Walking away in New Jersey

mwsnow

LoanSafe Member
Jun 23, 2010
6
0
0
Trenton, NJ
My fiance and I have decided to walk away from his condo starting July 1. We are nervous and excited to begin this new phase in our lives, but making this decision has been a huge relief. Here's our situation:

- New Jersey condo purchased in Jan 2007 for $230k, %105 financing.
- first mortgage is BofA, currently owe $172k
- second is CitiMortgage, currently owe $56k, bringing the total currently owed to $228.
- Condo is located in a blighted, urban area of Trenton. The development is gated and fairly upscale. He thought he was getting a good deal in an up-and-coming neighborhood. We all know how that worked out.
- Several units in the complex are already in foreclosure. The entire neighborhood has been hit hard. Home values have plummeted. We estimate the fair market value is around $160-$170, but could be much less. Our realtor has told us that finding a buyer for a short sale is very very unlikely, but we've put it on the market anyway.
- Our first thought was to rent the property. We have decided to live in my home in Philadelphia, which is not underwater. I purchased last year, FHA. We love it here and want to make this our home. The neighborhood is much safer for his two small children and the quality of life is better. His monthly payment at that time was $1,750 plus $185 HOA. He was able to refinance the first mortgage at a lower interest rate and we got the monthly payment down to $1,675 plus HOA. Even with the refinance we were only able to rent it for $1,250 starting last month. This means we're losing $610 a month on the property.
- We both have an absurd amount of credit card debt. Our combined household budget is totally stretched...but still most likely wouldn't qualify for a hardship even if we were lucky to find a buyer for a short sale.

Our problem is not that we can't afford the two mortgages (even with the $610 monthly loss), but that we're treading water and dangerously close to the edge. We can't pay down debt and we certainly can't save anything for our future or for his children's future in our current situation. It just doesn't make sense to sacrifice our future and keep paying these two mortgages. So we've decided to walk away.

The condo is still on the market, and I guess if we were able to find a buyer we would proceed with the short sale option but in the meantime, we're going to stop paying the mortgage and get the foreclosure ball rolling, and at this point, that's really our preferred outcome. I've read that the short sale process just provides the banks with all your financial information so making a deal with them to settle a deficiency just becomes harder. The less information they have about our finances the better.

Our main questions and concerns at this point are:

1. Deficiency judgement. New Jersey is a recourse state so we know we're going to have to deal with this. What we don't know is will we have to deal with it on both mortgages? If BofA gets less than the $172k they're owed (which is very likely) will they come after us? We know to expect it from Citi since they won't get anything in the foreclosure process.
2. Still not sure what the strategy is for the deficiency judgement (s?). Bankruptcy might be an option but we need to meet with a lawyer and verify he would qualify for either 9 or 13. We're prepared to settle on the second, just not sure how much we can realistically expect them to accept. If they want the whole enchilada it would destroy us.
3. Will the second mortgage do a charge off? How is that different than pursuing a deficiency judgement?
4. I've also not been able to get a clear picture on what actions they can take. We're not married yet...is that a good thing or a bad thing? We'll be taking the mortgage payments we're not making and paying down our debt very aggressively...both his and mine. Does that hurt us or should we just leave my debt out of his situation for now?
5. What about garnishing wages? I read somewhere that 2nd mortgages can't garnish wages...I also read that since he's head of household neither mortgage could garnish his wages. Is that true?
6. What are the tax implications of having the renter in there? We are wishing now that we just pursued the foreclosure option instead of getting a renter but at the time we just weren't ready for that leap. I know we need to stay current on the insurance because of the renter...which is why we'll continue to pay the HOA.

Sorry for the lengthy post, we just have so many questions at this point.
 

JerseyCity07305

LoanSafe Member
Feb 28, 2010
137
3
0
Hey mwsnow - I saw you posted in my thread, so I thought I'd drop by and give you an update on my situation and some insights I've learned from various sources (including this wonderful site by the way).

We're currently Late 30. We stopped paying May 1. My other thread explains the circumstances. Basically at this point there just isn't too much to report. I received a loan mod offer from the second already and the 1st just recently sent us a notice of default - not the 'official' notice, just a form letter saying we we owe x-number of dollars...

