Foreclosure in the time of Covid? - Denbeaux & Denbeaux

Foreclosure in the time of Covid?

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Date: August 28, 2020Author: Joshua Denbeaux

Foreclosure in the time of Covid?*

So, Josh.  Are the foreclosure courts open, or not?

I have had to field this question multiple times these last several months.  I have addressed this in my videos and blog posts, but this article will drill down much further.

It is an excellent question, the answer is complicated, and is both yes … and no.  The reason the answer is complicated is because our country, and our state, are governed by three equal branches of government: Legislative, Judicial and Executive.  Foreclosure law involves all three.

Each has its role and each is taking a slightly different position on foreclosures during the time of Covid.

The Executive Branch Response to COVID-19 and Foreclosures

The Governor is the head of the executive branch of New Jersey.  Ultimately, the executive actions undertaken by the State all derive from the authority of the governor of the State of New Jersey.

The Executive Branch enforces laws and is responsible for the safety and welfare of the New Jersey state citizens.

Every Governor has the right to issue Executive Orders, and all Governors do.  Usually a hundred or so each term.  For the most part, these Executive Orders are not directly relevant to the lives of New Jerseyans.  Covid, however, changed all that just as it changed so much else of daily life.

Executive Order 103

In Executive Order 103, issued March 9, 2020, Governor Murphy declared a public health emergency:

NOW, THEREFORE, I, PHILIP D. MURPHY, Governor of the State of New Jersey, in order to protect the health, safety and welfare of the people of the State of New Jersey, DO DECLARE and PROCLAIM that a Public Health Emergency and State of Emergency exist in the State of New Jersey


Executive Order 106

Based on that declaration of a public health emergency, Governor Murphy issued Executive Order 106 which imposed a moratorium on evictions and removals, either as a result of foreclosure or landlord/tenant actions.

The Governor Ordered in EO 106 that:

  1. Any lessee, tenant, homeowner or any other person shall not be removed from a residential property as the result of an eviction or foreclosure proceeding.
  2. While eviction and foreclosure proceedings may be initiated or continued during the time this Order is in effect, enforcement of all judgments for possession, warrants of removal, and writs of possession shall be stayed while this Order is in effect, unless the court determines on its own motion or motion of the parties that enforcement is necessary in the interest of justice. This Order does not affect any schedule of rent that is due.
  3. Sheriffs, court officers, and their agents shall refrain from acting to remove individuals from residential properties through the eviction or foreclosure processes during the time this Order is in effect, unless the court determines on its own motion or motion of the parties that enforcement is necessary in the interest of justice.


Expected Timeline

So Executive Order 106 was issued on March 18, 2020.  It has been in effect now for over five months.  According to EO 106, it has no fixed end date but the date that the Order will be lifted depends on the ability of the State to adequately address the Covid pandemic:

This Order shall take effect immediately and remain in effect for no longer than two months following the end of the Public Health Emergency or State of Emergency established by Executive Order No. 103 (2020), whichever ends later, unless this Order is first revoked or modified by the Governor in a subsequent executive order.

Executive Order 103, establishing the Public Health Emergency, has not been lifted.  I have not received any indication that the Governor has plans to lift the Public Health Emergency.  The general wisdom in the capitol is that the health situation is going to deteriorate again in the fall and winter, and if that turns out to be true I think the moratorium will be in place for quite some time yet.

But Governor Murphy, as head of the executive branch, does NOT have control over the judiciary.  The judicial branch of New Jersey state government resides in the Chief Justice of the New Jersey Supreme Court, and not the Governor.  (My reading of the State Constitution does not fully address whether it is the Chief Justice alone or the Justices of the Supreme Court that are the head of the judicial branch.  In practice, since there has never been a conflict between the Chief Justice and the Associate Justices, this remains an interesting but not particularly important legal question.)

The Judicial Branch Response to COVID-19 and Foreclosures

So the Executive Branch cannot control whether the Courts are open, and has little say as to whether the Foreclosure Courts are open … but the executive branch can – and did – announce that it would refuse to enforce Orders and Judgments of foreclosure.

We are in the territory here of theoretical state Constitutional conflicts arise in our form of government.  I am fairly certain that that is in part why the Governor specifically excepted from the Executive Order imposing the moratorium on removals and evictions situations in which “the court determines on its own motion or motion of the parties that enforcement is necessary in the interest of justice.”  – EO 106

The other reason, obviously, has to do with issues of domestic violence in which one party must be removed for the safety and health of other people.

Even at the beginning of the pandemic, the New Jersey Supreme Court and the Governor were never never on the same page on how to respond to the problems associated with COVID-19.


