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Foreclosure Prevention

The Princeton Packet / PacketOnline — Tuesday, October 14, 2008


Legislation Assemblywoman Bonnie Watson Coleman sponsored to protect New Jersey homeowners who are at-risk of foreclosure and to prevent the issuance of dangerous loans was released Oct. 7 by the Assembly Budget Committee.

"New Jersey has a responsibility to take action now to protect homeowners who are at-risk of losing the roofs over their heads," said Ms. Watson Coleman, D-Mercer, who crafted the measure in response to the national mortgage crisis.

According to data from the real estate tracking service RealtyTrac, statewide foreclosure filings spiked 49 percent in August compared to last year — almost twice the national rate.

New Jersey reported one foreclosure filing for every 576 households, amounting to 6,475 filings.

RealtyTrac rated Mercer, Sussex and Union counties as among the hardest-hit.

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

The measure (A2517) — 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 million 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 Ms. 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 if the 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.

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 now heads to the Assembly speaker who will decide if and when to post it for a floor vote.

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