Christie Blocks Foreclosed Homes as Affordable Housing

Joe Tyrrell | January 30, 2013 | Housing, More Issues, Politics
Proponents ponder next move in bid to solve housing shortage, foreclosure crisis

Gov. Chris Christie’s latest rejection of legislation to make vacant foreclosed homes available as affordable housing has left a broad coalition of proponents scratching their heads about what to try next to deal with New Jersey’s foreclosure crisis.

In twin vetoes, the governor suggested he would try to divert some federal foreclosure relief funding into Hurricane Sandy aid and would continue to fight to use municipal affordable- housing money to patch holes in the state budget.

Michael Cerra, legislative analyst for the New Jersey League of Municipalities, acknowledged that while the news was not good, he and other advocates are still trying to decipher what the governor’s words mean for future legislation and the state housing market.

“Everyone knows that foreclosure is a major issue, an issue for municipalities,” Cerra said. “We’re still suffering the effects of a real-estate downturn,” that has left New Jersey with the nation’s second-highest foreclosure rate after Florida.

The league was part of an unusually broad coalition of housing and business groups that supported one of the measures rejected by the governor on Monday, S2157, the Residential Foreclosure Transformation Act. Christie rejected a previous version of the bill, which aimed to help municipalities and community groups turn vacant foreclosed properties into affordable housing.

This time, Christie classified his new veto of RFTA as “conditional,” allowing for legislative changes.

But state Sen. Raymond Lesniak (D-Union), a principal sponsor, called the veto “absolute” because the governor’s conditions “don’t make any sense.”

“Whoever wrote that veto message did not understand the legislation or the federal program,” Lesniak said.
Proponents said they were particularly confused because Christie mistakenly used similar language to conditionally veto another Lesniak bill, S2202. While also related to foreclosure, that bill addressed a federally funded program, not state housing policy.

That bill, S2202, directed the state Housing and Mortgage Finance Agency to show more flexibility in spending $300.5 million in federal aid, making sure it went for the intended purpose of helping struggling homeowners keep their properties.

As one of the states hardest hit by high unemployment and a high foreclosure rate, New Jersey received the funds from the U.S. Department of the Treasury. The program, launched in 2010, has succeeded in some of the target states and has been augmented to a total of $7.3 billion.

New Jersey’s program, called HomeKeeper, lagged behind those in other states, approving only 56 loans in 2011. In October 2012, Community Affairs Commissioner Richard Constable 3d told a legislative hearing that he had replaced program managers and relaxed loan criteria.

A U.S. Treasury Department report found that through the third quarter of 2012, New Jersey had spent $9.6 million of the money on assistance and just under $7 million on administration, outreach and counseling. Cumulatively, the eligible states spent $742 million on assistance and just under $200 million on the other categories.

S2202 would have required HomeKeeper to use $50 million of the money toward principal reductions of mortgages. In conditionally vetoing that bill, Christie said HMFA “will use the federal funds to create other foreclosure prevention programs” such as mortgage modifications.

But the governor also suggested spending the foreclosure money on people “in arrears to a temporary hardship other than un- or under-employment,” key criteria for the federal aid, “such as recovering from a natural disaster.”

“People were losing their homes before Hurricane Sandy,” said Staci Berger, policy and advocacy director of the Housing and Community Development Network of New Jersey. “Foreclosure is an ongoing crisis in New Jersey, and we’ve yet to see the governor bring the kind of fire-and-brimstone approach to solving it that Chris Christie brings to other issues.”

The state Department of Community Affairs did not respond to questions about any new programs or state resources committed to fighting foreclosure.

“The veto message for the Residential Foreclosure Transformation Act also refers to the federal aid, but mixes that up with the HomeKeeper program,” Lesniak said. “It’s incomprehensible.”

In his RTFA veto, Christie suggested the HomeKeeper funds could also take the place of that initiative, Lesniak said.

But under federal rules, “that money can’t be used to move people into vacant homes,” the purpose of the RTFA program, he said.

The RTFA bill aimed to help New Jersey reduce its oversupply of vacant or abandoned properties, Lesniak said. Foreclosed homes, or those abandoned without a foreclosure ever completed, dot neighborhoods in communities around the state, he said.

“These aren’t homes with people in them, trying to avoid foreclosure,” Lesniak said. “These vacant properties are a drain on neighborhoods, a drain on property values, a drain on municipalities, a drain on the state housing market.”

Despite the harm to municipalities, Christie could have another reason for vetoing the measure, according to Cerra. The RTFA legislation would have allowed municipalities to voluntarily opt into the housing transformation program, he said.

Operating through the HMFA board, the towns would have been able to transfer their affordable housing accounts, accumulated from developer contributions, to make over the vacant units. But the governor is trying to take those funds, and approving the legislation might have made that seizure more difficult.

“That was sort of the undercard Monday before the state Supreme Court” hearing on the governor’s attempts to abolish the state Coalition on Affordable Housing, Cerra said.

A state appellate court ruled against Christie, but that has meant uncertainty for municipalities over the fate of their affordable- housing funds. State Treasurer Andrew Sidamon-Eristoff wants to use the money to patch holes in the state budget.

“We take the position that those are local funds, collected locally and should be used for local purposes,” Cerra said.
Christie’s RTFA veto makes a cryptic reference to the bill relying on “unavailable and, in some cases unidentified, state funding sources.” Cerra said he is unsure what that means, except that “the thought occurred to me that it could be the affordable housing funds.”

With these separate battles bleeding over into each other, Lesniak said he does not know if Democratic legislators have another move to make to reduce the number of foreclosures.

“Almost everybody recognizes that foreclosure is a huge drag on our state’s economy,” with one big exception, Lesniak said.

“It’s virtually impossible to get anything done… when the governor refuses to acknowledge the problem,” he said.
“We supported this legislation, but I don’t think anyone was surprised by the veto,” Cerra said. “We could see the handwriting on the wall.”

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