Stopping a NJ Sheriff's Sale in its Tracks
Stopping a NJ Sheriff's Sale In Its Tracks
Under 12 C.F.R. 1024.41(g) of Regulation X of Dodd Frank, "prohibition of foreclosure sale," the bank cannot go to Sheriff's Sale if a complete application for a loss mitigation option is under review at least 37 days prior to the scheduled sale date.
"If a borrower submits a complete loss mitigation application after a servicer has made the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process but more than 37 days before a foreclosure sale, a servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale..."
This is absolutely critical if you are facing an upcoming Sheriff's Sale. What is a complete application for loss mitigation? For one, a loan modification application submitted to underwriting will qualify. For another, a short sale listing and/or contract of sale to a buyer may sometimes be sufficient. Usually, when the homeowner has equity, the Judge will issue a stay under these circumstances to allow the homeowner a chance to access their equity by way of sale.
Moreover, when accompanied by all necessary documentation required by the Servicer/Lender's loss mitigation policies, this also qualifies as "loss mitigation review" under the statute. Most Servicers/Lenders will put off the sale voluntarily if the necessary procedures are followed sufficiently in advance.
Even last-minute submissions made a few days prior to sale must be given consideration by a Servicer/Lender under 12 C.F.R. § 1024.38(b)(2)(v), so long as the loan holder has procedures in place for evaluating such last-minute submissions.
For purposes of saving your home, time is critical and we have seen homeowners who got a good modification application filed or put the property up for sale a few months before a sale date extend the timeline by 6-12 months fairly routinely, so long as the delay was attributable to the bank reviewing the loss mitigation options rather than the homeowner's delay in responding to the bank's information requests.
Unlike filing a traditional judicial "motion for stay," filing for bankruptcy, or other more drastic options -- getting loss mitigation review complete is usually possible for anyone facing a Sheriff's Sale, is very low cost, carries little to no risk, and does not require a huge investment of attorney time. It is the first line of defense in stopping a Sheriff's Sale in its tracks, and a "no brainer" for anyone facing this stressful situation.
Consequences of a Sheriff's Sale Being Scheduled
Sheriff's Officers sometimes get a bad rap, but overall, we have found them to be some of the nicest and most helpful people you could ever meet. However, the County Sheriff's Office has a certain financial entanglement with Servicers/Lenders who serve them with a writ of execution to conduct a sale because they earn a statutory fee of approximately 4% when the sale goes through.
N.J.S.A. 22A:4-8 states:
"When a sale is made by virtue of an execution the sheriff shall be entitled to charge the following fees: On all sums not exceeding $5,000.00, 6%; on all sums exceeding $5,000.00 on such excess, 4%; the minimum fee to be charged for a sale by virtue of an execution, $50.00."
The bank has to usually pay the Sheriff's fee once they file a writ of execution, and they tend to pass this fee along to the borrower even when the sale is cancelled due to loss mitigation. It is important for foreclosure counsel to discuss a reduced fee on the "settlement amount" exchanged between lender and borrower rather than the auction price when a loss mitigation option like a modification is given and accepted after a sale date is scheduled.
This also may open your eyes as to why the bank is so staunch in its position that it will not review borrowers once the sale date is scheduled. They are concerned about having to pay the Sheriff's Fee but having no sale proceeds to do so. As such, always try to avoid putting the bank in that position by being proactive and undertaking loss mitigation far in advance of any scheduled Sheriff's Sale.
The first option for putting off a Sheriff's Sale that is less than 37 days out is to use your two (2) statutory stays. There are certain instances where you may not want to do so, such as cases where you intend to file bankruptcy, but anticipate potentially coming out of bankruptcy and potentially needing the stays down the road to buy additional time for review. You also may want to "save" your stays if you are afraid of a "motion for stay relief" being granted during the pendency of a bankruptcy because you are dealing with a particularly aggressive Servicer/Lender. But, in most situations, where a modification or short sale is pending, it is important under Dodd Frank to file the statutory stays to get the necessary time for review.
