Background, information, and links
New Jersey's Foreclosure Mediation process is limited to borrowers who have been served with a foreclosure complaint, that could cause you to lose your home. The program is available free to all qualifying homeowners whether or not they file an answer to the foreclosure complaint. New Jersey's foreclosure Mediation Process is free to homeowners, and help can be had by calling 888-989-5277. You must meet these qualifying criteria for foreclosure mediation:
1. You are an owner-occupant of a 1-3 family residential property
2. The property is your primary residence
3. You are the borrower (main signatory on the loan) and your mortgage is being foreclosed.
With banks not working with struggling borrowers in good faith, borrowers often get pushed into foreclosure in an attempt to achieve a loan modification. Endless delays by the banks allow delinquency levels to rise, often making the new unpaid principal balance unaffordable to many borrowers, ultimately causing a foreclosure. New Jersey recommends having an attorney represent you in any foreclosure proceedings. Remember, HUD counselors are often funded by the banks, and may not always be the best choice to protect your interests.
Applying for foreclosure mediation will not stop your lender from moving forward with the foreclosure action. After a foreclosure judgment has been entered, you need to apply for mediation assistance. The court may stay the sheriff's sale until after you have had an opportunity to have a mediation conference. If your home is scheduled for a sale, you will need to file a motion asking the court to stay the Sheriff's sale. A sample motion to stay the sale can be found on the Judiciary website at:
The challenge in the mediation process that many Mediators face however, is they have little evidence or a loan disposition analysis in which to in which to base their decisions. On one hand, you have a borrower coming to mediation with their bills, bank statements, and proof of income in hand, but little understanding on how to prove that a modification makes financial sense for the servicer/lender. Typically, the crux of a consumer's case is that they tell the Mediator: "I can afford the modified payment", while the bank comes to mediation with their more comprehensive analysis utilizing standard underwriting guidelines showing that the borrower cannot afford the payment and that they would lose more money modifying than they would lose in a foreclosure scenario. Without analysis from the borrower to challenge the banks position, Mediators often have no choice but to side with the bank. Remember, if the bank agreed with you, you would have been modified by now. It is critical you bring evidence to mediation to counter the banks position.
It is imperative to prove that the modification scenario makes the investor more money than a foreclosure scenario. This is commonly referred to as the Net Present Value (NPV) calculation. The best evidence you can bring to mediation is a REST Report that shows the NPV is positive. Showing a REST Report to a Judge or Mediator showing that modifying the loan is NPV positive for modification, is the best way you can save your home. Banks commonly make many mistakes calculating income, deriving the value of your property, so be sure to bring documentation for all of your income sources and a market evaluation, Broker Price Opinion, or a full appraisal of your home to establish its value. The lower the value, the more likely NPV will be positive, dependent of course on your income level. Our experience tells us that Judges and Mediators want to help the homeowner save their home in most circumstances, but often lack the necessary information to side with the borrower. The Rest Report changes the game.
What do I need to bring to the mediation session?
- Proof of income, if employed; for example, a current pay stub, Profit & Loss statement if self employed or 1099, Bank Statements showing your income being deposited;
- List of expenses;
- Copies of any completed application(s) for mortgage modification or financial assistance; and
- Any other information that may be helpful.
- A REST Report (www.hampreport.com) will allow you to show that your loan is NPV positive or modifiable. The REST Report utilizes the U.S. Treasury algorithm to determine HAMP eligibility as well as the Net Present Value (NPV) of your loan in a modified state. In other words, does your lender make more money modifying your loan, or foreclosing. If you can prove to the mediator it is in the investor's financial interest to modify as opposed to foreclose, your will likely prevail in mediation. Without this Report, it is difficult for the Mediator to know whether it is in the lender's best interest to modify.