So that's pretty much the update. I will say this though, the phone calls from the second have pretty much ceased completely. I have until the 29th to accept their offer for a loan mod so maybe they're taking it easy on me in the meantime. The first has never called...yet.

OK, you have a lot of questions and I suggest you keep researching things on these forums. Before I walked I did speak with a BK lawyer and a foreclosure lawyer. Both indicated that deficiency judgements in NJ are very rare. I've been trying to search for public cases where a lender/servicer won a DJ in NJ but I can't find a single one. I've found several old ones (like 1980's and early 90's) where lenders sued commercial holders but again, nothing for individual homeowners.

The thing with NJ is that the time for a lender to get the suit filed is extremely short - three months after sale. In addition to that, NJ requires a DJ to be based of fair market value of home which effectively reduces the amount of deficency. The BK lawyer also said that lenders know you can file BK. If you had to walk away in a recourse state, NJ is about as friendly to the homeowner as you can get.

I would suggest you contact a lawyer and just ask a few of the highest priority questions you might have. I think what you'll start to see is most lawyers will tell you Dj's are rare in NJ. Now there is absolutely no guarantee that this won't change in the future but for now, that seems to be the story.

I'll be honest with you - I wasn't 100% ready to stop paying when we did. It's a tough decision no doubt. I'm early in the process so I haven't experienced the full assault yet. But my attitude becomes more resolute each day. And I'm also finding myself totally and utterly indifferent to the recent spate of threatening articles against those who walk away.

If you walk, keep this thread going. You'll only be a month behind us and it'll be interesting to compare notes and share information.

It's important to keep the majority of your research focused on NJ specific laws.
 

mwsnow

LoanSafe Member
Jun 23, 2010
6
0
0
Trenton, NJ
Thanks JerseyCity, I will definitely be posting updates to our situation and any additional New Jersey specific info I can find. Best of luck to you and your family.
 

mwsnow

LoanSafe Member
Jun 23, 2010
6
0
0
Trenton, NJ
I did find this information regarding 2nd mortgages and deficiency judgements:

"The protection afforded by New Jersey’s deficiency statutes does not extend to business or commercial loans, one to four family residential dwellings owner occupied at the time the deficiency action is commenced where the mortgage is not the primary security for the debt or where there is a second mortgage lender and the mortgage is subject to a prior lien(s) not held by the same lender. It is a common misconception that these statutes protect all residential homeowners. For example the protection would not apply to a second mortgage held by a different lender than the one who holds the first mortgage, provided the first mortgage has already completed its sale"

Am i reading this to mean that our 2nd mortgage would be exempt from New Jersey's deficiency judgement protections? I.e. the judgement could be brought against us even after 3 months have passed from the completion of the foreclosure process?

Am I completely misunderstanding the whole deficiency process as it relates to 2nd mortgages after a foreclosure? What would the standard process be for the lender of a 2nd mortgage after foreclosure?

We are still planning on meeting with a BK lawyer, but wanted to see if anyone else here had any thoughts on the matter in the meantime.

I found the above information on this website:

Deficiency Actions After Foreclosure Judgements : New Jersey Law Blog
 

JerseyCity07305

LoanSafe Member
Feb 28, 2010
137
3
0
I believe that is the case. But again, the second has other options than just a lawsuit. They can settle or sell debt to a collection agency (in which case you can also settle). Many on these forums have been fairly successful in negotiating a settlement, typically in the range of 10% - 25%. Some lower, some higher. Like everything else, it just depends. You could bring a debt settlement lawyer into the picture if you wanted but of course, that will cost you too.

It just depends...

My plan all along has been to allow the first to initiate the foreclosure process and then begin negotiations with the second and try to get a settlement. The only leverage I would have is a Ch.13 filing. If it turns into a standoff, then I'll wait to see how they proceed (lawsuit or sell debt).
 

ooodsie

LoanSafe Member
Apr 25, 2009
80
0
0
Hey guys,
I also just posted our story and it's VERY similar to yours... Husband bought primary residence before we got married - moved into my house (i am on mortgage, but he is on title and deed with me) and currently live here. rented out his old house because at the time we didnt want to deal w/ a short sale/foreclosure and coudlnt sell his house. So now we're in the same boat as you - prices are still dropped, tenants want to leave.. So we are thinking it's not worth continuing to rent it out and lose money (the mortgage is 2k, rent is only 1600). We're worried about NJ being a recourse state as well, but this thread helps me feel better that they wont bother coming after us...

