Measure Would Help Revive Stagnant Economy, Increase Home Ownership
By a 45-33-1 vote, the General Assembly on Monday approved a bill sponsored by Assembly Democrats Jerry Green, Troy Singleton, Albert Coutinho, Mila Jasey, John Wisniewski, Annette Quijano and Benjie Wimberly that is aimed at transforming foreclosed properties into affordable housing.
“Abandoned properties are a major problem, particularly in urban areas and as they erode they drag down the value of other properties in the neighborhood,” said Green, Assembly Speaker Pro Tempore (D-Middlesex/Somerset/Union). “This bill provides a practical solution for residents who have limited financial means and are in need of affordable housing, and for communities that are dealing with the blight, reduced property values and illegal activity that is synonymous with vacant properties.”
The bill (A-2168) known as the “New Jersey Residential Foreclosure Transformation Act,” would establish the “New Jersey Foreclosure Relief Corporation” for the purpose of purchasing foreclosed residential properties from institutional lenders and dedicating them for occupancy as affordable housing.
“The residential mortgage foreclosure crisis presents untold problems for families, communities, businesses, and government, with particularly higher concentrations in disadvantaged neighborhoods,” said Singleton (D-Burlington). “When numerous properties in a neighborhood remain vacant for a prolonged period, there is a heightened risk of blight. This innovative proposal would address two of the most pressing problems we face during this economic recovery.”
The sponsors noted that more than 100,000 New Jersey homeowners are dealing with foreclosures, according to reports.
The lawmakers also pointed out that a vast number of foreclosed residential properties are owned by banks and other lenders. Maintaining this excessive inventory of deteriorating homes inhibits the ability of lenders and developers to take action to reinvigorate the economy.
“Despite the many measures we’ve passed over the last few years to help families struggling to pay their mortgages and stay in their homes, current economic realities are still forcing people to default on their mortgages,” said Coutinho (D-Essex). “The silver lining in this economic downturn is that we have a unique opportunity to take advantage of the glut of vacant, foreclosed residential properties and historically low interest rates in order to address one of the most intractable problems New Jersey faces, the creation and preservation of housing for families of limited means.”
Under the bill, the Foreclosure Relief Corporation would be established as a temporary entity within the New Jersey Housing and Mortgage Finance Agency (HMFA), and governed by a seven-member board, with its operations expiring on December 31, 2017.
The bill empowers the corporation 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 crisis not only impacts families, but entire communities,” said Jasey (D-Essex/Morris). “As these homes are foreclosed, they become nuisances for residents, municipalities and law enforcement. All of these factors exacerbate the difficulties governments face in trying to continue to provide vital services to the public. This truly transformative measure would help families attain the American dream, while also providing a shot in the arm to our economy.”
Municipalities would be given the right of first refusal to purchase such properties and dedicate them as affordable housing. A municipality that exercises this right and dedicates the property for affordable housing would receive bonus credits towards its affordable housing obligations.
“Our economy is intrinsically linked to a healthy housing market,” said Wisniewski (D-Middlesex). “Now, four years into the recession, there are many homes that have sat idle for quite a while and deteriorated, making it even harder to reclaim them. We need to pursue creative solutions such as this to reinvigorate our economy and our neighborhoods.”
Whenever a municipality does not exercise an option to purchase an eligible property, the corporation or its contractors may convey the property for occupancy as affordable housing subject to a 30-year deed restriction to another public agency, a community development corporation, a developer, or a qualifying household or the contractors may lease the property for occupancy as affordable housing subject to a 30-year deed restriction.
“This bill gives towns the power and flexibility to reclaim neighborhoods that have been diminished by the housing crisis,” said Quijano (D-Union). “We can’t sit idly by and hope this crisis will resolve itself. We need to be proactive through programs such as this.”
The bill establishes a mechanism through which a “foreclosure-impacted municipality” – one 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.” A foreclosure-impacted municipality can accomplish this by adopting a resolution committing the expenditure of its municipal affordable housing trust fund monies for the purchase of foreclosed properties from the corporation and pledging, and transferring, at least $150,000 of its municipal trust fund monies to the corporation for the corporation to use to produce affordable housing.
“This can be a transformative tool for municipalities sidelined by the housing crisis,” said Wimberly (D-Bergen/Passaic). “By giving them the power to reclaim ailing properties, we can rebuild neighborhoods that have been hit hard by foreclosures.”
If the corporation is unable to use all of the transferred funds within two years of the date of transfer, the remaining funds would be returned to the municipality and the municipality 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 period of time, 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 corporation or by one of its contractors pursuant to this mechanism.
The HMFA would administer the “Foreclosure to Affordable Housing Transformation Fund” and would be authorized to transfer into the fund any amounts it has that may be used for the production of affordable housing. Under the bill, any year in which the proceeds from the additional Realty Transfer Fee required by law exceeds $75 million, the first $10 million above the $75 million collected will be transferred into the foreclosure fund for the purpose of producing affordable housing. The bill provides that amounts deposited in the fund that are derived from federal funding sources or are otherwise dedicated to the production of affordable housing must be used for the production of affordable housing.
The bill was amended during the committee process to limit the authority of the New Jersey Foreclosure Relief Corporation to acquire real property under the bill to short-term purchases, of no more than 60 days, to facilitate prompt conveyance of the property for occupancy as affordable housing.
The corporation would be required to make an annual report of its activities to the Governor and the Legislature, setting forth a complete operating and financial statement covering its operations, transactions, and holdings during the year. The corporation’s books and accounts would be audited at least once in each year by certified public accountants. Upon its expiration, any assets, properties, or funds held by the corporation would transfer to the HMFA.
The m
easure now awaits final legislative approval by the Senate.