Foreclosure Prevention
(Also See: Insurance, Banking and Community Reinvestment Campaign and Auto Insurance Rates Campaign)
Tenants Rights During Foreclosure
Through our loan counseling services and community financial education outreach, New Jersey Citizen Action became aware of tenants being illegally forced out of their homes when living in properties facing foreclosure. Along with Legal Services of New Jersey and the New Jersey Tenants Rights Organization, NJCA brought tenant eviction issues to the attention of New Jersey Public Advocate and the New Jersey Department of Banking and Insurance.
The New Jersey Anti-Eviction Act protects tenants even when the property where they live is in foreclosure or has been foreclosed. The law protects tenants against eviction as long as they pay the rent, respect the peace and quiet of their neighbors, and avoid willful or grossly negligent damage to the property. The Act does not apply to tenants of owner-occupied homes with two or fewer rental units.
In some cases, tenants are offered "cash for keys" agreements, where they are given money to turn in their keys and move out, but the offer does not mention that they are also free to stay. In other cases, they are just told they have to get out.
The Public Advocate wants to hear from any tenants who have received notification that they must vacate their apartments due to a foreclosure. Call 609-826-5070 to learn about your rights and get appropriate referrals. Eligible low-income tenants threatened with illegal evictions can call the LSNJ hotline directly at 888-576-5529.
"As Citizen Action continues to be inundated with homeowners who are facing foreclosure, we are discovering that renters who occupy some of these homes are unaware of their rights as tenants and are being pressured to move out. Public education and strict enforcement of the law is essential to preventing more people from losing their homes," said Phyllis Salowe-Kaye, Executive Director of NJ Citizen Action.
For more information, see the Media Release from the New Jersey Public Advocate, Commissioner of Banking and Insurance: "Tenants In Foreclosed Properties Have Rights — Cannot Be Evicted Due To Foreclosure Under NJ Law."
CRA Is Not the Problem! Predatory Lending Is!
Repeatedly — in print, on the airwaves and online — the federal Community Reinvestment Act has become a target of blame both nationally and here in New Jersey. New Jersey Citizen Action and The Housing and Community Development Network of NJ, who have negotiated approximately $18 billion in CRA investments in New Jersey over the next three years will not remain silent while a good law responsible for a great deal of positive development in lower income communities is outrageously vilified.
"The CRA is not only responsible for good mortgages," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. "Under the law, banks have offered discounted home improvement loans, construction and permanent financing, small business loans targeting women and minorities, and other investments in community and economic development. Many of these investments would not have happened otherwise."
"Certain people are trying to blame CRA for the current financial crisis," said Paige Carlson Heim, the Network's managing director. "That is patently false. Mortgages originating from banks under CRA are among the soundest in the nation."
CRA is a federal law that imposes an affirmative obligation on banks to serve the credit needs of low- and moderate-income communities and to take steps to provide equal access to responsible financial products and services to traditionally underserved populations. The law was created in 1977 to counteract lending discrimination that restricted credit for low-income, minority and urban communities. Often cited as a positive agent for change, the CRA has lately come under attack. Legislators and others are claiming that the federal government — through the CRA — has forced banks to make subprime loans to people who were bad risks. Therefore, they say, CRA is responsible for all the toxic paper that is now poisoning the entire global financial system.
This is simply not true. Unregulated, unchecked predatory lending is the problem, not CRA. According to extensive documentation, including reports by governmental agencies, non-profits and research organizations, the vast majority of high-cost, subprime loans were originated by independent mortgage and finance companies — lenders not covered by the CRA. Banks that make below-market mortgage loans under CRA agreements, negotiated with groups like NJCA and the Network, provide these loans only to appropriately qualified homebuyers who have successfully completed home ownership and credit counseling classes and whose incomes have been verified. These are some of the safest loans for banks because of the CRA requirements and because advocacy groups like NJCA and the Network monitor their lending performance.
"Over the last 13 years, 12,000 NJCA clients have closed on 30-year fixed, below market-rate mortgages, with no points or PMI, using CRA mortgages negotiated with participating banks," Salowe-Kaye said. "All clients receive one-on-one counseling, pre- and post-mortgage, at one of our nine HUD-certified offices throughout the state. According to the banks with whom we partner, our default record is almost nonexistent."
