In New Jersey, lenders must file a lawsuit in order to foreclose on a home. After the housing market crisis several years ago where thousands of homeowners were forced from their homes, many lenders were required by new laws protecting consumers to offer alternatives ways to deal with underwater mortgages in order to prevent foreclosure.
Some of the most common alternatives to foreclosure in New Jersey include:
Loan modification — a mortgage loan can be modified if both the lender and borrower agree to change the loan terms. Many lenders have found this to be a more financially beneficial way to keep homeowners in their homes while protecting their financial interests.
Forbearance plan — in situations where a borrower has lost his or her source of income temporarily, a lender can choose to offer a forbearance plan instead of foreclosing on a primary residence.
Reinstatement — a lender can choose to reinstate a mortgage in default if the borrower is able to bring their mortgage payments current.
Deed-in-lieu of foreclosure — to avoid a foreclosure on their credit record, borrowers can turn the property deed over to the lender, who is then able to avoid the expense of a foreclosure proceeding. However, most lenders will not offer this option if there are junior liens attached to the mortgage, as it would require them to negotiate with the secondary lien-holders.
Short sale — this is typically employed when a home is worth less than the balance due on the mortgage loan. The lender agrees to be paid less than what is due on a mortgage loan and the borrower essentially “walks away” from the mortgage obligation without a negative impact on his or her credit record.
Before considering any of these options, borrowers facing foreclosure should consult with a New Jersey foreclosure defense attorney to determine which foreclosure alternative is the best choice for their particular circumstances.
If you are a homeowner experiencing difficulty in making your mortgage payments, or have been served with foreclosure papers, contact Johnson Legal PC for a consultation to find out what options exist in addressing the lender’s action and defending your rights and home under the law.