You cannot apply to the Court for a judicial "stay of sale" until after you have exhausted you two statutory stays.
Under N.J.S.A. 2A:17-36 you have two (2) statutory stays of two weeks each, for a total of a month.
“2A:17-36. Adjournments of sale of real estate. A sheriff or other selling real estate by virtue of an execution may make two adjournments of the sale, and no more, at any time, not exceeding 14 calendar days for each adjournment. However, a court of competent jurisdiction may, for cause, order further adjournments.”
The cost for the two stays is $56. The homeowner can do this on their own in most cases.
Bankruptcy Will Stay a Sherriff’s Sale
As a last resort, you can always file bankruptcy in order to stay a Sheriff's Sale. The Bankruptcy Code says that a bankruptcy “petition filed… operates as a stay, applicable to all entities, of… any act to… enforce [any lien] against any property of the debtor… .” See Section 362(a)(4). This means that the mere filing of your bankruptcy case will immediately stop a foreclosure from happening.
However, bankruptcy should be used only when absolutely necessary.
When a bankruptcy is filed, the Lender will usually file for "relief from automatic stay of sale" within a short time. This is particularly true when the property is under water and has negative equity.
What Happens at a Sheriff's Sale
At a Sheriff's Sale, you can make a bid on your own property. Third-party bidders can also step in and make an offer. But, in the majority of cases, the bank will take the property back as an REO for a nominal consideration.
Where a third-party bidder steps in, they usually put 20% down by way of cashier's check or purchase the Servicer/Mortgagee's bid prior to the auction date, and then have 30-days by statute to come up with the balance of the purchase price. Over strapped Sheriff's Sale purchasing companies often don't come through with the funds in the time allotted.
There are endless variations of what occurs in these scenarios. For one, you can make an offer to the third-party to buy back your property from them. For another, you can encourage the Sheriff's Office to keep their deposit, cancel their bid, remit the title back to you and schedule a new sale. A third option is to work with the third-party buyer and offer to be their tenant and see if they will give you a lease with an option to buy.
Creativity, along with proactive management of the players involved, can be critical to a successful outcome. As attorneys with experience navigating these situations, an experienced foreclosure defense attorney can be an invaluable resource if you find yourself in this situation.
What if the Sheriff's Sale Takes Place
Every homeowner has an "equity of redemption" that last for a minimum of 10-days and which extends until the Sheriff's Deed is issued and title formally transferred.
When a Sheriff's Sale takes place, the winning bidder usually deposits 20% of the purchase price and has 30-days to come up with the remaining balance.
Some of the various permutations that occur in these instances are described above and below.
How Long Will You Have to Move After a Sheriff's Sale - The Eviction Process
Every case is unique. But, you can expect 3-6 months as a general rule of thumb. It takes at least 30-days in most cases for a Sheriff's Deed to be issued and it can take 60+ days in some instances. Although the successful bidder technically only has 30-days from putting down their 20% deposit to come up with the strike price, in practice the Sheriff's Office often provides extra time for them to do so, and the Servicer/Lender may opt not to schedule a new sale if they think the third-party bidder will come through.
Once the Sheriff's Deed is issued to the new owner and title changes hands, the new owner must institute eviction proceedings. They do this by applying for a Writ of Possession. The new owner submits the paperwork to the Foreclosure Office in Trenton, which includes a $50 filing fee and a certification.
During this period, you can object to the Sheriff's Sale for any number of reasons and even file a "Motion to Vacate Sheriff's Sale."
While these are rarely granted, in appropriate cases they may be successful, and in many other instances may be a worthwhile means of communicating to the judge the reasons why you have been mistreated and deserve special judicial consideration of your other grounds for relief and communicating to the new owner that you wish to remain in the property and will put up a fight to do so.
Once a Writ of Possession is issued, it remains valid for three (3) months or 120-days. During this time, you can expect the new owner to take steps to remove you from the property. This is the time for communication and not evasion, and if you feel uncomfortable undertaking the negotiations, it is a good idea to have experienced foreclosure defense counsel in your corner during this stage, even if that is all you hire them for.