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January 17, 2024
New Jersey's Fair Foreclosure Act Bill
On January 12, 2024, New Jersey enacted Bill A5664 (the “Bill”), amending sections of the Fair Foreclosure Act and the statute governing foreclosure sale processes. The immediate impact of the Bill includes changes to the foreclosure sale process for residential properties and pre-sale notice requirements for lenders. Notably, there is uncertainty about the implementation of the Bill, leading to potential disparities among counties.
The Bill introduces requirements for sale notices on residential property which may conflict with the Fair Debt Collection Practices Act. Lenders must also now disclose the "upset price" (minimum sale amount) four weeks before the scheduled Sheriff’s sale, with limitations on price increases. Unforeseen expenses can be added to the upset price, except that taxes and insurance may not be included beyond the 3% cap for an increase in the original upset price given to the Sheriff.
Plaintiffs are prohibited from contacting borrowers, next of kin, or non-profit organizations regarding whether they intend to participate in the foreclosure sale before providing the upset price. The property's occupancy status must be disclosed, if known. The plaintiff is allowed to determine whether the foreclosed upon party qualifies for the 3.5% reduced deposit sale and evidence of financing the successful bid.
Protected Buyers, including borrowers, tenants and the community non-profits referenced in the Bill have rights to purchase for the upset price with a reduced deposit, subject to certain requirements. They also have first or second refusal rights, as applicable and an extended 90-business day closing period, with remedies including interest and a potential deposit forfeiture.
Community development companies with agreements to purchase the property for a borrower, next of kin, or tenant can exercise a second right of refusal. If a community development company is the successful bidder, any resale of the property is subject to income limitations, resulting in the property becoming affordable housing unit for a least 30 years.
The Bill also limits Sheriff Commission to $150.00 for properties reverting to the plaintiff on a credit bid.
Commercial properties or business loans are not subject to the Bill.
For questions please contact: Michael Kahme, Esquire or Eric Kelner, Esquire for additional information.
