Watson Coleman Anti-Foreclosure Bill Clears Assembly Panel

Assembly Democrats News Release

PolitickerNJ — Thursday, June 5, 2008

By teel

Measure Would Protect Homeowners, Neighborhoods At-Risk By Preventing Abusive and Dangerous Practices By Lenders & Loan Services

(TRENTON) - The Assembly Housing and Local Government Committee today released legislation Assembly Majority Leader Bonnie Watson Coleman sponsored to protect New Jersey homeowners who are at-risk of foreclosure and to prevent the issuance of dangerous loan products in the future.

"New Jersey has a responsibility to take action now to protect homeowners who are at-risk of losing the roofs over their heads," said Watson Coleman (D-Mercer). "The housing bubble has burst and we must do all we can to ensure New Jersey homeowners swept up in the flood at foreclosures can keep their heads above water."

Watson Coleman said she crafted the measure in response to the national mortgage crisis that has lead to one in 124 New Jersey households filing for foreclosure. According to RealtyTrac's "United States Foreclosure Market Report," New Jersey had the 13th highest foreclosure rate in the nation last year.

In 2007, roughly 8,000 New Jersey borrowers with subprime mortgages went into foreclosure. Newark, Camden and Edison have been ranked as three of the hardest hit cities in the nation.

"What is most troubling is that we are standing idly by as more and more families go all through the foreclosure process and homes become property of the banks," said Watson Coleman. "Every time a foreclosure happens another family is dislocated and lenders take the hit of another loss."

New Jersey Citizen Action estimates that there will be an additional 13,500 to 16,500 foreclosures this year alone.

The measure (A-2517) – "New Jersey Homeownership Preservation Act" – would impose a $2,000 per loan fee on lenders or loan services each time foreclosure proceedings are initiated for a subprime loan.

The Office of Legislative Services has estimated that these fees would generate between $27 to $33 million in revenue that would be placed in revolving trust fund for foreclosure prevention.

The bill would mandate the fund support anti-foreclosure measures that include:

"Homeowners facing foreclosure need to know that someone is in their corner," said Watson Coleman. "Providing access to credit counselors and foreclosure specialists can ensure families make financial decisions that make sense."

The bill would require creditors seeking to foreclose on subprime loans to offer, at the borrower's request, a six month hold on foreclosure proceedings. This would allow borrowers the opportunity to use mediation services to help negotiate refinancing or short sale options.

In addition, the bill would make lenders or loan services responsible for maintaining properties ifthe property is abandoned by its owner at any point while foreclosure proceedings are pending. Also, lenders or loan services would be liable for any costs incurred by the municipality for nuisance abatement once the notice of intention to foreclose has been filed.

Former homeowners who lose their homes to foreclosure would be permitted to remain in the property as tenants paying fair market rent until the property is acquired by someone who plans to occupy it.

The bill also would bar credit reporting companies from selling lists of "trigger leads" – those people who have recently applied for a mortgage – to other companies. This measure would prevent borrowers from being inundated with letters and phone calls from less-than-legitimate lenders.

New Jersey must do all that we can to protect homeowners from the threat of abusive and dangerous lending and loan practices today and down the road," said Watson Coleman. "We must safeguard New Jersey homeowners from shady lending practices that threaten the quality of life in urban, suburban and rural neighborhoods across the state."

Finally, the measure would require lenders and loan services initiating foreclosure actions on subprime loans to file an initial report and subsequent quarterly reports to the Department of Banking and Insurance on the status of the foreclosure, and the actions taken by the creditor to negotiate a loan workout with the borrower.

The measure was released by a vote 4 – 2 and now heads to the Assembly Appropriations Committee for further consideration.

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