ASSEMBLY, No. 2517

STATE OF NEW JERSEY

213th LEGISLATURE

 

INTRODUCED MARCH 13, 2008

 


 

Sponsored by:

Assemblywoman BONNIE WATSON COLEMAN

District 15 (Mercer)

Assemblyman JERRY GREEN

District 22 (Middlesex, Somerset and Union)

Assemblyman MATTHEW W. MILAM

District 1 (Cape May, Atlantic and Cumberland)

Assemblyman NELSON T. ALBANO

District 1 (Cape May, Atlantic and Cumberland)

 

Co-Sponsored by:

Assemblymen Coutinho, L.Smith, Assemblywomen Tucker, Oliver, Assemblymen Vas, Giblin, Assemblywoman Jasey and Assemblyman Ramos

 

 

 

 

SYNOPSIS

     The “New Jersey Homeownership Preservation Act.”

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning foreclosures on residential properties, amending P.L.1974, c.49 and supplementing Title 46 of the Revised Statutes.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1. (New section)  This act shall be known and may be cited as the “New Jersey Homeownership Preservation Act.”

 

     2. (New section)  The Legislature finds and declares that:

     a. Many thousands of New Jersey homeowners are at risk of losing their homes as a result of mortgage foreclosures in the immediate future;

     b. Foreclosures involve the loss of a family’s home, which is often the family’s most valuable financial asset, and foreclosures especially undermine the health and economic vitality of the urban neighborhoods in which a disproportionate share of foreclosures take place;

     c. Foreclosures result in the loss of millions of dollars in assets, not only those of the homeowners who are the victims of foreclosure, but in terms of the property values of homes located in the vicinity of foreclosed properties, as well as millions in additional costs to state and local governments;

     d. Foreclosures, particularly in urban neighborhoods, often result in abandonment of properties, leading to significant costs and lost revenue for local governments, as well as harm to the neighborhoods in which properties are abandoned;

     e. Foreclosures are largely the result of subprime lending practices, which have placed many homeowners in loans that they cannot realistically afford, by using loan features such as low introductory rates, high pre-payment penalties, and failure to require income documentation, all of which increase the risk of default for borrowers;

     f. Many of these foreclosures could be avoided if homeowners had greater access to high-quality, in-person foreclosure prevention counseling, emergency financial assistance, or additional time during which to negotiate loan modifications or obtain refinancing;

     g. There is a compelling public policy need for the State of New Jersey to address these issues, provide the means by which homeowners can obtain counseling, emergency financial assistance, and time to adjust their finances in order to increase their ability to retain their homes, protect local governments and neighborhoods from the negative social, economic, and fiscal consequences of foreclosure and abandonment; and

     h. Beyond the provisions of this act, a concerted effort, including federal action and the provision of additional public and private financial resources, is needed to address this issue in a responsible and effective manner.

 

     3. (New section)  As used in this act:

     “Covered mortgage loan” means a first mortgage loan, other than a reverse mortgage loan, on residential real property, which meets any of the following criteria:

     (1) the loan is a fixed rate mortgage loan with an annual percentage rate which, including all costs charged the borrower amortized over the duration of the comparable Treasury yield at the time of closing, which is at least 300 basis points above the comparable Treasury yield at the time of closing;

     (2) the loan is an adjustable rate mortgage with an introductory rate, and the highest possible interest rate chargeable under the terms of the loan is at least 300 basis points above the comparable Treasury yield at the time or closing;

     (3) the loan contains a pre-payment penalty;

     (4) the total points and fees charged to the borrower at closing exceed four percent of the principal amount of the loan;  or

     (5) the loan is a nontraditional mortgage product, including but not limited to those products set forth in the federal Interagency Guidance on Nontraditional Mortgage Product Risks, and any additional mortgage product or feature thereof that may subsequently be defined as a nontraditional mortgage product by the Department of Banking and Insurance.

     “Creditor” shall have the same meaning as “lender” as set forth in section 3500.2 of title 24, Code of Federal Regulations, except that it shall also include any person required to be licensed under the provisions of the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.), and any entity acting on behalf of the secured creditor named in the debt obligation including, but not limited to, servicers.

     “Department” means the Department of Community Affairs.

     “Introductory rate” means an initial interest rate charged on a covered mortgage loan that remains in effect for no more than three years from the initial date of the loan and which is less than the highest possible interest rate chargeable at any time under the terms of the loan.

     “Mortgage broker” has the same meaning as set forth in section 3500.2 of Title 24 of the Code of Federal Regulations.

