Zombie Second Mortgage Foreclosure Defense

In New Jersey, a “Zombie Second Mortgage” refers to a Second Mortgage/ Credit Line/ HELOC that disappeared years ago and was thought to be satisfied or forgiven but “comes back to life” years later to haunt the homeowner. Many times, no mortgage statements had been sent for several years, and the homeowner may have believed that the second loan had been forgiven or been part of a modification of the first mortgage.

Lenders may attempt to collect several years’ worth of interest and fees by threatening to take the house through a “Zombie” foreclosure. Legal assistance is necessary to resolve these issues. It is my position that if no statements have been sent, the Homeowners would not know who to pay, where to pay, or how much to pay and the foreclosure may violate state and federal laws.

Zombie Mortgage Loan foreclosures are on the rise in New Jersey, and these debts (and their lenders) are suddenly reappearing and threatening to take everything. I offer aggressive representation to fight against zombie second mortgage foreclosures, and countersue the lenders through Counterclaims and Third Party Complaints under the New Jersey Consumer Fraud Act (NJCFA), The Truth in Lending Act and the Fair Debt Collection Practices Act (FDCPA). My goal is to have the lender remove interest and fees, provide a modification at a reduced interest rate, and pay attorney fees.

In New Jersey, the second mortgage foreclosure process usually involves the following key steps:

1. Non-Payment: It is possible that the Home Owner stopped paying years ago, or the lender stopped sending monthly mortgage statements and just disappeared. However, the lender starts the foreclosure process because they seek payments that could/should have been made. .
2. Notice of Intention to Foreclose: Lenders must send borrowers a notice at least 30 days before filing a foreclosure complaint detailing the default and the borrower’s rights. If the Notice of Intent to Foreclose includes fee for years when no mortgage statements were provided, it can be a basis to defend the foreclosure.
3. Filing of Complaint: If the homeowner doesn’t cure the default, the lender can file a foreclosure complaint with the court. Once served, the homeowner has 35 days to respond.
4. Court Proceedings: If contested, the process may extend to include discovery, motions, and possibly a trial. If uncontested, or after a court ruling in favor of the lender, a final judgment of foreclosure can be issued.
5. Judgment and Sale: If there’s no response or the court rules in favor of the lender, a foreclosure judgment will be entered, and then a sheriff’s sale will be scheduled.

For further information, look at our Foreclosure Timeline or Comprehensive Guide to New Jersey Foreclosure Notices.

Homeowners facing zombie foreclosures are not defenseless. Taking prompt action, especially with legal guidance, is crucial to effectively manage the loan, protect your property, and prevent unexpected financial consequences. Strategies include:

• Negotiate a Settlement: Often, lienholders are willing to accept a lump sum payment to satisfy the debt.
• Loan Modification: Lenders will often agree to a loan modification, with the goal being to have the lender remove interest/fees and provide a modification at a reduced interest rate.

Aggressive Legal Defense & Counterclaims: Engage a foreclosure defense attorney to explore legal defenses. At the Law Office of Ira J. Metrick, Esq., we offer an aggressive approach to fighting zombie second mortgage foreclosures by bringing claims, Counterclaims, and Third-Party Complaints under key consumer laws:

• The Truth In Lending Act (TILA / Regulation Z): TILA requires mortgage borrowers to be provided with a periodic statement (monthly mortgage statement) for each billing cycle unless the loan has been charged off and no additional fees or interest will be charged on the account (see 15 U.S.C. § 1638(f), 12 C.F.R. § 1026.41). If a debt has been charged off, lenders are not permitted to charge interest and fees during the time no statements are sent. We find many homeowners simply never receive notice from lenders, allowing debt to grow without their knowledge until it’s too late.
• New Jersey Consumer Fraud Act (NJCFA): In cases where clients are improperly charged interest and fees while receiving no monthly statements, we file counterclaims arguing it is an unconscionable business practice for a lender to be “lying in wait” and charging interest/fees without notice.
• Fair Debt Collection Practices Act (FDCPA): We bring claims against debt collectors seeking to collect amounts that are not legally due.

Facing a zombie second mortgage can be a distressing experience, but understanding your rights and exploring available strategies empowers homeowners to protect their financial future. We have already successfully fought against zombie mortgages in NJ and will continue to do so.

If you are facing collection or foreclosure from a zombie second mortgage, contact us today. We offer aggressive representation for our clients, whether it’s battling zombie second mortgages or helping with loan modifications. Contact the law office of Ira J. Metrick today to discuss your options.

Important resources, timelines, and additional information can be found here:

• Foreclosure Defense
• NJ Foreclosure Timeline
• Common Mortgage Servicing Companies Who Foreclose
• Receiving and Reviewing Foreclosure Notices
• Loan Modification Help
• Mortgage Reinstatement Help
• Fighting NJ Sheriff Sales
• NJ Sheriff Sale Timeline
• Eviction After Foreclosure Process