Facing Foreclosure in NJ
For a homeowner, the word foreclosure is something they never want to hear from their mortgage holder. Not only does it mean they may possibly lose the home they are probably currently living in, but it could also make it very hard, if not impossible, for the owner to purchase another property for the foreseeable future. If you or anyone you know are facing a foreclosure in NJ, here is some information that may be helpful.
The foreclosure process usually begins with a notice from the lender that they are filing an order called a lis pendens, which is a Latin word meaning pending litigation. At this point, homeowners can usually stop the process by paying the lender the late housing payments and the balance of any penalties, fees and interest that may have been incurred once payments to the lender have stopped.
Once this balance has been paid, the lender will stop the foreclosure process. As long as the owner stays current on their subsequent payments, this incident will not affect their future ownership of the house.
However, many people do not have the ability to stop the pre-foreclosure process for any number of reasons and the process may move forward to the point where other options must be explored.
Options for the Homeowner
If a homeowner cannot bring these payments current, they may have limited options if they desire to keep their house. These options include refinancing the home, a loan modification or even selling the house before it has been officially foreclosed upon.
Loan Modification and Refinancing
The first option for many homeowners who wish to keep their house is to enter into negotiations with their current lender and try to work out something on the payments. Some lenders may be willing to work with a distressed owner if it appears their current financial difficulties are temporary and the prospects of making the regular monthly payments are good in the near future.
This might involve a time frame where the owner is required to make interest only payments or even a period of no payments while they get back on their feet. Both of these options may add to the time it will take to pay off the loan but at least it removes the worry of foreclosure from the owner.
Occasionally, a lender has even been known to reduce the balance of the principle owed on the mortgage but that is not something most homeowners facing foreclosure in New Jersey can count on.
If the current lender is unwilling to work out a remodification plan, a complete refinance of the mortgage can also be explored. This may mean finding another lender and can be difficult if past late payments are showing up on your credit profile.
Selling the Home
Another option would be to sell the property. This allows the owner to pay off the mortgage and keep their credit somewhat intact. The owner then may be able to purchase another house down the road that might better fit their current financial situation.
At this point, it is advisable to contact a Realtor familiar with the area and ask them to provide a comparative market analysis, or CMA, on the property to see what price it might bring on the open market. Most Realtors will provide this service for free or a nominal fee as long as they are given the opportunity to give a listing presentation to the owner in the hopes that they will receive the listing.
If the real estate market in a particuliar area has deteriorated to the point where the property can no longer be sold at a high enough price to pay off the mortgage when it is sold, a short sale may be required. A short sale generally involves selling the house for less than is owed and coming to terms with the lender on how to handle the balance after the sale.
Many lenders will waive the balance but others may require the owner to set up a payment plan to pay off this amount after the house is sold. Since the lender must give their approval when a house is sold in this manner, it is best to contact them before trying to do a short sale to see exactly what will be expected of the owner.
Some Realtors specialize in working with short sales where the property must be sold quickly to avoid a foreclosure and will have the expertise required to get the house marketed properly to reach the potential buyers.