With New Jersey once again leading the nation in foreclosures, a state Senate committee has scheduled a hearing on a package of bills meant to reform the process, helping property owners having trouble meeting their mortgage payments and getting foreclosed homes back on the market more quickly.
The bills on the agenda of the Senate Community and Urban Affairs Committee are part of a bipartisan package that attacks the state’s stubborn foreclosure problem from multiple angles. They were suggested by a special judiciary committee last September.
That report found the court system had reduced the backlog of foreclosure cases significantly and shortened the time it takes to clear these cases, in addition to issuing recommendations for further improvement.
NJ: still tops in foreclosures
New Jersey continues to struggle with a foreclosure problem. After briefly sinking to number two among states with the greatest number of properties in some part of the process — pre-foreclosure, up for auction, or bank-owned — the Garden State was back in the top spot this past December. According to RealtyTrac, one in every 986 homes in the state were in some stage of foreclosure, more than twice the national average of one in 2,526.
In New Jersey, foreclosure is a judicial process that is meant to balance the rights of property owners with those of the banks that hold mortgages and servicers that process payments. The laws and rules governing it include specific timeframes. Some delays in processing foreclosures naturally occur because of the reassigning and transferring of mortgages from one lender to another.
When the mortgage crisis hit in 2008, New Jersey instituted a number of practices to try to keep the process moving while also ensuring fairness. That included mediation, which was very popular and recently resulted in about 40 percent of mediated cases being resolve through loan modification, short sale, or other strategies. The Murphy administration has revised and reinvigorated this program.
Making mediation the law
Codifying that mediation program into law is the purpose of one of the bills in the package. S-1244 would spell out program requirements, including that home owners are notified about it and their eligibility to participate. Property owners would also be able to apply for mediation with their lender. The bill would establish a funding mechanism to keep the program viable, with money coming from a $50 fee on every foreclosure filing and penalties that could be levied against lenders that do not mediate in good faith.
The mediation bill and the other measures are backed by programs like the Housing and Community Development Network of New Jersey because they have the potential to solve some of the issues surrounding foreclosures. Sponsors of the package include Sen. Troy Singleton (D-Burlington), chair of the community and urban affairs committee, and Sen. Steven Oroho (R-Sussex), who was a member of the judiciary committee on foreclosures.
Another important measure, S-3411, would revise the Fair Foreclosure Act, lengthening the time required to file a notice of intent to foreclose to six months, including information about housing counseling and mediation, from at least 30 days before a lender begins legal action to take possession of a home. The goal is to limit the amount of time a property is in pre-foreclosure, so properties are not kept in limbo for long periods. Under the measure, a bank that has not begun legal proceedings within six months has to file a new intention before it can act.
Another part of the package, S-3413, would limit the amount of time a property remains vacant and abandoned, so it’s not a blight on a neighborhood and could more quickly be turned back into needed housing. This bill would expand the definition of what constitutes a vacant and abandoned property, require lenders to take action to foreclose on these properties, and oblige the sheriff to conduct a sale on vacant and abandoned properties within 60 days of a court-determined foreclosure judgment.
Putting foreclosures on the map
The goal of S-3412 is to create a statewide database and interactive map of foreclosed properties, using information submitted by the courts. It would include the block, lot, and location of each property; current owner; and record of foreclosure proceedings. This database could both help public officials better track foreclosures in a given area and assist community developers and the public find properties they might want to buy and convert back into homes. An additional $30 fee would be levied on deeds and lis pendens (formal notice of pending legal action) by county clerks and registrars to pay for the database.
Municipal officials would be able to better ensure that foreclosed properties are maintained under the provisions of S-3415. The bill would require a creditor that begins a foreclosure proceeding on a residence to file with that complaint the name and contact information of the person responsible for property maintenance and code violations. That data would include at least one in-state contact who would be responsible for security and maintenance of the property if it is abandoned.
Other bills in the package would make smaller and more technical changes to laws governing foreclosure. These include rules that would specifically impact liens in condominiums and other planned-development associations; spell out licensing requirements for mortgage lenders, brokers and servicers, and loan originators; and reduce the statute of limitations for residential mortgage foreclosures.