Pursuant to N.J.S.A. 2A:50-63, mortgagees foreclosing on residential real property may proceed under a rarely utilized Optional Foreclosure Procedure. An action completed under the Optional Foreclosure Procedures does not require a public sale, as Final Judgment awards Plaintiff title instead of the customary Sheriff’s Deed.
A mortgagee may proceed under the Optional Foreclosure Procedure so long as the property is abandoned or the debtor lacks equity in the mortgaged premises or the debtor and mortgagee have completed a deed in lieu of foreclosure. Being that the new Expedited Process appears to the quickest and most efficient method of foreclosure in New Jersey, the Optional Procedure is most valuable for those foreclosures where the property lacks equity and is occupied.
Under the Optional Procedure, the foreclosing mortgagee would still file a 14 day Notice to Cure after the action is deemed uncontested. However, the specific notice provided differs slightly from that provided under the Regular Procedure. Here, the Notice states that an Order of Redemption, not a Judgment Package, may be filed in 14 days should the mortgagee fail to respond to the Notice with a certification indicating cure (aka reinstatement) will likely occur within the next 45 days. If the foreclosing mortgagee does not receive such a certification within 14 days (from the day the Notice was sent), an Order of Redemption may be filed without further notice.
The Order of Redemption includes, among other certifications, a Certification of No-Equity which sets forth the fair market value of the mortgaged premises and the unpaid balance of all obligations owed on the property. So long as the total sum of the obligations, which may include escrows, advancements and sums owed to secondary lien holders, is greater than or equal to 92 percent of the fair market value of the property, the Order of Redemption should be granted by the court.
Once signed, the Order of Redemption will give the defendant mortgagor between 45 and 60 days to redeem (aka payoff) the total amount owed on the mortgage. Should the defendant mortgagor fail to do so, the foreclosing mortgagee may file a Judgment Package with a Proposed Judgment which will grant title to the mortgaged premises to the Plaintiff.
While the process is nearly as straightforward as it appears, there are a few aspects of the Procedure that a foreclosing Plaintiff should be made aware of. First, upon entry of judgment vesting title in the mortgagee, the mortgage debt is deemed satisfied and therefore the mortgagee could not move for a Deficiency Judgment at a later date. Second, should the property be sold at a later date for a figure that exceeds the amount necessary to cover the judgment, interest and reasonable costs, the mortgagee is to deposit any excess with the Court. Finally, a defendant may object to the Optional Foreclosure Procedure and request a public sale. So long as the defendant does so within the requisite time frame, a public sale would be required and much of the benefit of this procedure would be lost.
Written By: Adam J. Friedman, Esq.