Town hall is often the first port of call when residents face unforeseen hardships. The recent disruptions in the housing finance market have proven no different, and municipalities throughout the state are seeing their residents shaken by rising foreclosure rates resulting from a variety of poor lending practices and the downturn in the real estate market.
According to a report released in April by the Pew Charitable Trusts, one in 37 homeowners in New Jersey is projected to face foreclosure, primarily in the next two years, as a result of subprime loans made in 2005 and 2006. The accumulated cost to the state and local tax base could be almost $20 billion.1 Foreclosures have a ripple effect on the economy in a myriad of ways: from the homeowner, to the neighborhood, to the municipality and ultimately, to the state. With the foreclosure crisis leaving no one unscathed, there has never been a more important time for the state and its municipalities to work together to save our homes, our neighborhoods and our state.
The New Jersey Housing and Mortgage Finance Agency, in partnership with the national nonprofit organization NeighborWorks® America and participating lenders and housing counseling agencies, is working to help those of us who may be in danger of losing our homes to foreclosure.
Homeownership Preservation Refinance Program Last year, the Housing and Mortgage Finance Agency (HMFA) launched the Homeownership Preservation Refinance Program (HPRP) to provide an affordable financing alternative to borrowers whose current mortgage is no longer suitable for their financial situation. HPRP is designed to assist borrowers with hardships caused by rate resets on adjustable rate mortgage (ARM) loans or other non-traditional loan products. HPRP is a 30- or 40-year loan fixed at a low interest rate for the life of the loan. The program provides closing cost assistance and one-on-one counseling and is available to families earning up to 140 percent of the area median income. The maximum allowable incomes range from $113,680 to $134,120, depending on where you live.
The maximum mortgage limits also vary depending on where you live, as reflected in the following chart:
Maximum Mortgage Limits
COUNTIES 1 - FAMILY 2 - FAMILY
Atlantic $382,500 $430,815
Bergen $429,619 $550,005
Burlington $320,625 $361,125
Camden $320,625 $361,125
Cape May $429,619 $503,040
Cumberland $364,500 $410,542
Essex $429,619 $550,005
Gloucester $320,625 $361,125
Hudson $429,619 $550,005
Hunterdon $429,619 $550,005
Mercer $395,595 $445,563
Middlesex $429,619 $550,005
Monmouth $429,619 $550,005
Morris $429,619 $550,005
Ocean $429,619 $550,005
Passaic $429,619 $550,005
Salem $320,625 $361,125
Somerset $429,619 $550,005
Sussex $429,619 $550,005
Union $429,619 $550,005
Warren $332,465 $413,329
Borrowers, who have experienced a financial hardship because their mortgage payment has increased due to rate reset or other loan terms, or who have been denied a mortgage modification, may be eligible for the program. HPRP does not specifically rely on FICO credit scores so it is very important for borrowers to check with the specifics of the program to see if they are eligible. The program does require that the property refinanced with the HPRP loan be occupied as the borrower’s primary residence and the borrower must maintain occupancy for the life of the loan. For more details, please call 1-800-NJ HOUSE or visit us online at www.state.nj.us/dca/hmfa/.
Foreclosure Prevention and Asset Preservation Program In an effort to reach more homeowners, this year HMFA also developed a more comprehensive approach by creating the Foreclosure Prevention and Asset Preservation Program (HPAP). This program provides in-depth credit and default mitigation counseling to households who do not qualify for the Homeownership Preservation Refinance Program or other refinancing products. HMFA partnered with NeighborWorks® America to provide extensive foreclosure prevention and default mitigation counseling to 12 New Jersey counseling agencies certified by the U.S. Department of Housing and Urban Development.
Homeowners who may be in danger of losing their homes to foreclosure are encouraged to seek help immediately by contacting either the national foreclosure counseling hotline at 1-888-995-HOPE or one of the counseling agencies listed in this article. Assistance is confidential and provided by trained counselors free of charge. The most important message that must reach New Jerseyans who are in need of assistance is that help is available.
Counseling Agencies Partnering
with HMFA to Provide Foreclosure Prevention Assistance
Affordable Homes of Millville Ecumenical, Inc. (A-HOME)—400 East Main St.,
Millville, NJ 08332
Affordable Housing Alliance of New Jersey—
59 Broad St., Eatontown, NJ 07724
Atlantic Human Resources—1 S. New York Ave., Suite 303, Atlantic City, NJ 08401-8012
Brand New Day—176 First St., P.O. Box 6803, Elizabeth, NJ 07206
Faith Fellowship CDC—2707 Main St., Sayreville, NJ 08872
Isles, Inc.—619 Greenwood Ave.,
Trenton, NJ 08609
Jersey Counseling Housing Development, Inc.—
1840 So. Broadway, Camden, NJ 08104
NJ Citizen Action—744 Broad St.,
Newark, NJ 07102
O.C.E.A.N., Inc.—P.O. Box 1029, 22 Hyers St., Toms River, NJ 08753
Puerto Rican Action Board, Inc., Housing Coalition Unit—90 Jersey Ave., P.O. Box 240
New Brunswick, NJ 08903
Tri-City Peoples Corp.—55 Washington St.
