The Fair Foreclosure Act (FFA), N.J.S.A §§ 2A:50-53 to 2A:50-73, is a state law that protects residential mortgage debtors and establishes a uniform statutory framework under which courts can more clearly identify the rights and remedies of the parties involved in foreclosure proceedings throughout New Jersey.See Wells Fargo Home Mortgage, Inc. v. Stull, 876 A.2d 298, 302–03 (NJ. Super. App. Div. 2005) ("the Fair Foreclosure Act was designed to make clear the rights and remedies of both borrowers and lenders prior to and throughout the foreclosure process.") The FFA was approved by the New Jersey State Legislature on September 5, 1995, and signed into law by Governor Christine Todd Whitman on December 6, 1995—nearly two years after the bill was first introduced in the State General Assembly on January 24, 1994.New Jersey State Law Library, Legislative History Checklist ("Fair Foreclosure Act"), Bill No. A1064, Chapter 244, Laws of 1995. The New Jersey Legislature amended the FFA on September 19, 2017, to require mortgage servicers to consider debtors' good faith short sale offers and respond within 60 days of receiving them (as discussed in Subsection 2A:50-56.2 below).Amendment to New Jersey’s Fair Foreclosure Act Imposes Deadline on Mortgage Servicers Reviewing Short Sale Offers, Practical Law Legal Update w-010-3059 (Sept. 18, 2017).
New Jersey is a judicial foreclosure state, meaning that before a creditor with a lien on residential property may foreclose on that property, they must file suit in the New Jersey Superior Court, Chancery Division—the court of general equity in New Jersey.Judicial Foreclosure, Practical Law Glossary Item 3-502-0039. As a result of this limitation on the means of foreclosure available to creditors, the Garden State has one of the longest foreclosure processes in the United States, averaging nearly three and a half years or 1,262 days between the time a notice of default has been issued to a debtor and the time that the property is sold at auction. It is because of this lengthy foreclosure process and the fact that residential mortgage debtors often lack bargaining power that the New Jersey Legislature has established a broad statutory framework to protect debtors and their property interests.See New Jersey State Law Library, Legislative History Checklist, Pg. 32, New Jersey Office of the Governor News Release, https://repo.njstatelib.org/bitstream/handle/10929.1/8937/L1995c244.pdf?sequence=1&isAllowed=y (Issued Sept. 6, 1995).
The FFA protects debtors by providing them with "every opportunity" to pay off their mortgages and prevent their homes from being seized by lenders in foreclosure.See Spencer Sav. Bank, SLA v. Shaw, 949 A.2d 218, 221 (App. Div. 2008) (“The FFA is remedial legislation intended to provide protection to residential mortgage debtors.”);
The Fair Foreclosure Act, N.J. Stat. Ann. § 2A:50-54 (1995) ("The Legislature hereby finds and declares it to be the public policy of this State that homeowners should be given every opportunity to pay their home mortgages, and thus keep their homes.") The Act provides such opportunities by imposing substantial notice requirements on lenders before they may institute foreclosure proceedings and by providing debtors with the right to cure defaults on their mortgage, thereby stalling the foreclosure process and returning their mortgage loans to performing status.The Fair Foreclosure Act, N.J. Stat. Ann. § 2A:50-57 (1995) ("the debtor, or anyone authorized to act on the debtor's behalf, shall have the right at any time, up to the entry of final judgment or the entry by the office or the court of an order of redemption…to cure the default, de-accelerate and reinstate the residential mortgage by tendering the amount or performance specified in subsection b. of this section.") Because the FFA is legislation intended to protect residential mortgage debtors, the Act's provisions only apply to residential foreclosures, not commercial foreclosures.The Fair Foreclosure Act, N.J. Stat. Ann. § 2A:50-62 (1995) ("The provisions of sections 1 through 9 of this act1 shall not apply to the foreclosure of a non-residential mortgage nor to collection of the obligation by means other than enforcing the lender's lien on the residential property.") Residential mortgage debtors will always be entitled to the protections of the FFA because § 2A:50-61 of the Act voids any waiver of the debtor's statutory rights prior to a default on their mortgage.The Fair Foreclosure Act, N.J. Stat. Ann. § 2A:50-61 (1995) ("Waivers by the debtor of rights provided pursuant to this act are against public policy, unlawful, and void, unless given after default pursuant to a workout agreement in a separate written document signed by the debtor.") A borrower defaults on their mortgage when they fail to make payments as required by the terms of the promissory note they signed concurrently with their mortgage.DEFAULT, Black's Law Dictionary (11th ed. 2019).
Although the New Jersey Legislature's main objective in enacting the FFA was to protect residential mortgage debtors, the Act was also intended to benefit residential mortgage lenders by expediting New Jersey's historically slow judicial foreclosure process.New Jersey State Law Library, Legislative History Checklist, Pg. 32, New Jersey Office of the Governor News Release, https://repo.njstatelib.org/bitstream/handle/10929.1/8937/L1995c244.pdf?sequence=1&isAllowed=y (Issued Sept. 6, 1995) ("This legislation will help lenders to complete the residential foreclosure process in a more timely manner, bringing New Jersey in line with its neighboring states.") While there is debate as to whether the FFA has actually shortened the judicial foreclosure process in New Jersey, § 2A:50-63 of the Act empowers mortgagors to bypass that process entirely under specific circumstances, such as when the mortgaged property has been abandoned or when the parties have agreed to execute a deed in lieu of foreclosure.The Fair Foreclosure Act, N.J. Stat. Ann. § 2A:50-63 (1995).
