New Jersey recently enacted legislation that allows certain National Guard and United States Reserve members on federal active duty to temporarily defer mortgage loan payments and suspend property tax payments under certain circumstances.
The New Jersey 2016 Assembly Bill 766 (the “Bill”) was approved and became effective on November 14, 2016. In general, the Bill allows certain borrowers mobilized for federal active duty as a member of the National Guard or a Reserve Component of the Armed Forces of the United States to request a deferment of interest and principal payments on a mortgage loan obtained before the borrower entered federal active duty. The Bill requires lenders and servicers to defer the payment of interest and principal. The deferment starts on the date the borrower enters federal active duty and remains in effect while the borrower remains in service, plus 60 calendar days after release or separation from active duty. Upon receipt of the borrower’s deferment request that contains certain required information, the lender must prepare a modification of the agreement extending the term of the loan commensurate with the number of months of active duty service, plus 60 calendar days. The lender must send the modification for signature to the borrower and any other mortgagor.
The Bill provides that interest may not be compounded as a result of the deferment. Late or delinquency charges, attorneys’ and collection fees, and recording or filing fees incurred prior to the date of entry on active duty generally may not increase during the period of deferment and may not accrue as a result of the deferment.
These requirements apply to consumer mortgage loans made to natural persons and secured by real property located in New Jersey on which there is erected or to be erected a structure that services as the primary residence of the borrower and contains one to six dwelling units, a portion of which may be used for nonresidential purposes, in the making of which the lender relies primarily upon the value of the mortgaged property. The mortgage loan must be obtained before the date on which the borrower enters federal active duty.
The deferment generally does not affect payments to or from the escrow account for property taxes, special assessments, mortgage insurance and hazard insurance. However, payments to or from the escrow account for real estate and personal property taxes owned by the borrower may need to be deferred if the borrower obtained deferment under a different New Jersey statute. Under that statute, which was amended by the Bill, property tax deferment may be available under certain circumstances to certain borrowers deployed for active service in time of war.