residential property is at risk of foreclosure. The LMP facilitates resolutions by opening and maintaining the lines of communication between the debtors’ and lenders’ decision makers. The LMP encourages the parties to finalize a feasible and beneficial agreement with the assistance and supervision of the Bankruptcy Court.
According to the Bankruptcy order adopting the program, “The term ‘loss mitigation’ includes solutions that may prevent either the loss of a debtor’s property to foreclosure, increased costs to the lender, or both. Loss mitigation includes, but is not limited to, loan modification, loan refinance, forbearance, short sale, or surrender of the property in full satisfaction.”
Will I qualify?
If you are a “debtor” meaning that you filed Bankruptcy under Chapter 7, 11, 12 or 13 of the Bankruptcy Code and have a “loan” which means any mortgage, lien or extension of money or credit secured by eligible property, regardless of whether the loan: (1) is considered to be “subprime” or “non-traditional,” (2) was in foreclosure prior to the bankruptcy filing, (3) is the first or junior mortgage or lien on the property, or (4) has been “pooled,” “securitized,” or assigned to a servicer or to a trustee, you will have the opportunity to take part in the LMP.
After filing Bankruptcy the debtor must simply file a Notice of Request for Loss Mitigation, at any time after the commencement of the case up until three (3) days before the first date scheduled for the First Meeting of Creditors. The debtor must also file a certificate of service. Of course the mitigation must be in good faith. In fact the debtor will most likely be required to provide a “adequate protection payments” during the loss mitigation period.
Once I’m in the Program what should I expect?
Upon filing a Request for Loss Mitigation, the debtor must make adequate protection payments to the creditor in an amount that is at least 60% of the monthly principal and interest payment that is contractually due, plus 100% of any required monthly escrow payment (taxes).
After the Loss Mitigation Order is entered; within seven (7) days contact persons by both the debtor and the lender will be designated. The purpose of the initial contact is to create a framework for the discussion at the loss mitigation session and to ensure that each of the Loss Mitigation Parties will be prepared to participate meaningfully in the loss mitigation program. This will eliminate the days when borrowers made calls to the lenders loss mitigation department only to find themselves lost in an abyss of unresponsive bank employees and lost documents that borrowers submitted repeatedly. Hopefully, this will result in some real success stories and help to stem the foreclosure epidemic along with the State Court program.
The New Jersey personal bankruptcy attorneys at Riviere Cresci & Singer LLC can answer any questions you may have concerning mortgage debt, or any general bankruptcy questions. If you live in New Jersey, including the towns of, Brick Township, Manchester, Aberdeen, Middlesex, and Point Pleasant, call us for a free consultation to find out how we can help you.