We're also worried obviously about my husbands credit tanking (how much has yours gone down so far?) .. lastly, we are unsure about the fact that we are now married, if they could come after anything of mine that has both of our names on it?

I am curious to learn that short sale may NOT be the way to go because it just provides them w more financial info, as opposed to just walking away and letting them know what they used to know about my husband... Any thoughts?

I'll keep an eye on your thread and if you want to keep each other updated feel free to PM or email privately. :)
 

mwsnow

LoanSafe Member
Jun 23, 2010
6
0
0
Trenton, NJ
Just a quick update:

We're now 30 days late. Started getting calls at 15 days late from the 2nd, and even an email. Didn't hear from 1st until last week. Answered phone calls at least once and replied with pre-arranged non-answer to their when-can-you-pay questions "Cannot answer that question at this time." Also verbally requested that all communication be in writing. Sent a letter with similar language to 2nd since they were calling the most. Phone calls seem to have stopped now. Have received a couple of reminders in the mail and weirdly worded offers to participate in modification program.

No word from credit cards on lowered limits etc., and haven't checked score.

House is still on the market, no showings, no interest. Realtor called to ask if they can lower asking price.

Also of interest, Citi lied to us about an appraisal fee. Last year when we contacted them about possibly refinancing (in the end, they wouldn't, but we did refinance with the 1st which lowered our payment a tiny bit). They said they would have to send an appraiser out as a preliminary step, at no cost to us. We noticed an appraisal fee on the mortgage statement a few months later. Called to complain/have it removed. Received letter last week that after "investigating" the situation, the fee stands and has been reinstated to the balance on our account. Nice, right?
 

ooodsie

LoanSafe Member
Apr 25, 2009
80
0
0
Looks like you and I will be following the SAME exact timelines.. We didnt pay July, so we are also now officially 30 days late as well. No calls yet though surprisingly.. I'll post once we get our first notice/phone call/etc. We do not have a 2nd, just a 1st, with Chase, so maybe Chase is so backed up they don't have time to pay attention to the fact that we currently owe them 2 months mortgage payments!
 

Smackamac

LoanSafe Member
May 30, 2011
1
0
0
Looks like you and I will be following the SAME exact timelines.. We didnt pay July, so we are also now officially 30 days late as well. No calls yet though surprisingly.. I'll post once we get our first notice/phone call/etc. We do not have a 2nd, just a 1st, with Chase, so maybe Chase is so backed up they don't have time to pay attention to the fact that we currently owe them 2 months mortgage payments!
Hi. I am in a similar situation and those of you who posted on here and I am considering walking away. I am curious to hear how things progressed with you and whether walking away adversely affected your life situation (I.e. Credit rating).
 

ooodsie

LoanSafe Member
Apr 25, 2009
80
0
0
Hi. I am in a similar situation and those of you who posted on here and I am considering walking away. I am curious to hear how things progressed with you and whether walking away adversely affected your life situation (I.e. Credit rating).
If definitely affected the credit score.. Luckily the house was just in my husbands name, so my credit is untouched and we're using that solely for everything. His score started at around 690, and dropped to a low of about 510, and currently is around 540. I am assuming 510 was the lowest, which was after the 90 day late hit. Not it's just a matter of it becoming a charge off/foreclosure and then the debt being taken off the report which SHOULD bring the score up because its less $ owed.
 

staircase

LoanSafe Member
May 10, 2011
83
0
0
My credit is about 640ish and I'm four months late if that helps. It wasn't great to start with though :/
 

ooodsie

LoanSafe Member
Apr 25, 2009
80
0
0
JerseyCity - you out there? Anything new? We're going on a year now.. and nothing, no calls, no letters besides the typical "it's not too late, come to this seminar" letter. Odd.
 

PatZZ

LoanSafe Member
Jan 30, 2011
2,026
157
63
Nearby
Just a quick update:

We're now 30 days late. Started getting calls at 15 days late from the 2nd, and even an email. Didn't hear from 1st until last week. Answered phone calls at least once and replied with pre-arranged non-answer to their when-can-you-pay questions "Cannot answer that question at this time." Also verbally requested that all communication be in writing. Sent a letter with similar language to 2nd since they were calling the most. Phone calls seem to have stopped now. Have received a couple of reminders in the mail and weirdly worded offers to participate in modification program.

