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Family Law

Foreclosure Defense Litigation

FORECLOSURE

The attorneys at the Law Offices of Joseph A. Chang & Associates, LLC are experienced foreclosure defense attorneys with a reputation for being aggressive advocates for homeowners and borrowers. We have successfully represented clients at all stages of the foreclosure process, including in the Chancery Division where emergency foreclosure matters are frequently heard.

Today, foreclosure defense law and procedure are changing at a rapid pace. It is important that you have competent, aggressive legal representation whether foreclosure is imminent or has been filed against you, no matter what stage of the process you are in.

Mr. Chang is committed to continuing education to stay abreast of current foreclosure defense law. He recently attended an intensive training seminar: "Foreclosure Defense Training: Saving Homes, Protecting Home Equity, Eliminating Predatory Lending."

ABOUT FORECLOSURE LAW

Know Your Rights. If you are facing foreclosure, you need to know your legal rights. The lender cannot obtain possession of your home automatically even if you have late or missed mortgage payments. The lender must formally pursue a legal action against you in court and prove it has a legal basis to foreclose. You have a right to defend yourself against the foreclosure action. This can be a complicated process.

Years ago, most homeowners did not contest a foreclosure action. Many assumed the lender had all the rights and no contest was possible. However, by law, the lender must prove it has a legal basis to foreclose. The lender must have complied with the following laws. These laws apply beginning from their advertisement of loan products, to initiation of your loan, to requirements they must follow at all stages of proceedings against you. In some circumstances, loss of your home can be prevented - even if a foreclosure action has already been filed and no matter what stage of the process you are in.

Summary of Defenses to Foreclosure. While not intended to provide a complete description, the following is a summary of laws intended to protect you as a borrower. They are defenses available to you in a foreclosure action.

The New Jersey Fair Foreclosure Act, N.J.S.A. 2A:50-53, et. seq.

The lender is required to serve you with a Notice of Intent to Foreclose at least thirty days before filing a Complaint. You must receive proper service of the Notice of Intent to Foreclose via registered or certified mail, return receipt requested. The lender must provide you with the name and address of the lender, as well as the name, telephone number and address where you should send your payment. This Notice must inform you specifically of the nature of the default that is the basis of the foreclosure, including the particular obligation or security interest. The lender must provide the right to cure the default and inform you of the amount you must pay to cure. To "cure" means to pay what you owe and have the mortgage reinstated. You have the right to cure your default at any stage of the process before final judgment.

New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, et . seq.

Lenders or lenders' agents may not engage in "unconscionable" commercial practices. They are liable under this law regardless of whether a person has actually been "misled, deceived or damaged". In other words, lawmakers passed this law as a strong public policy measure so that lenders must employ "above board" practices to advertise to borrowers. The law prohibits the following practices: deception, fraud, false pretense, false promise, misrepresentation, knowing concealment, suppression or omission of any material factwith intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate …"

Some important questions help define "predatory lending practices". Were the loan payments affordable at the time the loan was made? Did the lender or lender's agent lie or conceal the fact that the homeowner qualified for a "fixed-rate" as opposed to an "adjustable rate" mortgage? Did the lender advertise low interest rates, then sell the borrower a loan that originates at the low rate but then adjusts to a higher rate? Was a low monthly payment loan offered that failed to cover interest on the loan, resulting in an increase of the loan's principal balance?

The Truth in Lending Act (TILA), 15 U.S.C.A. § 1601 et. seq.

At the time your loan was made, the lender was required under this federal law to accurately disclose to you the terms of the mortgage, including accurate statements of finance charges, annual percentage rate (APR) and payment schedules. They were also required to provide a disclosure known as a "Notice of Right to Cancel". This Notice must explain that you have a right to cancel the loan and include the time by which you must cancel and where to send the cancellation notice. This Notice must be served to anyone whose name is on the Deed, whether or not they are co-borrowers.

Fair Debt Collections Practices Act, 15 U.S.C. § 1601, et. seq.

In an attempt to collect a debt from a consumer, a collector may not make false, deceptive, or misleading representations or engage in abusive, harassing or oppressive practices. In addition, lenders must provide you with payoff and reinstatement figures or debt verification, and/or other information as requested.

Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et. seq.