First Omnibus Order

The Supreme Court of New Jersey issued the First Omnibus Order on Court Operations and Legal Practice on March 27, 2020.

Where is regards foreclosures, section 4(g), it says:

The Office of Foreclosure will not review or recommend motions or judgments on or after March 1, 2020 pending further court order.

There is nothing in any of the Supreme Court omnibus Orders that prevents banks or mortgage servicers from filing new foreclosure complaints.  At their most restrictive, in the first Omnibus Order, the Supreme Court closed the Office of Foreclosure so that no foreclosure actions would be processed after filing.

That is not the same as closing the Foreclosure Courts – Complaints can still be filed.

Fifth Omnibus Order

The Fifth Omnibus Order on Court Operations and Legal Practice, issued on June 25, 2020, which can be read here, lifts the first four Omnibus Orders as to the Foreclosure Unit and permits the Courts to process existing foreclosure actions.

But … remember that the Executive Branch has announced – via EO 106 – that it would not enforce Judgments of Possession or Writs of Removal?  So the Supreme Court is allowing Foreclosure Complaints to be filed, permitting foreclosure litigation … but the Governor is not going to enforce any Judgment of Foreclosure or Writ of Possession (that’s the legal term for the document that gives possession to the buyer of the property).

Where Does This All Leave You?

From the mortgage industry’s perspective, they know that they can file foreclosure Complaints and can litigate foreclosure cases … but they also know that even if they win they cannot remove anyone.

Heck, they cannot even sell the property! (Which happens before the owner is evicted, of course.  Not that this happens to many of my clients, but we are talking big picture here.)

The County Sheriff is an Officer of the Executive Branch, and right now they are taking directive from the Governor and are refusing to hold auctions to sell foreclosed homes.

There are moratoriums on the filing of foreclosure complaints for FHA mortgage loans and some other types of federally backed mortgage products – but that is beyond the scope of this article.

The Supreme Court of New Jersey has put the power back into the hands of the mortgage servicers.  The foreclosure courts are open, but the Governor has made it explicitly clear that he will not allow foreclosure Judgments to be enforced.

Thanks to the New Jersey Supreme Court, what we are waiting on is … the mortgage servicing industry’s decision on how to proceed.

What’s coming?

Right now, the vast majority of the mortgage industry is not filing foreclosure complaints.  There are some being filed but they are relatively few.  At some point, at a time known only to the mortgage companies, there are going to be many, Many, MANY foreclosure complaints filed.

In other places I have predicted that New Jersey will see 100,000 foreclosures filed per year for between two and four years.  It is going to get very messy.

And that is where WEconsumers and your consumer attorney advocates – have power.

During the financial crisis of 2008, only 6% of the foreclosures were answered.  SIX PERCENT!!!!

And the foreclosure courts were absolutely, completely overwhelmed and almost broke down.  Well, GOOD!

This time, let’s do it again, but better.

If the banks want to file 100,000 foreclosures a year, well, I would like to see 94% be Answered.

Think of it.  There are 21 Counties in the State of New Jersey.  If the cases were evenly distributed (they won’t be, but bear with me), and there were 94,000 contested foreclosure cases in the Court system, each County would have to deal with 4,476 foreclosure cases.  Each year.

Back in 2009 through 2012, fewer than 10% of the foreclosure cases filed were Answered and there were about 65,000 filed each year.  That means that each county only had to deal with 309 cases.  The judiciary could handle that number of foreclosure cases … but only just barely.  And they ‘handled’ it by making the foreclosure cases go in the bank’s way as quickly and smoothly as possible.

Except for attorneys like me.  We – and me more than anyone I think – made a lot of enemies on the bench, making a mess of the neat little system they had going.

I’m ready to do it again, people!

But this time, let’s make it even worse for the Courts and the Banks … Answer your complaint … Defend yourself … make the banks work and pay … put the Courts to the breaking point until structural changes have to be made.  That will be a conversation at which consumer attorneys – including me – will have a seat at the table.

But for you … what you want to do is to get ready to fight.  Get ready to Answer.  And I can definitely help.

The mortgage servicers and their attorneys are going to be under so much stress they are going to make mistake after mistake after mistake … and exploiting mistakes by banks and their foot soldiers is one of the best ways to win a foreclosure litigation.

Who is with me?

John Lewis is gone, but his spirit remains.  Consider the act of Answering a Foreclosure Complaint as causing the kind of “good trouble” that he would have loved to be a part of.

Thank you.

* The first person who reaches out and shows me that they ‘get’ the clever literary reference in the title of the newsletter gets a free consultation with me.  This offer is worth, exactly, zero because all of my consults are free.
At least you get bragging rights, though.  You won! 🙂
** And if you need a hint … well, my wife is a Spanish teacher.


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