No word from credit cards on lowered limits etc., and haven't checked score.

House is still on the market, no showings, no interest. Realtor called to ask if they can lower asking price.

Also of interest, Citi lied to us about an appraisal fee. Last year when we contacted them about possibly refinancing (in the end, they wouldn't, but we did refinance with the 1st which lowered our payment a tiny bit). They said they would have to send an appraiser out as a preliminary step, at no cost to us. We noticed an appraisal fee on the mortgage statement a few months later. Called to complain/have it removed. Received letter last week that after "investigating" the situation, the fee stands and has been reinstated to the balance on our account. Nice, right?

I know my response comes late but I just read this.

I was in the mortgage biz for 10 years and what you described is TOTALLY not allowed. When a borrower gets a mortgage loan, ANY and ALL charges/fees associated with that loan MUST appear on the HUD-1 that you get at closing. Your lender ABSOLUTELY cannot put a closing fee on your mortgage statement. PERIOD. Fight this. It is absurd & I have never heard anything like that. Just imagine how crazy this could get if lenders could do such a thing. What would stop them from adding $3,000 to your statement? GET YOUR MONEY BACK !!! Makes me so angry.
 

sheshy

LoanSafe Member
Aug 18, 2011
28
0
1
NEW JERSEY
Hi everyone I have been reading your posts trying to find out what I should do. My husband has been out of work for year 1 1/2 and before that on and off 2 years prior. I have my job still I should be happy but with struggling to pay the 1st and 2nd mortgage and taxes we just can't do it anymore. Our business tanked in 09 we opened in the summer of 2008. My property taxes went up $1000 in one shot because the company Merck moved out. They increased our tax rate but all the percentages were the same or less and I realized my rate changed. The town asked the county to reassess the value and I was told the county said no. So I want to not pay anyone and let it all go! My sister has been in foreclosure in Fairfield NJ for 8 months now but she was one of the people who never should have been granted a loan. She owes 50,000 more then when she first mortgaged. But that's her story. I know if I just stop paying mortgage and taxes it will effect my credit. My plan is to pay off my credit card debt which I had none when we bought the house but had big car repairs and needed to use them. We don't buy anything ever and are just struggling to put food on the table. We could pay off our debt in about 6 six if we stop paying taxes and mortgage. We have exhausted our retirement accounts tapping when things got really behind to keep current with everything. I plan on renting and never owning ever again. So I don't know where to turn. I feel like I'm being drained of every penny! That's my story.
 

sheshy

LoanSafe Member
Aug 18, 2011
28
0
1
NEW JERSEY
Oh I forgot to add to my first post I purchased my home at 442,500 when the market started dropping in 2007 my mortgage 322,000 and my 2nd mortgage is 49,000 and my yearly taxes are 9,800 all this credit cards on $52000 a year and a husband on unemployment.
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org
Hi sheshy,


Welcome to the forum and thank you for joining...............

If you did want to try to keep the house, N.J. is one of the states that received funding from the Treasury Dept. for the Hardest Hit Fund, here is the information for you to look over regarding that.

New Jersey Housing and Mortgage FInance Agency | The New Jersey Homekeeper Program

http://www.treasury.gov/initiatives/financial-stability/programs/housing-programs/hhf/Documents/NJ.pdf


If you are not wanting to keep the property, N.J. foreclosures are up around an average of 800+ days.

Bottom Lines: Foreclosures in New Jersey now take an average 849 days - pressofAtlanticCity.com: Business
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org
My pleasure, I hope it is able to help fellow New Jersey peeps :)
 

sheshy

LoanSafe Member
Aug 18, 2011
28
0
1
NEW JERSEY
Thank you Cat D. I will check the links. I really don't want to own anymore. I would rather rent a house and try to live an easier life with no pressure's if that's possible. So I guess the people staying in the homes in foreclosure are in for over 2 years? I just want to do this right to save and stay as long as I can. Come out of this with cash in my pocket and recoup what has been lost and start over.
Any other advice would be appreciated from you or anyone else. Thank you so much! Taxes are due next week and I really need to make some decisions. Thanks Sheshy
 

Cat Damiano

Mortgage Wars
Sep 10, 2007
10,541
39
48
Colorado
www.loansafe.org