In order for real estate investors to maximize returns, being aware of recent legislation changes is very important. In this blog, we will help you understand what’s going on with the Foreclosure Moratorium in New Jersey.
During the Covid-19 pandemic Governor Phil Murphy and the state of New Jersey stepped in to prevent people from being evicted from their home by banning foreclosures when the state issued Executive Order No. 106 on March 19th, 2020.
Over a year later, on August 4th, 2021 the governor signed another bill into law that was going to end the eviction moratorium early for families that were above a certain income threshold. Under the law that Murphey signed, renters that made less than 80% of the area’s median income were protected from eviction through December 31st 2021, while renters that made above 80% of the median would not be protected from eviction, and the moratorium for them ended on August 31st 2021.
It’s worthwhile to note that there wasn’t a ban on sheriff sales but they were only occurring for abandoned properties – – not for properties that were still occupied by the owners. Additionally, recent federal regulations didn’t allow lenders to file foreclosure actions between August 31st 2021 and December 31st 2021 unless borrower was 120 days behind on their mortgage payments and (i) no one lived in the property (ii) the borrower did not respond to the lender’s messages for 90 days, or (iii) the borrower applied for loss mitigation and deemed ineligible.
Under Executive Order No. 249 that was signed on August 4th 2021, the foreclosure moratorium ended on November 15th of 2021. With the moratorium gone, however, evictions are not likely to be immediate. Occupants in properties that were already sold during the eviction halt, would be the first to get notices of eviction, but even they will have opportunities to request more time from a judge. On the faster side, non-occupied properties are expected to be foreclosed upon significantly sooner.
The foreclosure moratorium expiring provides a great opportunity for real estate investors. As we know, foreclosure auctions typically result in sales prices below fair retail market price. Additionally, owners behind on their mortgage payments may consider short sales to avoid being foreclosed upon and evicted now that the Moratorium has been lifted. These homes may be priced significantly lower than market value. Often, the homes may not be in great condition and require renovation which makes them perfect targets for fix-and-flip investors. However, both of the scenarios above may require a good bit of capital up front and real estate investors may not be able to, or want to put in the significant capital. While a traditional bank could be an option for end buyers, it does not work well for real estate investors as banks cannot loan on foreclosure or short sale properties in the fast timeline requested for these sales. Hard money lenders, such as West Forest Capital are much better options to take advantage of the lifting of the foreclosure moratorium in New Jersey!