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Residential Real Estate - New Jersey Law Blog
- Eliminating an Old Mortgage
When selling a home a buyer’s title search may uncover an old mortgage of the homeowner - or a prior owner, that was not discharged of record. Frequently the mortgage has been paid off, but unfortunately just not discharged of record in the county clerk’s office. There are ways to discharge such old mortgages depending on the particular situation.
The easiest is if the original mortgage was discharged and returned to the homeowner’s possession and the homeowner can locate it. The original mortgage, marked as paid and discharged, can then be sent to the county clerk’s office for recording.
If the discharged mortgage has not been recorded, and cannot be located, the mortgage can be discharged of record by the filing of an affidavit provided the provisions of N.J.S.A. 46:18-11.5 et seq. apply. The New Jersey Legislature enacted this law in 1999 to provide a relatively simple and expeditious means of removing mortgages from the record when a lender has failed to have a mortgage discharged, or canceled of record, in a timely manner.
Pursuant to this law, an attorney-at-law or licensed title insurance producer who has caused a “residential mortgage” to be paid can obtain its discharge by filing a detailed affidavit which sets forth the steps taken to obtain a discharge of the mortgage from the lender. Specifically, the person signing the affidavit (the “affiant”) must attest to the following:
1. Payment was made to the lender in accordance with a current, written pay-off letter, as defined by ... the Act;
2. the affiant knows that the lender received the payment;
3. a notice was sent to the lender by registered or certified mail at least 30 days after payment was received, advising it of the affiant’s intention to cause the mortgage to be discharged by affidavit;
4. a second notice was sent to the lender at least 30 days after the first notice was received; and
5. at least 15 days have elapsed since the lender received the second notice.The affidavit with the above information is then attached to a discharge prepared by the affiant, and recorded.
If the facts surrounding the payoff of an old mortgage do not fit the requirements of N.J.S.A. 46:18-11.5 et seq., then a court action under N.J.S.A. 2A:51-1 et. seq. can also be commenced. This type of action requires the filing of a complaint in Superior Court and thus is a more time consuming and costly endeavor.
Some mortgages are old enough that they are no longer enforceable. Mortgages which have a maturity date at least 20 years last past, are no longer enforceable. The New Jersey court ruled in Security National Partners v. Mahler, 336 N.J. Super. 101 (App. Div. 2000) that the statute of limitations for enforcement of a mortgage is 20 years. Thus, a lender’s right to enforce a mortgage expires 20 years after the last payment is due. - New Jersey Realty Transfer Fees Due on Sale of Residences
Upon the sale of residential real estate, many Sellers are surprised to learn that the transfer is subject to a New Jersey Realty Transfer Fee. This is a tax imposed on Sellers by the State of New Jersey pursuant to N.J.S.A. 46:15-5 et seq. In certain instances the amount can be significant.
First enacted in 1968, and comprised of a modest fee, the Realty Transfer Fee law has been amended several times, most recently in 2004. Each time, not surprisingly, the Realty Transfer Fee has been increased on higher priced real estate.
The Realty Transfer fees are calculated on a sliding scale, with the rate per $500.00 of sales price increasing as the sales price increases. The table below summarizes the standard rates:
Sales Price Realty Transfer Fee
$500.00 to $350,000.00 $2.00 to $2,105.00
$350,000.00 to $1.0 million $2,105.00 to $9,575.00
$1.0 million to $2.0 million $9,575.00 to $21,675.00
and $6.05 per $500.00 in excess of $2.0 millionA reduced Realty Transfer Fee is available to senior citizens, blind persons, and disabled persons on the sale of one-or two-family residences which they own and occupy, and on the sale of low and moderate income housing.
Those reduced fees are:
Sales Price Realty Transfer Fee
$500.00 to $350,000.00 $.50 to $650.00
$350,000.00 to $1.0 million $650.00 to $4,675.00
$1.0 million to $2.0 million $4,675.00 to $11,475.00
and $3.40 per $500.00 in excess of $2.0 millionCertain deed transfers are exempt from the Realty Transfer Fee under N.J.S.A. 46:15-10. The most common of these are:
• Deed for consideration of less than $100.00;
• Deed between husband and wife, or parent and child;
• Deed by an executor or administrator of a decedent to a devisee or heir to effect distribution of the decedent’s estate in accordance with the decedent’s will or the intestacy laws;
• Deed recorded within 90 days following the entry of a divorce decree which dissolves the marriage between the grantor and grantee;
• Deed conveying a cemetery lot or plot;
• Deed in specific performance of a final judgment;
• Confirmatory or corrective deed; and
• Deed of a receiver, trustee in bankruptcy or liquidation, or assignee for the benefit of creditors.
In 2004, legislation was also passed requiring non-resident Sellers to file an estimated Gross Income Tax on the transfer of real property as a condition to recording the transfer. The estimated Income Tax payment is determined by multiplying the Seller’s gain, as computed for tax purposes, times the highest Gross Income tax rate of 8.97%. However, in no case may the estimated payment be less than 2% of the sales price paid.
Finally, there is a Realty Transfer Fee due from the Buyer for purchases of residential property in excess of $1.0 million. This is commonly referred to as the “Mansion Tax” and is 1% of the purchase price. Thus, if the “Mansion Tax” applies, the minimum transfer tax paid by the Buyer is $10,000.00.
- Who Really Holds Your Mortgage?
It used to be that homeowners went to their local banker to borrow funds to purchase a new home. The local banker usually knew the home buyer as well as the property and its value. If the homeowner later encountered trouble making timely payments, he or she would go back to the bank which held their mortgage, meet with their banker, and together they would try to work out a solution acceptable to both sides to forestall a possible foreclosure.
Now, however, it is not unusual for a home buyer to use the internet or a mortgage broker to find a lender for them with whom they have had no prior contact. And thus begins a confusing journey for a homeowner who may someday be in financial distress and need to find the ultimate holder of their mortgage.
In recent years a process called “securitization” has made mortgages much more easily available to home buyers. At the same time, this process has made it much more difficult for a borrower to locate the ultimate holder of their mortgage with authority to modify the terms of their loan.
The process begins when a borrower goes to a mortgage broker or lender who originates their loan. The loan is then assigned to a servicing company which collects the homeowner’s mortgage payments which are available for distribution to investors. A Wall Street investment bank then gathers thousands of these loans and packages them together to create mortgage-backed securities which generate an income stream from the loan payments