You were entitled to facts and information important to the closing of your loan at the time it was made. Lenders may not have complied, or they may have used brokers acting as their agents who did not comply.

Standing

Do you know who owns your mortgage? Quite possibly, you don't. Many lenders sell their loans to other companies, often "pooling" loans and selling them as investment securities. It is highly likely that the company you have been making mortgage payments to is not the company that owns your mortgage. In addition, your payments may be going to a "servicer" who acts as a debt collector. The plaintiff who filed a complaint against you for foreclosure is required to prove it owns your loan. The plaintiff must prove it is the holder of your Note. If the Mortgage was sold, the plaintiff must hold an Assignment. This seemingly small issue has been of significant importance in many cases throughout the United States.

SOME ALTERNATIVES

New Jersey Foreclosure Mediation Program. The mediation program is intended to facilitate open and fair communication between lender and borrower. Mediation allows you the opportunity to negotiate a payment plan with the lender with the assistance of a foreclosure mediator. During the mediation process, foreclosure proceedings continue but, if mediation is successful, the parties may agree to stop the foreclosure.

As a Certified Foreclosure Mediator, I understand how stressful it is to go through this process. Many of our firm's clients were first time homebuyers who were simply swept up in the irrational exuberance of the last few years. The first step is education. Although the Internet is full of good information, just as much misinformation is out there. With so much on the line it is essential that you have accurate information from a licensed, experienced attorney.

Below please find an informative announcement of the New Jersey Judiciary explaining the Foreclosure Mediation Program (link found below).

Judiciary Announces Foreclosure Mediation Program to Assist Homeowners at Risk of Losing Their Homes

Chief Justice Stuart Rabner today announced the roll-out of a statewide Judiciary program to assist homeowners in foreclosure actions. The program will provide mediators to help homeowners and lenders negotiate with one another and try to work out agreements to avoid foreclosures.

Chief Justice Rabner said, "While the courts must remain neutral in all foreclosure matters, it is in everyone's best interest to have a forum where homeowners facing foreclosure have the opportunity to negotiate to save their homes. Our goal is to get lenders and borrowers to meet at the table and work out a mutually beneficial arrangement. I encourage continued cooperation among the courts, lenders, borrowers, and the bar as we address the increasing number of foreclosure actions in New Jersey in today's difficult economic times."

Under the program, the courts will require mediation in all cases in which homeowners contest owner-occupied foreclosure actions. Volunteer mediators will meet with eligible homeowners and their lenders in an effort to resolve the foreclosure action and renegotiate the terms of mortgage agreements.

In uncontested actions, where the homeowner has failed to respond to a foreclosure complaint, the courts will notify the homeowner of the mediation program and encourage participation. If the homeowner fails to respond and a default judgment is entered, mediation will remain an option before the matter proceeds to a sheriff's sale.

The Chief Justice praised Middlesex Vicinage Assignment Judge Travis L. Francis for spearheading an innovative pilot project on foreclosure mediation. The program is operating in the Middlesex Vicinage, where volunteers from the Middlesex County Bar Association are providing free mediation services for homeowners facing foreclosure. General Equity Presiding Judge Frank M. Ciuffani has been working closely with representatives from the bar, Legal Services, and other agencies to build awareness of the program.

"The worst thing a homeowner facing a foreclosure action can do is nothing. It is critical to let homeowners know that even after a default action has been entered, there may still be a window of opportunity for borrowers and banks to work out an agreement that will avoid a sheriff's sale," said Judge Francis.

The Judiciary will expand Middlesex's model mediation program throughout the state in the coming months. In the next 30 days, the program will be expanded to Essex, Union, Ocean, Camden, Bergen, and Hudson counties, which had the highest number of recent foreclosure filings. Within 60 days, the project will be in place in all 21 counties.

During the past 12 months, the courts received 46,130 residential foreclosure filings, a 46 percent increase from the previous 12 months, when 31,667 filings were received.

In September 2008, the courts received 3,997 residential foreclosure filings, compared to 1,400 filings in September 2006. Oct 16, 2008, Judiciary Announcement

Bankruptcy. If you are in foreclosure and file a bankruptcy, all actions and proceedings against you are stayed. This means the foreclosure is "stopped", including sheriff's sales. Joseph A. Chang & Associates are experienced bankruptcy attorneys who will consult with you to determine whether bankruptcy is advisable for you.

