There’s no place like home, according to 1939’s cinematic marvel, “The Wizard of Oz.” But Joe and Teresa Giudice are going to need more than ruby red slippers to find their way home now that the bank has filed a mortgage foreclosure lawsuit (Read bankruptcy complaint below). The bank that holds the mortgage for the Giudices’ Montville Township, New Jersey manse started foreclosure proceedings against Joe and Teresa on April 3, 2015. Can Teresa click her Jimmy Choo heels three times in an effort to keep her property?
Foreclosure is a devastating and dreaded legal process in which the bank takes possession of a mortgaged home as a result of the mortgagor’s failure to keep up mortgage payments. A mortgage foreclosure action may result in a Final Judgment and Writ of Execution ordering the sheriff to sell realty to raise the amount due on the debt.
As we travel along the yellow brick road, beware of flying monkeys, a brainless scarecrow, and the Who, What, When, Where, Why, and How of foreclosure law.
WHO: In New Jersey, the bank must file a foreclosure case with the court. The Complaint In Mortgage Foreclosure filed by the Community Bank of Bergen County, New Jersey (“Plaintiff”) contains all the information about the Giudices’ (“Defendants”) mortgage – the amount owed, names of borrowers, address of the property, and requested relief from the Court.
On September 12, 2008, Defendants were indebted to Plaintiff in the sum of $1,720,000.00, payable in monthly installments of $10,679.38, at an initial interest rate of 7.25% starting on November 1, 2008, according to the Complaint. Under the Second Count, Plaintiff declares it is “entitled to possession of the premises.”
WHAT: A foreclosure is a court-ordered sale of property to satisfy a mortgage debt, and an individual who has not paid his/her mortgage is considered to be in default and the lender can begin foreclosure proceedings. In New Jersey, a Notice of Intention to Foreclose must be sent at least 30 days before the lender can file a complaint. This Foreclosure Complaint filed in Superior Court of New Jersey, Chancery Division asks the Court to allow the mortgagee (the bank) to recover the property. A Foreclosure Complaint must be served on any party who has a legal interest in the property, which may include a spouse, tenant, or other party who may hold a lien against the property.
Under paragraph 5 of the Complaint, the bank indicates “should any default be made in the payment of any monthly installment on account of the principal and interest….the entire principal sum remaining unpaid….shall at the option of the oblige….become due and payable immediately.” On December 1, 2014 an installment of principal and interest, insurance and taxes became due and payable on Plaintiff’s First Mortgage and it was not paid, according to the Complaint.
WHEN: It usually takes 250 days or more to execute an uncontested foreclosure, which is where no Answer to the Foreclosure Complaint is filed, allowing the Plaintiff to proceed with a Request to Enter Default against the homeowner and other Defendants. If the Giudices do not file a written answer, they are admitting the claims of the Complaint. Once a default is declared, the lender must wait another 45 days – time when Defendants can cure the default – before a Final Judgment is issued and a Writ of Execution is delivered and sent to the local sheriff’s office to start the foreclosure sale process. In total, it can take a year for an uncontested foreclosure to be final, from the date of the Notice of Intention to Foreclose through the time the sheriff takes possession of the property.
Defendants have 35 days in which to file a Contesting Answer to the Complaint otherwise default will be entered. A Contesting Answer is one that expressly challenges the Plaintiff’s right to foreclosure on the property. If Defendants file an Answer and contest the Complaint (argue that the bank is in the wrong and therefore not legally entitled to foreclose on their property) they’ll have an opportunity to explain their side of the story and present evidence in support.
Next, the bank will have a chance to defend its position. If the Giudices challenge the action, seek delays and adjournments of hearings, or there is a backlog in foreclosures – New Jersey has one of the longest wait times for foreclosures as a result of the real estate market tanking – it could take 1,000 days or nearly 3 years to resolve this action.
The Giudices will be able to live in their house until the foreclosure process is final and the property has been sold. Banks aren’t ecstatic about foreclosing on homes because each bad loan costs them upwards of $40,000 and sometimes that lets borrowers apply pressure on their lenders into considering reducing the mortgage principal and/or mortgage obligations.
WHERE: Once Final Judgment is entered and the Plaintiff delivers a Writ of Execution to the sheriff of the county, the sheriff is required to schedule (and conduct) a sale of the property. The defaulting borrower and every party who has appeared in the action must be given at least 10 days notice before the foreclosure sale can take place. The sheriff posts a notice of sale at the property and in the sheriff’s office. The notice is also published in two newspapers. Once a sale is conducted, the homeowner loses ownership of the property. Borrowers in New Jersey have “redemption rights,” which means a foreclosed homeowner can reclaim his/her property during the 10 days following the sale by paying the full amount of the unpaid loan plus costs.
WHY: When you snooze on making mortgage payments, you can lose your home. The bank likely will not act until you have missed at least three payments. In this case, on December 1, 2014 (date of default) an installment of principal and interest, insurance and taxes became due and payable on Plaintiff’s First Mortgage and it has not been paid, according to paragraph 18 of the Complaint. “Plaintiff has elected that the whole of the unpaid principal and interest shall now be due,” indicated the bank.
Until the entry of Final Judgment, the Giudices could attempt to “cure” their default by catching up on missed payments and late fees. Paying off the loan, refinancing, or participating in a loan modification plan can help prevent the sale of one’s home. Bankruptcy stops a foreclosure too but it does not automatically eliminate mortgages and other liens on the property without payment. This is inconsequential because the Giudices voluntarily withdrew their Bankruptcy Petition and admitted to hiding assets from bankruptcy creditors and submitting phony loan applications to get some $5 million in mortgages and construction loans.
The Giudices’ foreclosure defense lawyer (if they have one) will try to slow down the foreclosure process by establishing that the lender engaged in a “rubber stamping” of documents and/or there was substandard record-keeping performed by lenders.
HOW: If a sheriff’s auction sale produces more money than is needed to satisfy the foreclosure judgment, the sheriff will deliver the extra money to the Superior Court Clerk. These moneys stand in the place of the land itself for the purpose of distribution among lien holders with an interest in the property. Plaintiff can also obtain a deficiency judgment against the Giudices, which can be applied if the property is sold at public sale for less than the balance owed, and the Giudices are responsible for that difference.
The Giudices always had the power to avoid foreclosure on their stone and stucco cottage situated on approximately 3.5 acres, but they have to learn it for themselves. Will this legal drama evolve from a gloomy black and white film to brilliant Technicolor? Grab your gavel, join the conversation, and let us know what you think about the bank foreclosing on Joe and Teresa’s marble palace.