Let me preface this by saying that even though New Jersey allows for deficiency judgments the state statute actually frowns upon deficiency judgments. Consider the case law below. Correct me if I am wrong but the majority of mortgage companies provide for short sales it appears because they would rather cut their losses up front and they would rather be in accord with NJ's feeling on collecting deficiency judgments from a default borrower. However, some institutions like IMB seem to frown on Short Sales and it looks like they are placing deficiency judgments on default homeowners once the foreclosure proceedings are over. I have heard from some of my partners that they actually have an anti short sale policy.
I am also hearing that a number of New Jersey courts are now refusing to confirm the foreclosure sale unless the lender agrees, as part of the confirmation, not to sue the borrower for a deficiency greater than the difference between the fair market value and the balance owed on the loan.
Also, consider N.J.S. 2A:50-1. which forbids a personal deficiency judgment in a foreclosure action. A foreclosure proceeding is an action quasi in rem; the relief granted is against the land itself. Usbe B. & L. Assn v. Ocean Pier Realty Corp., 112 N.J. Eq. 580, 582 (Ch. 1933). An action on a note [or bond] is in personam. Ehnes v. King, 41 N.J. Super. 429, 433 (App. Div. 1956). A foreclosure judgment is res judicata as to the amount of the debt, 79-83 Thirteenth Ave., Ltd. v. DeMarco, 79 N.J. Super. 47, 55 (Law Div. 1963), aff'd 83 N.J. Super. 497 (App. Div. 1964), aff'd 44 N.J. 525 (1965), but not as to the defendant's liability for any deficiency. Weiss v. Pelton, 132 N.J. Eq. 248, 249-250 (Ch. 1942).
Thoughts on IndyMac Bank?
Feedback on NJ’s position on deficiency judgments?
Anyone else picking up a correlation here?
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