Measure comes amid growing concerns about the high rate of foreclosures in New Jersey despite millions in unspent federal foreclosure aid by the administration
(TRENTON) – Legislation sponsored by Assembly Speaker Pro Tempore Jerry Green (D- Middlesex/Somerset/Union) to create a temporary program that would allow the state to purchase foreclosed properties for use as affordable housing, while protecting municipalities from having to forfeit funds appropriated for affordable housing received final legislative approval Monday and now heads to the governor’s desk.
“Housing in New Jersey is expensive. New Jersey consistently ranks as one of the most expensive states to live in. Not surprisingly, we also have some of the highest foreclosure rates in the country. With little regard from the administration, it will not get any better,” said Green, who chairs the Assembly Housing and Local Government Committee. “We have a responsibility to ensure there are sufficient affordable housing options for our residents. Foreclosures bring down property values and are magnets for criminal activity. This bill attempts to kill two birds with one stone by taking these properties which can become real nuisances and transforming them into affordable housing.”
The bill, named the “New Jersey Residential Foreclosure Transformation Act”, would create the temporary New Jersey Foreclosure Transformation Program within the New Jersey Housing and Mortgage Finance Agency (HMFA) to buy foreclosed residential properties from institutional lenders for use as affordable housing. The HMFA would be required to cease the program on Dec. 31, 2017.
The bill (A-3413) would empower the HMFA to purchase foreclosed residential property and mortgage assets from institutional lenders in order to produce affordable housing and dedicate it as such for 30 years. The bill would direct the HMFA to enter into contracts or loans, or both, with no more than two experienced, financially sophisticated, community development financial institutions to enhance the ability of the HMFA to fulfill its purpose of producing affordable housing in the state.
The bill comes amid continued concerns that Gov. Christie has failed to help New Jersey homeowners facing foreclosure. New Jersey has the nation’s second highest foreclosure rate, but Christie was slow to spend $300 million in federal foreclosure aid. Earlier this year, the governor vetoed a similar bill to create more affordable housing out of foreclosed properties in the state.
“It’s easy to deny a family affordable housing when you’re living comfortable,” said Green. “Foreclosures in New Jersey are happening at an alarming rate despite a substantial pool of money available to the administration to prevent that from happening. The governor has been too slow to take action, and actually quashed an earlier legislative effort to create more affordable housing out of foreclosed properties, but we will not neglect the issue. Frankly, we can’t afford to.”
The HMFA or, if applicable, one of its contractors, would give the municipality where the property is located the right to consent or withhold consent to the proposed purchase and dedication of the property as affordable housing, as well as the right of first refusal to purchase the property for use as affordable housing. As part of the bill, a municipality could purchase and dedicate eligible property for affordable housing, decline the option to purchase, or instead, authorize the HMFA or its contractors to use monies from the municipality’s affordable housing trust fund to buy the property.
Under the bill, whenever the HMFA, its contractors or a municipality purchases an eligible property using monies deposited in a municipality’s affordable housing trust fund, the municipality would receive two units of credit toward any Council on Affordable Housing obligation to provide affordable housing for each eligible unit of affordable housing dedicated and provided. The bill would also award municipalities additional units of credit, above the actual number of dedicated affordable housing units produced, as an incentive for municipalities to authorize the use of their affordable housing trust fund monies for the purchase of eligible properties for use as affordable housing.
In addition, the bill would establish a mechanism through which a “foreclosure-impacted municipality” – a municipality that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days – can insulate its affordable housing trust funds from the laws that will require the transfer of its trust fund monies to the “New Jersey Affordable Housing Trust Fund.” To do this, the municipality would have to adopt a resolution committing the expenditure of its municipal affordable housing trust fund monies for the production of affordable housing and authorizing the transfer of at least $150,000 of these monies to the HMFA for the HMFA to use to produce affordable housing.
The HMFA would be required to use funds transferred from a foreclosure-impacted municipality to produce affordable housing within that municipality. If the HMFA is unable to use all of the transferred funds within two years of the date of transfer, the HMFA would return the remaining funds to the municipality which would have at least six months from the date the funds are returned to commit the funds in accordance with other provisions of law. During this time period, all municipal trust fund monies designated for the purchase of foreclosed properties would be protected from transfer to the state. A municipality would receive bonus credits, as otherwise provided in the bill, for affordable housing produced by the HMFA or by one of its contractors pursuant to this mechanism.
The bill would also establish the “Foreclosure to Affordable Housing Transformation Fund,” a nonlapsing, revolving fund to serve as the repository for funds appropriated or otherwise made available for the HMFA to fulfill its purposes. The HMFA would administer the fund and would be authorized to transfer into the fund any amounts it has that may be used for the production of affordable housing. The bill authorizes the HMFA to issue bonds to fund the activities of the program. Lastly, the bill would require the HMFA to prepare an annual report about the program for the governor and the Legislature that would include a complete operating and financial statement covering the program’s operations, transactions and holdings during the year. The HMFA would be required to display the annual reports on the agency’s website.
The bill was approved 43-32 by the Assembly on Monday and 22-17 by the Senate in October.