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Singleton, Green, DeAngelo, Sumter & Lampitt Bill to Reduce Foreclosures, Help Families Stay in their Homes Advanced by Assembly Panel
Bill Would Create Three-Year Pilot Program to Help Struggling Homeowners Reduce Mortgage Principal(TRENTON) - Legislation sponsored by Assembly Democrats Troy Singleton, Jerry Green, Wayne DeAngelo, Shavonda Sumter and Pamela Lampitt to create a pilot program to help distressed New Jersey homeowners stay in their homes and avoid foreclosure was released Thursday by an Assembly panel.
"Behind every financially-troubled home is a family working feverishly to stay afloat," said Singleton (D-Burlington). "This pilot program would help these homeowners be able to afford to stay in their homes without encouraging homeowners who are current on their mortgages to default, reducing the foreclosures and short sales that are stifling the recovery of the housing sector."
The bill (A-955) would establish the "Mortgage Assistance Pilot Program" in the New Jersey Housing and Mortgage Finance Agency (NJ HMFA). The three-year pilot program would allow homeowners, who have negative home equity and who are in default on an agency owned mortgage, to lower their principal balances by transferring shares of equity in the mortgaged property to the agency.
The sponsors noted that New Jersey's foreclosure inventory is still the second highest in the nation, and we are one of the few states in the nation where the foreclosure percentage rose over the past year.
"We have the second highest foreclosure inventory in the country, and according to some experts, we might be on our way to taking the lead," said Green (D-Middlesex/Somerset/Union). "We cannot remain stuck while other states continue to rebound from the housing crisis that crippled our economy. This program can help stem the tide of foreclosures and jumpstart our economy."
"The goal of this pilot program is to help homeowners afford to stay in their homes while discouraging distressed homeowners, who are still current on their mortgages, from defaulting," said DeAngelo (D-Mercer/Middlesex). "If we can reduce foreclosures and short sales, we can help eliminate the factors that are stifling the recovery of our housing sector."
"It's time to work together to help distressed families and revive our economy," said Sumter (D-Bergen/Passaic). "We can no longer afford to sit back and hope the market resuscitates itself. Other states are moving forward and recovering at a far quicker pace than New Jersey."
"In addition to having one of the highest foreclosure rates in the nation, New Jersey also has the distinction of registering one of the nation's longest foreclosure timelines," said Lampitt (D-Camden/Burlington). "This adds insult to injury when faced with the nightmare of losing one's home. This pilot program could significantly curb that possibility for many New Jersey homeowners."
The bill would help ease the state's housing crisis by allowing someone whose property value has plummeted below what they owe on their mortgage to have their principal lowered to an amount more reflective of current market realities. If approved, the remaining principal owed on the mortgage could be reduced by as much as 30 percent, and the interest rate could be reset to lower existing rates.
In exchange, the homeowner must convey an equity share in the property to the HMFA equal to the percentage of the principal reduction. That would not have to be paid until the property is eventually resold or over a 10-year period starting after the restructured mortgage is paid off. A homeowner who qualifies for the pilot program would be required to remain the owner of the property for at least five years in order to qualify for the benefits. However, if a homeowner sells the property in less than five years, an additional five percent of the sales price would be forfeited to the HMFA.
The agreements under the pilot program would only be available for a period of three years after the date of enactment to allow these agreements to be studied for efficacy. The Department of the Treasury, in consultation with HMFA, would be required to study whether HMFA has minimized its losses and reduced foreclosures and short sales through the pilot program and to submit a report with its findings and recommendations to the governor and the Legislature.
Properties subject to a lien or a government tax exemption may be subject to certain restrictions.
The bill was released by the Assembly Housing and Community Development Committee.
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