As stated by CFED, the national nonprofit dedicated to expanding economic opportunity to all Americans, the CRA has an impressive track record of providing affordable, sustainable and profitable loans in underserved communities, and that those loans have a consistently low default rate.
"Banks under CRA must follow strict underwriting standards that ensure that the borrower understands and can afford the loan, and that disallow and penalize the unfair lending practices that caused the current mess," Carlson Heim said.
NJCA and The Network agree with CFED's analyses that the subprime crisis is a result of risky and complex lending and poor or absent regulation. Lenders approved risky adjustable-rate mortgages, often without considering whether borrowers could afford them; investors bought them in securitized form perhaps without understanding the risk; and regulators did not step in. The worst offenders, the independent mortgage companies, were never subject to CRA or any federal regulator for that matter. In short, CRA didn't make them lend; profit motive did.
NJCA and our allies will continue to defend the CRA, and to push for assistance to those families and communities threatened by the subprime foreclosure crisis. On October 6, 2008, the Assembly Budget Committee approved the New Jersey Home Ownership Preservation Act (A-2517/ S.1599), clearing the way for a vote on the measure before the full chamber. Thanks and congratulations to all of the members and friends who communicated their support to Assembly committee representatives! We will need to keep the pressure on our lawmakers and Governor Corzine to enact the relief the state needs. New Jersey's families deserve quick and decisive action to stem the threat to homes, neighborhoods and the state's economy. For more information about getting involved in our effort to pass this bill, see the articles on this page, or email Phyllis Salowe-Kaye, Executive Director of NJ Citizen Action, at phyllis@njcitizenaction.org.
About the Community Reinvestment Act (CRA)
The Community Reinvestment Act (CRA) is a federal law that requires banks to invest money into all areas where they take deposits. This law was designed to eliminate "redlining," the practice of not lending or investing in an area because of its income level or minority population.
NJCA and the NJCA Education Fund (NJCA's research and education arm) have mobilized community groups and local activists to negotiate Community Reinvestment Act Agreements with almost all of the largest and some of the smallest banks in New Jersey. We have CRA Agreements totaling over $8 billion in commitments for below market rate mortgages, discounted home improvement loans, construction and permanent financing for non-profit affordable housing developers, and small business loans for women and minority owned businesses.
NJCA’s CRA Agreements provide:
- Below market rate mortgages and grants for down payment and closing costs assistance to low and moderate income first time homebuyers
- Discounted home improvement loans to tenants and homeowners
- Construction and permanent financing to non-profit affordable housing developers
- Small business loans to women and minority owned businesses
- Grants to community and economic development organizations
Ongoing analysis by NJCA shows that many banks still do not lend to low and moderate income or minority applicants at the same level as high income, non-minority applicants. Some banks still do not offer competitive and affordable loans. Some members of Congress have tried to weaken the Community Reinvestment Act.
As a result, NJCA needs your help! Support our CRA Campaign:
- Write a letter to a bank that does not have an Agreement with NJCA
- Participate in informational picketing of a bank that does not have a CRA Agreement
- Write a letter to your Representative or Senator, asking him or her to vote in support of CRA
- Monitor banks in your area (we can send you special information about this)
How NJCA Uses CRA to Help Working Families
Our free, one-on-one Mortgage and Credit Counseling Service helps low and moderate income first time homebuyers deal with budgeting and credit repair in order to qualify for one of the special mortgages offered by banks who have Agreements with NJCA.
We also provide a Home Improvement Loan Counseling Service to help homeowners review contracts, research contractors and obtain affordable financing for home improvement projects.
NJCA holds Women’s Housing Initiatives statewide to encourage women to use loan counseling to achieve the dream of homeownership. We provide marketing and outreach services to increase the communities’ awareness of the loans in the CRA Agreements.
Protect Yourself from Predatory Lending
Beware Before You Borrow: Protecting Your American Dream
For many people, homeownership is a major part of the American dream. In fact, your house is likely to be your single greatest asset. Unfortunately for homeowners, predatory lenders are on the prowl, targeting unsuspecting New Jersey consumers and often forcing them into high cost loans that could lead to foreclosure. In order to protect your dream, there are some important things you need to know, whether you are buying a house for the first time, refinancing your mortgage, or simply making improvements or repairs on your home.
