The Star-Ledger

Bill Aims To Deter Foreclosures And Prevent High-Cost Loans

The Star-Ledger — Wednesday, March 12, 2008

Star-Ledger Staff

With a garbage-strewn front lawn, a roof charcoaled black by fire and gaping holes where the windows and doors used to be, the house at 95 Ellis Ave. in Irvington has one of those unfortunate urban histories.

It started down the path to foreclosure in 2005, went vacant and, according to neighbors, was quickly broken into by drug-ad dicted squatters who set it ablaze.

And now it stands (barely), awaiting a wrecking ball and re minding anyone who walks by exactly what neglect looks like.

"It's an eyesore," said Melvin Torres, 28, who lives just down the street in a well-kept duplex owned by his grandfather. "It brings down the whole neighborhood."

It's the kind of blight the New Jersey Homeownership Preservation Act, introduced yesterday in Trenton by Sen. Ronald L. Rice (D- Essex) and Assemblywoman Bonnie Watson-Coleman (D- Essex), would try to prevent.

The proposal is the first legislative effort to address a broadening foreclosure problem that has housing advocates – particularly those in urban areas – on edge as adjustable rate loans signed during the peak of the subprime mortgage feeding frenzy begin to re-set to higher rates, potentially threatening thousands of New Jersey families with foreclosure.

"Foreclosures harm not only an individual family, but also neighborhoods, communities and this state as a whole," said Cornell Brooks, executive director of the New Jersey Institute for Social Justice, which worked with New Jersey Citizen Action and the Housing and Community Development Network of New Jersey to create the legislation.

The bill would establish a $2,000 fee, paid by lenders or loan servicers when they initiate foreclosure proceedings on high-cost loans, which include most subprime loans.

The resulting fund, which the bill's crafters expect to be in the neighborhood of $30 million with roughly 15,000 loans expected to go into foreclosure this year, would provide counseling and education for those in foreclosure, emergency foreclosure prevention assistance and also support nonprofit groups looking to buy foreclosed properties and put them to productive use.

The bill's advocates hope the fee will also deter lenders from making bad loans to begin with. Data from the Federal Reserve Bank of New York, the arm of the Federal Reserve that serves New Jersey, indicate that nearly 30 percent of subprime adjustable rate mort gages in New Jersey are either in foreclosure or heading in that direction.

"It's impossible to buy a toaster that has a one in five chance of catching fire and burning your house down," said Phyllis Salowe- Kaye, executive director of New Jersey Citizen Action. "But it is possible to get a mortgage that has a one in five chance of putting your family out in the street."

The bill would allow homeown ers to stay in their houses as renters during the course of foreclosure proceedings, and gives them the right to request a 6-month grace period to work out deals with their lenders to avoid foreclosure. The foreclosure process may begin when borrowers are 90 days late on their payments.

It would also shift responsibility for the upkeep and maintenance of homes in the foreclosure process – which can sometimes drag on for a year or more – to the lender or loan servicer.

"We're going to make sure we start to hold lenders and loan servicers accountable for what happens when a house goes vacant," Rice said.

Gary Trabachino, a real estate broker from Monmouth County, is trying to sell the house at 95 Ellis Avenue on behalf of the owner, Vera Romain, a Queens resident. Trabachino said Romain bought the house as an investment and that not long after foreclosure proceedings began, it burned down – making it impossible for Romain to avoid foreclosure by selling it. Trabachino said all efforts to contact the lender and negotiate a settlement failed.

"I have to walk by it all the time," said Chidinma Okaro, 27, a nursing student who has relatives on the block. "It makes you feel terrible."

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