Corzine Acts to Stem Foreclosures

TRENTON — To reduce foreclosures and further assist New Jersey homeowners at risk of losing their homes, Gov. Jon S. Corzine Friday, Jan. 9 signed the Mortgage Stabilization and Relief Act into law.
According to a release, the legislation, (S-1599/A3506), which is another component of the Governor’s Economic Assistance and Recovery Plan, establishes the Mortgage Stabilization Program and the Housing Assistance and Recovery Program. It also imposes additional requirements on lenders foreclosing on mortgages. The New Jersey Housing and Mortgage Finance Agency (HMFA) will be responsible for the administration of the two new programs.
“The magnitude of the foreclosure crisis has made many New Jerseyans feel that maintaining their dream of homeownership is beyond their control. It shouldn’t be,” said Corzine in a release. “The deep recession has caused some New Jerseyans to lose their jobs and their ability to pay their mortgages, creating the all-too-inevitable march toward foreclosure.
“We must have options for the sake of stabilizing the entire financial system as well as individual homeowners. The programs established through this bill signing, build upon the actions we have taken in partnership with the Legislature and reaffirm our commitment to keeping homeowners and their families in their homes where they belong.”
Through the Mortgage Stabilization Program, HMFA will promote modifying or refinancing of first mortgage loans in imminent danger of foreclosure to qualified homeowners by offering non-amortizing (no monthly payment) second mortgage loans.
The State will provide a mortgage stabilization loan of up to $25,000 to match the lender’s contribution in an effort to bring the mortgage payment down to an amount that the borrower can afford. Both the State’s and lender’s assistance loans will be repaid by the homeowner upon sale of the property.
To qualify for assistance, a homeowner’s household income may not exceed 120 percent of the area median household income or the HMFA’s Mortgage Program income limits, which vary by county, but are as high as $135,380. The lender must agree to write the mortgage down to the current value of the home. Homeowners who accept program assistance are required to participate in agency approved household budget counseling sessions. Funding for the Mortgage Stabilization Program is appropriated at $25 million through Long Term Obligation and Capital Expenditure Fund.
A second program, the Housing Assistance and Recovery Program (HARP), will help homeowners who face imminent foreclosure stay in their home while paying affordable rent until the homeowner is able to buy back the property. HMFA will provide financial support through the Housing Assistance and Recovery Program Support Fund to certain nonprofit and public entities to execute lease-purchase agreements with existing homeowners who meet program requirements. $15 million from the Long Term Obligation and Capital Expenditure Fund is appropriated for the program.
Following separate legislation that the Governor signed last month, the Administrative Office of the Courts will provide mediation services between the homeowner and the creditor to assist the parties with entering into an agreement that allows the borrower to remain in the home with an affordable monthly mortgage payment.
Other new requirements will prohibit consumer reporting agencies from selling credit inquiries from consumer mortgage loan applications to third party entities. It does not apply to third parties holding an existing mortgage loan on a property.
The legislation also protects neighborhoods by requiring creditors who initiate foreclosure proceedings to notify municipalities where the foreclosed property is located. As a result, municipalities now have recourse against those creditors who fail to comply. In addition, the legislation supports a six-month forbearance period prohibiting creditors from taking steps to remove the borrower/homeowner from a property.