Are you wondering how Deed in Lieu of Foreclosure works in New Jersey?
Cash for keys in New Jersey or more specifically “Deed in Lieu of Foreclosure” in New Jersey is when a homeowner gives his home to his bank instead of facing foreclosure. This is called a “Mortgage Release” by some banks in that they will release you from your mortgage in exchange for the keys to your home and all the rights you have to own it and they will not continue in court to foreclose on you.
A deed in lieu sometimes offers benefits to both the homeowner and the bank, but at other times the deal is extremely one sided. If you have a lot of equity in your home, the bank is going to fall over backward to work with you because you are basically giving them free money. If you do not have equity in your home, a bank may make you try to sell the home for the full value of your home or try to perform a “Short Sale” prior to accepting a deed in lieu. As a borrower, the benefits can include being released from all of the debt on the home and avoiding the stigma of a foreclosure on your record, however, the bank may still try to get a delinquency against the borrower for the difference what they eventually sell the home for and what is owed. Make sure that if you go for a deed in lieu that is actually your best option.
What if there is a NJ TAX LIEN or Second Mortgage? Will a deed in lieu work?
If there are any junior liens or a second mortgage on the NJ home being foreclosed a deed in lieu maybe less attractive option for the lender. Many banks and lenders make sure that the municipal taxes are paid, but this is not always the case. A tax sales certificate in NJ can cut off the holder of the first mortgage’s rights to foreclose, so this is a tough situation for the bank to be in. The bank will most likely not want to assume the liability of the junior liens from the property owner unless they can pay off the lien from the profits of selling the home. A bank can foreclose in order to get a clean the title through the NJ Foreclosure process. However, this can be a position for you as the borrower to negotiate with your bank and junior lien holders to reduce the debt you owe by paying them off for less than you owe.
In order to be considered a deed in lieu of foreclosure, both you and your bank and any junior lien holders must enter into the transaction voluntarily and in good faith. Because of the requirement that the this must be voluntary, banks will often not approve a deed in lieu of foreclosure in NJ unless they receive a written offer of such a conveyance from the borrower that specifically states that the offer to enter into negotiations is being made voluntarily by the borrower. Neither the borrower nor the lender is obliged to proceed with the deed in lieu of foreclosure until a final agreement is reached and neither can be forced to even entertain the idea of a deed in lieu.
If you have any questions, it is important to speak with an attorney who can help you understand your options during this time if you are thinking of giving up on your home. Protecting your family’s number one asset is something we can help you with. Contact us today, and we will go over all of your options. Contact us at (973) 200-1111 or email us at INFO@FocusedLaw.com.