East Orange, NJ 07017
Tri-County Community Action Partnership—
110 Cohansey St., Bridgeton, NJ 08302
Foreclosure Prevention Workshops Many organizations, municipalities, state agencies and elected officials are joining together to host foreclosure prevention workshops throughout the state. HMFA and the New Jersey Department of Banking and Insurance have been conducting informational sessions since late last year in order to reach out to as many affected homeowners as possible. During each session, counseling agencies, legal services organizations, social service providers, lenders and servicers are invited to provide information about foreclosure prevention and to provide one-on-one assistance to homeowners.
Experience has shown that homeowners facing foreclosure are reluctant to seek help, many times out of fear or shame or embarrassment at the thought of losing their homes. The most successful workshops have been supported by local mayors, faith-based organizations and other groups that are known and trusted in the community. If you are interested in hosting a foreclosure prevention workshop in your municipality, please do not hesitate to reach out to HMFA.
Local Initiatives to Combat the Foreclosure Crisis Although a lot of attention has been focused on the federal government’s role in dealing with the foreclosure crisis and in regulating the lending industry, our municipalities are on the front lines. Local governments across the country and in New Jersey are adopting creative and practical initiatives to minimize the impacts of foreclosures and abandoned properties in their communities. While each state is different and the laws that govern the foreclosure process vary, the enormity of this issue requires all of us—states, municipalities and community organizations—to gather our collective resources and maximize the tools that are available to us. The following are some of the ways in which municipalities are working to minimize the effects of foreclosures in their communities.
Establish Creditor Responsibility To Maintain Vacant Properties Property owners must maintain their properties as determined by local codes. In most states, a city abating a code violation or a nuisance could place a priority lien on the property and can collect the costs of the abatement from a property owner’s other assets. According to a recent report released by the Brookings Institute, New Jersey has the strongest state statute in the country with regard to nuisance abatement, permitting municipalities to collect the costs of the nuisance abatement or receivership against any asset of the owner of the property, whether it be an individual property owner, a partnership or other recognized form of business organization.2
In California, for example, cities have passed ordinances holding mortgage lenders responsible for the upkeep on vacant properties. Chula Vista, CA created the Abandoned Residential Property Program, through which mortgage lenders must regularly inspect defaulted properties and take responsibility if the property is vacant. Under the program, the lender must register the property with the city, secure and maintain the property to the neighborhood standard, and hire a local company to inspect the property.3
A different approach has been taken in Buffalo, New York. A city prosecutor and judge, in an attempt to hold someone responsible for the deterioration of foreclosure properties, are holding lenders accountable. When banks ignore summonses for code violations, a judge enters default judgments and fines against them. Those fines give the city a lien that prevents the banks from buying or selling other properties in the area. Because liens can hold up the lenders’ other real estate transactions, Buffalo is requiring the banks to keep foreclosed homes in good condition until a buyer can be found. As an alternative, the prosecutor tries to get lenders to donate properties to community groups or to pay for demolition when houses are beyond repair.
Redeveloping Abandoned Properties County and local governments across the country are taking steps to reduce the barriers to rehabilitating abandoned properties and promoting their reuse for a variety of purposes. The New Jersey Abandoned Property Rehabilitation Act was enacted into law in 2004. The Act offers New Jersey’s municipalities and others a toolkit of new ways to gain control of abandoned properties and restore them to productive use. Such resources include accelerating the foreclosure of abandoned properties, allowing municipalities to take possession and create lists of abandoned properties to make them eligible for special tax sale or spot blight, and permitting the recovery of funds spent by a municipality on the rehabilitation of abandoned properties under nuisance abatement laws.
Some states have also facilitated the creation of land banks to demolish dilapidated structures, redevelop abandoned properties and restore the health of their neighborhoods. In Michigan, the adoption of a new tax foreclosure process led to the creation of the Genesee County Land Bank Authority. Working in collaboration with the Genessee County Treasurer’s Office, the Land Bank Authority prevents tax foreclosure on area homes and brings tax reverted properties back into productive use. Through partnerships with public, private and nonprofit partners, the Land Bank has encouraged reinvestment in more than 4,000 residential, commercial and industrial properties that it has acquired through the tax foreclosure process since its inception in 2002.4
While municipalities throughout New Jersey work every day to provide programs and services that continue to meet the needs of residents, the impact of the foreclosure crisis has brought home the urgent need for the state and its local governments to not only help residents who are facing foreclosure, but also to create sound, long-term policies that will help maintain the stability of our healthy neighborhoods and replenish the vitality of our impacted communities.
For more information about HMFA or its programs, visit us online at www.state.nj.us/dca/hmfa/ or by calling 1-800-NJ-HOUSE.
1 Defaulting on the Dream: States respond
to America’s Foreclosure Crisis, 4/16/08,
The Pew Charitable Trusts.
2 “Tackling the Mortgage Crisis: 10 Action Steps for State Government,” Alan Mallach for the Metropolitan Policy Program at Brookings, May 2008.
3 “Tackling the Mortgage Crisis: 10 Action Steps for State Government,” Alan Mallach for the Metropolitan Policy Program at Brookings, May 2008.
4 Genesee County Land Bank—information available at www.thelandbank.org/default.asp