The pandemic has affected industries across the board, and the default servicing industry is right there in the thick of it all. It seems everywhere you look, new legislation is being rolled out which affects a financial institution’s right to proceed with a foreclosure case on a defaulted loan.
On March 19, 2020, New Jersey Gov. Phil Murphy signed Executive Order 106 into effect, altering the shape of foreclosures and evictions for the foreseeable future. Executive Order 106 directs that no Sheriff, court officer, or relevant representative might proceed with acting to remove people from houses through the eviction or foreclosure processes. The Executive Order is designed to remain in effect through the period of the State of Emergency or for two months following the end of the stated Public Health Emergency, whichever ends later.
Executive Order 106 is to be read in conjunction with Assembly Bill No. 3859 and Senate Bill No. 2276, which clarify that foreclosure and eviction procedures may be started or continued however that enforcement and removals should be halted. President Joe Biden has signed an executive order that extends the foreclosure and eviction moratorium through the end of March, and additional extensions are not beyond the realm of possibility.
Good Intentions, Additional Challenges
This legislation is necessary to safeguard the core thread of the economy and households throughout the state and has actually prompted lenders and servicers across the board to carry out sweeping moratoriums, which suspend any foreclosure-related activities on occupied houses to ensure total and full compliance with these policies. This approach, though well-meaning, misses the mark and possibly develops more problems than it deals with.
An excessively broad “full-stop” method puts loans in default at risk and needlessly extends timelines beyond the intent of the legislation. Rather, lenders and servicers need to think about a complete evaluation of their inventory to carry out the next steps that will completely safeguard all of their rights along with respect the protections for homeowners that are currently in place.
Lenders and servicers can and ought to continue to start and proceed with foreclosure actions, approximately to the point of sheriff sale on loans that have been in default for 2 or more years. Failure to start foreclosure actions in a prompt fashion will just subject plaintiffs to extra analysis under the statute of limitations. For loans in default carried out on or after April 29, 2019, the statute of limitations has been even more reduced by A5001; which bars plaintiffs from starting a foreclosure action more than 6 years after the maturity date, 36 years from the recording date of the home loan, or six years from the date of default, whichever might be earliest.
For actions that have currently been started but are presently on hold, servicers ought to examine such loans to make sure there has been no expiration of an active lis pendens and renew said lis pendens where essential. This small action will reduce costs of getting new title search reports or continuation searches, continue to cut off secondary judgment lenders, condo, or homeowner association liens from impacting the continuous foreclosure action, and it likewise decreases the likelihood of needing to extend a foreclosure timeline with the filing of a modified case.
Regardless of whether a foreclosure action was formerly set up or not, loan providers and servicers are urged to continue to maintain their lien priority by curing of any flaws in title, recording and performing any assignments of the mortgage required to finish the chain of title, and getting property owners any readily available loss mitigation alternatives. Taking the time to deal with any supplementary problems now is the most sensible method to lower the risks of the unknown later on down the road and do not intrude upon the stays that are now in place.
What Can Be Done Now
Despite the foreclosure restriction, loan providers and servicers continue to have a green light to continue with foreclosures on vacant and abandoned properties without restriction. 2A:50 73 (2013) defines a foreclosure track, particularly for vacant and deserted residential properties and that process was expanded under NJ S3413.
When all pandemic-related holds are removed, there is no presuming how backlogged sheriffs will be with scheduling and holding sales. Taking a more detailed look at loans now to identify eligibility and start of actions under the uninhabited and deserted foreclosure track might be the very best way to circumnavigate agonizing hold-ups at the point of sheriff sale. For residential properties that do not receive the vacant and abandoned foreclosure track, these sheriff sale delays will just be further intensified by the protections and procedural modifications produced by Senate Bill No 3464.
Moving on with these recommendations is a thoughtful and proper way to proceed without jeopardizing any of the property owner securities which are currently in place.
