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"Why Am I Being Joined In This Foreclosure Action?"

“Why Am I Being Joined In This Foreclosure Action?”

By: Dolores DeAlmeida, Esq.

“Why am I being joined in this foreclosure action?” is a very common question posed to lenders and foreclosure counsel handling judicial foreclosure actions. New Jersey foreclosures are judicial actions. All parties to the action, including borrowers, mortgagors and lienholders, are served with a summons and complaint, thereby being placed on notice that they have been joined in the foreclosure action. It is this service step in the foreclosure process that causes alarm and panic for many defendants, specifically those who are judgment lienholders, and who are confused as to why they are being involved in a legal matter they know nothing about. It appears their biggest fear is being held liable for the borrower’s debt to the lender, which is quite understandable.

A foreclosure action in New Jersey is an “in rem” action which by its definition means an action “against a property” as opposed to an action “against an individual”. A foreclosure action by itself in New Jersey does not seek compensation from an individual. Rather, a foreclosure action seeks to recover the property alone. A separate suit on the note could be brought on a residential mortgage once the foreclosure is completed. The borrower, who is obligated under the note, could be held liable for any deficiency between the amount collected from the sale of the property at the conclusion of the foreclosure and the amount owed to the lender. Most importantly, the lender can never seek monetary compensation from lienholders joined in the action. Lienholders are joined solely to sever their interest in the property being foreclosed. Additionally, New Jersey foreclosure actions seek to foreclose the property free and clear of all liens, thereby rendering the property as marketable. For this reason, all lienholders, who have an interest in the property, must be joined.

So how are defendants determined? The attorney handling the foreclosure action will run a title search for the property. The title search will report all liens that are filed with the county or docketed with the courts. All liens against the property or mortgagor(s)/title holder(s) that are recorded, filed or docketed subsequent to the mortgage must be joined in the foreclosure action. In the case of a purchase money mortgage, the proceeds of which were used primarily for the purchase price of the property, prior liens against the mortgagor(s)/title holder(s) must also be joined. There are other exceptions to this rule but we’ll keep it simple. The lienholder’s interest may be a mortgage, bail bond, condominium lien, federal tax lien, judgment or other lien against the property or title holder. It is important to know that docketed judgments are automatic liens against real property owned by the debtor(s), including future acquired real estate while the judgment is still valid.

Only those liens filed prior to that of a “lis pendens” need to be joined in the foreclosure action. A lis pendens is filed in every foreclosure action once the complaint has been filed and a docket number is obtained. The filing of a lis pendens with the county clerk or register is constructive notice to the world of a pending foreclosure action and is currently valid for five (5) years from the date of filing. If a lien is recorded after that date, there is no need for it to be joined in the foreclosure action. Any liens that are filed or recorded after the filing date of the lis pendens are bound by the foreclosure judgment as if they were properly served and joined in the foreclosure action. See, N.J.S.A. 2A:15-7. An Amended lis pendens should be filed prior to the expiration of the initial filing to avoid having to amend the foreclosure complaint to join additional subsequent intervening liens.

Hopefully this will serve to clear up some questions as to who should be joined as a defendant and why in a New Jersey foreclosure action.

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