MAYS LANDING — Atlantic County Sheriff Joe O'Donoghue says he wasn't willing to stand by and carry out a New Jersey foreclosure law he believed could strip struggling homeowners of equity they had spent years building in their homes.
Now, about a month after a state appeals court sided with O'Donoghue and other challengers, the sheriff is explaining why he decided to take on the state — and why he believes the case was about far more than the mechanics of a sheriff's sale.
"We had to go to court," O'Donoghue said Thursday during a special WOND broadcast he co-hosted with Atlantic County Clerk Joe Giralo. "Put my foot down. I said, no, this is improper."
"We fought it," he added. "It's a constitutional win."
The dispute centered on New Jersey's Community Wealth Preservation Program, a law enacted in 2024 that changed the way certain residential foreclosure sales are conducted.
One provision gave qualifying nonprofit community development corporations a "right of second refusal" to purchase a foreclosed property at the lender's upset price.
O'Donoghue objected because exercising that right could end competitive bidding — potentially eliminating surplus proceeds that otherwise might go to junior lienholders or back to the former homeowner.
'Who Gets That Equity?'
O'Donoghue illustrated his concern during Thursday's broadcast by describing a case involving a property he said was worth approximately $550,000.
The sheriff said the amount owed on the property was substantially less than its value and questioned what would happen to the homeowner's remaining equity if the property were transferred without competitive bidding.
"Who gets that equity?" O'Donoghue asked.
That question gets to the heart of the legal challenge.
When a foreclosed home is sold through competitive bidding, the sale price can exceed the amount necessary to satisfy the mortgage and other obligations. Any remaining surplus can potentially be claimed by those legally entitled to it, including the former homeowner after other valid claims are satisfied. Atlantic County's own sheriff-sale notices explain that surplus funds remaining after the mortgage debt, costs and expenses are satisfied are deposited with the Superior Court, where those claiming the money may seek payment.
But under the provision challenged by O'Donoghue and others, a qualifying nonprofit could exercise its statutory right to acquire the property at the upset price, stopping further competitive bidding.
The Appellate Division said that could deprive property owners of surplus equity and junior lienholders of potential surplus proceeds.
O'Donoghue Says He Drew a Line
O'Donoghue's involvement was significant because sheriff's offices conduct foreclosure sales.
Faced with implementing a provision he believed violated property owners' constitutional rights, O'Donoghue said he decided he could not simply go along with it.
"We had to go to court," he said Thursday. "Put my foot down."
His position ultimately placed the Atlantic County Sheriff's Office and O'Donoghue among the parties challenging the State of New Jersey.
The case was consolidated with several foreclosure matters presenting the same constitutional question.
A Mercer County judge ruled in August 2025 that the nonprofit provision was unconstitutional as applied. The state appealed.
On July 10, 2026, a three-judge Appellate Division panel upheld that conclusion.
The court found that subsection (g) of the Community Wealth Preservation Program violated the Takings Clauses of the U.S. and New Jersey constitutions as applied because of its effect on homeowners' surplus equity and junior lienholders' potential proceeds.
The appellate opinion is unpublished, meaning it does not constitute binding precedent for other cases, although it is binding on the parties involved.
Losing a Home Doesn't Necessarily Mean Losing Its Equity
The distinction O'Donoghue is emphasizing is an important one.
A homeowner facing foreclosure may lose ownership of a house because the mortgage hasn't been paid. But that doesn't necessarily mean the homeowner has no financial interest remaining in the property.
A simple example illustrates the issue.
If the amount necessary to satisfy a foreclosure is $200,000 but competitive bidders ultimately pay $350,000 for the property, that additional value can produce surplus proceeds after debts, liens and costs are addressed.
O'Donoghue's concern was that allowing a nonprofit to stop bidding and purchase at the upset price could prevent that higher price from ever being established.
The appeals court reached essentially the same constitutional issue, holding that the challenged provision deprived owners of the opportunity to recover surplus equity and junior lienholders of their interests in potential surplus funds.
For O'Donoghue, the question was whether his office should participate in a process he believed could take that value away.
"I said, no, this is improper," he recalled Thursday.
Court Did Not Strike Down Entire Program
The ruling did not invalidate New Jersey's entire Community Wealth Preservation Program.
Other portions of the law remain in effect, including provisions designed to give homeowners and certain other occupants opportunities to purchase foreclosed properties.
Atlantic County's Sheriff's Office continues to operate under the program and publishes specific requirements for homeowners, next of kin and other eligible participants in residential sheriff's sales.
The court fight focused specifically on the nonprofit community development corporation's right of second refusal under subsection (g).
That distinction is important because the case was not a wholesale challenge to New Jersey's effort to help residents remain in foreclosed homes. It was a challenge to one mechanism that O'Donoghue believed went too far by potentially sacrificing an owner's remaining equity.
'It's a Constitutional Win'
Nearly five weeks after the appellate decision, O'Donoghue's comments on WOND provide a more personal explanation for why an Atlantic County sheriff became involved in a constitutional fight with the state in the first place.
His argument is that foreclosure is already devastating enough for a homeowner without unnecessarily losing whatever equity may remain in the property.
And rather than waiting for someone else to challenge the provision, O'Donoghue said he decided his office had an obligation to act.
"We fought it," O'Donoghue said.
His assessment of the result was succinct:
"It's a constitutional win."
About the Author
Karen Johnson
With over 30 years of news experience in major markets like Los Angeles, Denver, and Columbus, Karen now covers our area for South Jersey NewsBeat. She also brings her articulate and conversational news delivery to WOND radio listeners every weekday. Her background includes work with the NBC Radio Network, and she thrives in fast-paced news environments.
