While a short sale can help underwater homeowners avoid foreclosure, the process isn't always as “short” as buyers would like. In response, New Jersey recently enacted a new law that establishes a process for the consideration of offers from short sale buyers during residential mortgage foreclosures.
In a short sale, the lender or servicer agrees to release the lien that is secured by a residential mortgage on the property upon receipt of a lesser amount than is owed on the mortgage. For lenders, a short sale is often preferable to foreclosure because it allows the bank to avoid the time and expense of a foreclosure suit, as well the burdens associated with owning a hard-to-sell property.
Assembly Bill 2060 specifically amends and supplements New Jersey’s “Fair Foreclosure Act” to require residential mortgage loan servicers to engage in consultations on short sales with prospective buyers and to respond to short sale offers from buyers within certain timeframes. Under the bill, “servicer” is defined as the “person, corporation or other entity responsible for servicing a residential mortgage loan, including a residential mortgage lender who makes or holds a loan if the lender also services the loan.”
The new short sale legislation specifically requires a mortgage loan servicer to respond to a good faith offer from a seller, seller’s agent, or authorized third party to purchase the property through a short sale within 60 days of the date of the offer. A response would include an approval, a denial, or a request for further information. If the servicer decides not to approve a short sale, or fails to respond to the seller’s, seller’s agent’s, or authorized third party’s offer within 60 days, any deposit made by the buyer in connection with the purchase of the property shall be refunded in its entirety and the potential purchaser shall have no further obligation with respect to the sale or other disposition of the property.
Assembly Bill 2060 specifically states that its provisions do not constrain a servicer and debtor from participating in the New Jersey Judiciary’s Foreclosure Mediation Program or any other form of mediation or settlement discussion or enter into a settlement agreement. The legislation takes effect on September 19, 2017.
Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Matt Kane, at 201-806-3364.