Mr. Chang has extensive experience serving as a court-appointed mediator. If you need experienced and professional legal representation contact Joseph A. Chang & Associates, L.L.C. today at (973) 925-2525 to schedule a consultation.

It is important to be aware of two new Appellate Division cases that are very important for New Jersey homeowners. Together, these cases provide authority to dismiss many pending foreclosure cases.

In a decision issued recently (Aug. 2011) in Deutsche Bank v. Mitchell et al , the Appellate Division vacated a sheriff's sale, final judgment and summary judgment for reasons related to the plaintiff's lack of standing to pursue the foreclosure complaint. Although no stay was sought by the homeowner pending the appeal, the appellate division rejected plaintiff's invitation to dismiss the appeal as moot because the issues are important and no third party rights were impacted. Relying heavily on Wells Fargo v. Ford the court found that the plaintiff did not have standing to file the complaint because it did not have the assignment of mortgage at the time of the filing of the complaint and it did not demonstrate that it had possession of the note underlying the mortgage. The court engaged in a lengthy analysis of the UCC requirements for enforcement of notes and ultimately held that the Plaintiff "could not cure the defect in the initial complaint, filed one day before obtaining the assignment, by filing an amended complaint following the assignment." The court also held that the proofs presented by the plaintiff in support of summary judgment were inadequate in part because the assignment was not authenticated by an affidavit or certification based on personal knowledge.

The Appellate Division ruled in Bank of New York v. Laks that the failure either to identify or to properly identify the lender in the Notice of Intention to Foreclose requires the dismissal of the foreclosure complaint, not a new notice issued after the complaint. The Laks case arose on a Pro Se homeowner's Motion to Vacate Default (later default judgment) and to dismiss the complaint. The motion was denied by the trial court and reversed in this opinion. The Appellate Division engaged in a lengthy statutory construction analysis of the Fair Foreclosure Act and concluded that the New Jersey Legislature intended to require the lender to identify itself in the Notice of Intention to Foreclose prior to the commencement of foreclosure proceedings. The Appellate Division noted that it is confusing to homeowners to receive a foreclosure complaint from an entity that was not the originator and also not named in the Notice of Intention to Foreclose.

What is a Notice of Intention to Foreclose?

New Jersey law requires that a servicer send a borrower a Notice of Intention to Foreclose letter at least thirty days before filing a complaint against a borrower in connection with a foreclosure lawsuit involving a primary residence. Although a Notice of Intention to Foreclose correspondence might look like an unimportant and routine letter from your servicer, take this correspondence seriously and don't be deceived. A Notice of Intention to Foreclose is an important document of legal significance that essentially provides you with notice that the foreclosure process has begun or is about to begin. As required by the New Jersey Fair Foreclosure Act, N.J.S.A. 2A:50-56, your servicer (the mortgagee) or your servicer's attorney is required to send a Notice of Intent or Notice of Intention to Foreclose via registered or certified mail, return reciept requested. Whether you get a Notice of Intention to Foreclose from an attorney or directly from your servicer, it should be treated as the serious legal document that it is. A foreclosure defense attorney can help defend against the foreclosure action that your servicer intends to initiate against you or has already commenced.

What's a default judgment in a New Jersey foreclosure?

In New Jersey, if you are in foreclosure and miss the deadline to file an Answer, or file a Non-Contesting Answer, your servicer has the right and will likely file papers with the court seeking the court to Enter Default Judgment against you. This is an important step in a foreclosure case, and should, if possible, be avoided as the entry of a default judgment can both compromise your legal rights and impair your ability to fight a New Jersey foreclosure case.


It is, however, possible to fight a previously entered Default Judgment, although this is typically an uphill battle. New Jersey Court Rule 4:43-3 provides a mechanism to fight a Default Judgment by giving you the right to file a motion to vacate the default and seek leave to file an Answer. In other words, this rule enables you to, if successful, effectively remove the default and it gives you the right to file an Answer to the lawsuit filed against you following the removal of the default. However, as previously mentioned, it is difficult to successfully vacate a default judgment as it is only possible if you both show good cause for not answering the complaint filed against you and if you can demonstrate that the answer you intend to file has meritorious defenses.

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