Singleton, Green, DeAngelo, Sumter & Lampitt Bill to
Reduce Foreclosures & Help Families Stay in their Homes Continues
Advancing
Bill Would Create Three-Year Pilot Program to Help
Struggling Homeowners Reduce Mortgage Principal
(TRENTON) – Legislation
Assembly Democrats Troy Singleton, Jerry Green, Wayne DeAngelo, Shavonda Sumter
and Pamela Lampitt sponsored to create a pilot program to assist distressed New
Jersey homeowners stay in their homes and avoid foreclosure was recently
released 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 Appropriations Committee.