What is the difference between subprime and predatory lenders?
Subprime lenders make loans to borrowers who have a less than perfect credit history. As a result, they charge higher rates and fees than banks (conventional lenders) to offset borrowers' credit problems. Predatory lenders, however, systematically target individuals who are least able to pay back loans and who are most vulnerable to the abusive lending tactics listed below.
What are some common predatory lending practices?
- Charging borrowers high loan fees, points, or other charges upfront (padding)
- Selling borrowers costly and unnecessary insurance policies upfront ("packing") – for example, single premium credit life insurance,disability insurance,or unemployment insurance
- Charging borrowers outrageous prepayment penalties
- Forcing borrowers to make a large payment midway or at the end of the loan ("balloon" payments)
- Charging high interest rates
- Repeatedly refinancing loans ("flipping"), with no benefit to the borrower
- Using home improvement scams to lure borrowers into bad loans (steering)
Who do predatory lenders target?
Although anyone can be a victim of abusive lending practices, research throughout the country has shown that minorities, seniors and other low income groups are typically targeted by lending predators.
What are home improvement scams?
Although the majority of home improvement contractors are honest people who provide homeowners with important services at fair prices, there are some contractors who are deceitful. In most home improvement scams, these contractors will overcharge consumers for work, urge them to have unnecessary repairs done, perform work that is shabby and below standard, and in some cases, will steer unsuspecting homeowners to a high-priced and often predatory lender to finance the improvements.
Important Do's and Don'ts for Homebuyers
DON'T:
- Don't deal with door-to-door or telephone solicitors for home mortgage loans or home improvement contracts.
- Don't use a lender or contractor who will not provide a written contract specifying all costs.
- Don't deal with any unlicensed lenders or contractors.
- Don't sign any forms or papers with blank lines or spaces.
- Don't allow yourself to be pressured into signing anything.
- Don't believe anyone who says you have no other options.
- Don't accept a promise that isn't in writing.
DO:
- Do make sure that the lender or contractor is licensed and check with the New Jersey Department of Banking (609-984-2777) or the Division of Consumer Affairs (1-800-242-5846) to see if any complaints have been filed against the lender or contractor.
- Do ask the contractor for references.
- Do shop around for the best offer.
- Do keep careful records and get copies of everything, making sure the lender signs and dates all papers.
- Do read all documents carefully and pay special attention to interest rates, fees, points, and terms and conditions of the loan. If you do not understand something, ask for an explanation--you are paying for these services.
- Do ask the lender to provide you with a "Notice of Recission," also known as a "Notice of Right to Cancel" (within 3 days)
- Do ask if you qualify for a less expensive loan before accepting a subprime mortgage product.
- Do beware of offers of debt consolidation—if lenders offer to pay off your credit card or medical bills with a home equity loan, you could lose your home if you don't make the payments.
- Do make sure that you can afford to repay your loan. Even if the lender says you qualify for the loan, it does not mean that you can afford the monthly payments.
- Do make sure that your contractor gives you a start date and an expected completion date in writing.
- Do get pre-loan counseling from a reputable loan counseling office.
Contact NJCA if you have any questions. Always remember, if the deal sounds too good to be true, it probably is!
Are You the Victim of a Loan Scam?
We hold informational meetings for individuals who feel that they may be victims of predatory lending. At NJCA's informational meetings about predatory lending, you will receive information on the following:
- Individual loan counseling to repair your credit and help you prepare for refinancing in order to lower your monthly mortgage payment;
- Information on NJCA's current negotiations with major New Jersey banks, Fannie Mae, the State of New Jersey, and various municipalities in the hopes of possibly creating a grant pool of funds that would be available to homeowners to make the necessary repairs on their homes;
- Information on how to contact state agencies that are looking into the dealings of lenders who engage in abusive lending practices;
- Information on proposed legislation that would prohibit specific predatory lending practices, and what you can do to help stop predatory lending;
- Potential legal strategies available for victims of predatory lending (although victims should be mindful that there may be a statute of limitations preventing them from pursuing legal action).
If you are facing immediate foreclosure, contact NJCA's free loan counseling service for crisis counseling.