During the worst of the decline in the real estate market, it was estimated that over 80% of the New Jersey properties purchased during the boom market were “underwater” [the owner/mortgage borrower owed more to their mortgage lender than the market value of their home].
The evaporation of real estate home owner equity, coupled with the general downturn in the economy spurred legal preservation protocols, and a flurry of federal and state programs designed to provide the beleaguered homeowners with possible financial relief.
The concepts and language of forbearance agreements, loan modifications, deeds in lieu of foreclosure, short sales, and Chapter 13 bankruptcy became common parlance in the real estate market place. These remedial measures were designed to avoid the dreaded prospect of foreclosure.
Ironically, when all of the legal alternatives have been exhausted, the foreclosure process may provide the harried homeowner with a last chance, friendly and efficient forum.
“Equity abhors a forfeiture.” This is the mantra of the Chancery Court and judiciary that exists in every county in New Jersey. Simply translated, the judge presiding in Chancery may rise above the black letter of the law and craft an equitable remedy to achieve a fair result. The loss of the, arguably, most precious and necessary asset, a home residence, must be justified in the face of hundreds of years of legal precedent.
The practical application of this timeless principle of equitable relief lies in the foreclosure mediation process. The mediation process is available to almost every owner/occupant/borrower. The individuals that have attempted to go head-to-head in pre-foreclosure negotiations with their lender now have a powerful, objective and knowledgeable third party participant in the borrower/lender paradigm, the presence of the Chancery judge.
As I assume many Chancery Judges have been borrowers in the mortgage equation, logic would infer a possible empathetic understanding of the problem. Given a credible and documented severe financial hardship and a realistic repayment plan, the Chancery Judge may afford the borrower/owner an eleventh hour reprieve by facilitating a negotiated foreclosure loan modification settlement. Please note, I am not encouraging borrowers to abandon all available pre-foreclosure remedies from a risk, cost or credit damage standpoint. Nor is it fair to the Chancery Courts, which are already inundated by existing litigation, to place reliance on their limited resources without pursuing all other mortgage options.
However should foreclosure ensue, the underwater homeowner who has been exhausted, ignored or abused by a balance sheet focused lender may be able to save their home by resorting to foreclosure mediation, and to defy the laws of probability and nature and be able to “breathe underwater.”
Charles Michael Damian, Esq.