Key Provisions and Relevant Case Law 2A:50-56. Written notice of intent to foreclose; contents. After a debtor fails to make a payment on their mortgage and before a creditor may commence a foreclosure action, the creditor must send the debtor a written notice of intention to foreclose ("NOI") that complies with the formalities set forth in § 2A:50-56(c) of the Fair Foreclosure Act.N.J. Stat. Ann. § 2A:50-56(c) (1995). These formalities include stating the identity of the lender, the obligation or security interest at issue, the right of the debtor to cure the default on that obligation, the sum necessary to cure default, and the debtor's right, if any, to transfer the mortgaged real estate to another person subject to the original security interest (mortgage).N.J. Stat. Ann. § 2A:50-56(c) (1995). In determining how strict a lender must be in their compliance with Section 56(c), the Court in Wright v. Bank of America N.A., recognized that "a lender or its agent must accurately recite in any notice of intention to foreclose those things the FFA specifically requires."See Wright v. Bank of America, N.A., 194 A.3d 101, 102 (App. Div. 2018). Such a strict application of Section 56(c) was demonstrated in U.S. Bank National Association v. Guillaume, wherein the Court held that the creditor had failed to comply with the notice requirements of the FFA when its NOI identified the creditor's loan servicer instead of the name and address of the actual lender.See US Bank National Association v. Guillaume, 38 A.3d 570, 584–85 (2012). Despite its holding, the Court concluded that the default judgment entered against the debtor by the trial court was not void "by virtue of lender's violation of Fair Foreclosure Act's requirement that a notice of intention to foreclose include the name and address of the actual lender."See US Bank Nat. Ass'n v. Guillaume, 209 N.J. 449, 480, 38 A.3d 570, 588 (2012) ("The court noted that a lender's failure to serve a notice of intention, or to identify a contact person for the homeowner to call, would be more significant than the omission of the lender's name from the notice of intention.") Although lenders must be in strict compliance with the notice formalities of the Fair Foreclosure Act, it is up to the courts' discretion to balance the equities in the broader context of the entire foreclosure proceeding and provide relief to the parties in accordance therewith.See US Bank National Association v. Guillaume, 480, 38 A.3d 570, 588 (2012) ("Given the Guillaumes' thorough familiarity with the status of their mortgage—reflected in their consultations with a professional adviser and active loan modification negotiations with ASC—the trial court's remedy of a cure constituted a proper exercise of its discretion.")
§ 2A:50-56(a) limits the amount of time between the debtor's receipt of the NOI and the lender's filing of any foreclosure action.N.J. Stat. Ann. § 2A:50-56 (1995). Under this section, a residential mortgage lender must give to a residential mortgage debtor a written notice of intention to foreclose at least 30 days, but not more than 180 days, prior to the commencement of any foreclosure action.N.J. Stat. Ann. § 2A:50-56(a) (1995). If more than 180 days have passed since the lender sent the NOI, then they must send a new notice within the same 30 to 180 day time frame.N.J. Stat. Ann. § 2A:50-56(g) (1995). § 2A:50-56(b) further requires that any notice of intention be in writing and sent to the debtor by registered or certified mail, return receipt requested, at the debtor's last known address.N.J. Stat. Ann. § 2A:50-56(b) (1995). If the mortgage is secured by "a residence for which a restriction on affordability was recorded," then an NOI must also be provided to the clerk of the municipality in which the mortgaged property is located.N.J. Stat. Ann. § 2A:50-56(a) (1995). § 2A:50-56(d) provides an exception to the requirement that a lender send a notice of intention to foreclose, which applies when a debtor has "voluntarily surrendered the property which is the subject of the residential mortgage."N.J. Stat. Ann. § 2A:50-56(d) (1995).
2A:50-56.1. Statute of limitations relative to foreclosure proceedings. An action to foreclose a residential mortgage shall not be commenced following the EARLIEST of: a. "Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage…except that if the date fixed for the making of the last payment or the maturity date has been extended by a written instrument, the action to foreclose shall not be commenced after six years from the extended date under the terms of the written instrument;" b. "Thirty-six years from the date of recording of the mortgage, or, if the mortgage is not recorded, 36 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 30 years;" orc. "Six years from the date on which the debtor defaulted, which default has not been cured…except that if the date to perform any of the obligations or covenants has been extended by a written instrument or payment on account has been made, the action to foreclose shall not be commenced after six years from the date on which the default or payment on account thereof occurred under the terms of the written instrument." N.J. Stat. Ann. § 2A:50-56.1 (1995).
2A:50-56.2. Response by servicer to good faith offer of short sale.