The New Jersey court system has reduced significantly the backlog of foreclosure cases and the time it takes to clear each one, according to a new report that also recommends some reforms to further improve the foreclosure process.
The number of foreclosure cases on the court’s docket at one time numbered close to 150,000, and that number has been reduced to 27,229, including 20,949 homes, according to areleased by the Special Committee on Residential Foreclosures yesterday. At the same time, the average length of the court’s involvement in foreclosures, from complaint to judgment, decreased from 1,360 days to 148 days; and so far this year, that time has been reduced again to 114 days.
Officials have been cognizant of the continuing negative publicity generated by New Jersey’s enduring rank atop lists of states with the most foreclosures. When Chief Justice Stuart Rabner created the committee in May 2017, he charged it with reviewing foreclosure practices and rules in the state and looking for ways to improve the process. The report emphasizes that New Jersey has made significant gains in dealing with the problem and has 17 recommendations to create a smoother process. These include the statutory enactment of foreclosure counseling and mediation programs with a funding source and some new or revised timeframes.
Pending foreclosure cases in the state are now at their lowest point since before the collapse of the housing market. At its worst point, in 2009, New Jersey had 65,000 new foreclosure filings — the average had been 25,000 a year.
At least one committee member is skeptical of the dramatic reduction in the amount of time it takes to clear a foreclosure case. “I don’t see how you lose 1,100 days in the process and yet the bankers I represent say the process still takes a long time,” said Mike Affuso, director of government relations for the New Jersey Bankers Association. “Maybe there’s something more that someone is not saying.”
Some issues still exist.
“The Committee recognizes that despite overall progress, thousands of cases aged three years and older remain on the docket,” the report states. “Unresolved foreclosures cause measurable harms far worse than unfavorable media coverage: lingering foreclosures depress property values, burden municipalities, and reduce tax revenues necessary to support education, emergency response, and other public services. Vacant and abandoned properties detract from New Jersey’s communities and cause economic and safety risks that undermine quality of life.”
In New Jersey, foreclosure is a judicial process that is meant to balance the rights of property owners with those of the banks that hold mortgages and servicers that process the payments. The laws and rules governing it include specific timeframes. When the crisis hit, New Jersey instituted a number of practices to try to keep the process moving while also ensuring fairness.
In 2008, the state began a mediation process that was very popular and, most recently, has resulted in about 40 percent of mediated cases being resolve through loan modification, short sale or other strategies. The Murphy administration has revised and reinvigorated this program and has appointed at least two counseling agencies in each county to help homeowners with remediation.
Some delays in processing foreclosures will naturally occur because of the reassigning and transferring of mortgages from one lender to another. But the report found more than a dozen areas in which it believes reform can further improve the processing of foreclosures. Some of these will need legislative action, while the courts can implement others.
Its first recommendations seek to improve public information and outreach. These include developing informational materials, including for people representing themselves; providing public access to the electronic foreclosure docket and restructuring the foreclosure mediation program, especially its eligibility and participation requirements. An education campaign to make lawyers and the public more aware of what exactly a foreclosure entails is also suggested.
“The Committee recognizes that a lack of understanding of the foreclosure process contributes to negative public perception of the courts on this topic,” the report states. “To combat that lack of understanding, the Committee recommends creating and launching two sets of educational seminars, one designed for the legal community and one designed for the public … For non-attorneys, the Committee suggests a multi-pronged approach that would include live seminars at courts and other county locations, production and posting of an educational video explaining the foreclosure process, and public service announcements.”
Several other recommendations would need legislative action. These include revising the Fair Foreclosure Act to require the filing within six months of a notice of intent to foreclose or a service of a new notice and modifying the procedures for foreclosure sales to ensure that sheriff’s sales occur within 120 days. The report also suggests the Legislature put into statute foreclosure counseling and remediation programs that were used effectively to move cases along and to increase the fee for the reinstatement of a foreclosure complaint to help pay for the counseling.
Affuso said mandatory mediation in foreclosure filings has merit, but he would like to see data that shows it results in a positive outcome, which he defines as a person remaining in their home and making payments for at least five years or the owner agreeing to hand over title without going through a foreclosure, sometimes getting a cash payment from the bank.
Finally, the report suggests eight modifications to court rules to improve the process, including amending some of the timeframes currently in force and expanding the authority of the Superior Court Clerk to improve oversight of languishing cases.
Grant said the implementation of the committee’s recommendations would lead to an ever-better foreclosure process. “The recommendations set forth by this Committee will further improve efforts to resolve housing disputes in a fair and equitable manner that benefits homeowners, lenders and communities throughout New Jersey,” Grant said.
Affuso was somewhat less optimistic about how much the recommendations would be able to speed the process. Ultimately, banks would prefer to move to a foreclosure process in which they would not have to go to court to take ownership of a property when a person has defaulted on a mortgage. That was not one of the report’s suggestions.
He said getting sheriff’s sales to occur within 120 days, as required by law, would help. And he cited the creation of a database of properties in foreclosure as something that would help municipalities and banks know the status of a given home and who is responsible for its maintenance.
“There are some things coming out of this that I think are important,” Affuso said.