     “Points and fees” means:

     (1) all items included in the definition of “finance charge” in sections 226.4(a) and 226.4(b) of title 12, Code of Federal Regulations except interest or the time price differential;

     (2) all items described in Section 226.32(b)(1)(iii) of title 12, Code of Federal Regulations.

     (3) all compensation paid directly or indirectly to a mortgage broker from any source, including a mortgage broker that originates a loan in its own name in a table-funded transaction;

     (4) the cost of all premiums financed by a creditor directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance or any other life or health insurance, or any payments financed by the creditor directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums, including private mortgage insurance or debt cancellation or suspension fees calculated and paid on a monthly basis or through regularly scheduled periodic payments, may not be considered financed by the creditor;

     (5) the maximum prepayment fees and penalties that may be charged or collected by the creditor under the terms of the loan documents; and

     (6) all prepayment fees or penalties that are incurred by the borrower if the covered mortgage loan refinances a previous loan made or currently held by the same creditor or an affiliate of the creditor.

     Points and fees shall not include the following items: taxes, filing fees, recording fees and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing or satisfying a security interest; bona fide and reasonable charges and fees paid to a person other than a creditor or an affiliate of a creditor for the following: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determinations; appraisal fees; fees for inspections performed prior to closing; fees for credit reports; fees for surveys; attorney’s fees; notary fees; escrow charges not otherwise included under paragraph (1); title insurance premiums; and fire and hazard insurance and flood insurance premiums, as long as the conditions in section 226.4(d)(2) of title 12, Code of Federal Regulations are met. For open-end loans, the points and fees shall be calculated by adding the total points and fees known at or before closing, including the maximum prepayment penalties that may be charged or collected under the terms of the loan documents and the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.

     “Qualified counseling entity” means an agency, organization, or other entity approved by the department to provide foreclosure prevention counseling and  related services pursuant to the terms of this act.

     “Residential real property” means property in this State upon which there is located or there is to be located a one to four family story dwelling which is or will be occupied by a borrower as the borrower’s principal dwelling.

     “Servicer” means the person or entity responsible for servicing a mortgage loan, and shall include any person who makes or holds a mortgage loan if such person also services the mortgage loan.

     “Trust fund” means the Foreclosure Prevention Revolving Trust Fund established in section 4 of this act.

 

     4. (New section) a.  There is established, in the Department of Community Affairs, a Foreclosure Prevention Revolving Trust Fund, comprised of monies collected or accruing to the trust fund pursuant to section 8 and 15 of this act, for the purpose of providing:

     (1)  grants to qualified counseling entities for the purpose of maintaining or expanding foreclosure prevention counseling and related activities;

     (2) grants to qualified counseling entities for the purpose of providing emergency foreclosure prevention assistance loans; and

     (3) loans and grants to non-profit entities for the purpose of acquiring mortgage loans or properties from creditors in order to restructure the mortgage loans or restore the properties to productive use.

     b.  The department may utilize up to five percent of the revenues in the trust fund or $500,000 per year, whichever is less, for the purposes of contracting with appropriate qualified vendors, which may be qualified counseling entities, to provide training for foreclosure prevention counselors, and to provide information, outreach, and educational programs for borrowers potentially at risk of foreclosure.

     c. The department shall establish rules and regulations governing the procedures for approval of qualified counseling entities, which shall be based on demonstrated experience in providing counseling to low and moderate income homebuyers and homeowners, and evidence that personnel have received specific training in foreclosure prevention counseling.

 

     5. (New section)  The department shall deposit the monies collected pursuant to sections 8 and 15 of this act into the trust fund, and shall expend monies from the trust fund, subject to any initial expenditures made pursuant to subsection b. of section 4 of this act, in accordance with the following schedule:

     a.  The first $5,000,000 collected during a fiscal year shall be allocated as grants to qualified counseling entities for the purpose of maintaining or expanding their foreclosure prevention counseling and related activities, and any monies collected but not allocated by the end of the fiscal year shall be available for allocation for these grants in the subsequent fiscal year;

     b.  Any amounts collected during a fiscal year, above $5,000,000 and up to $20,000,000, shall be allocated as grants to qualified counseling entities, for the purpose of making emergency foreclosure prevention assistance loans, and any monies collected but not allocated by the end of the fiscal year shall be available for allocation for these grants in the subsequent fiscal year;

     c.  Any amounts collected in excess of $20,000,000 during a fiscal year, shall be allocated, in the form of a loan or grant, to non-profit entities, for the purpose of assisting homeowners in financial distress by restructuring covered mortgage loans acquired from creditors, or restoring the properties acquired from creditors to productive use, and any monies collected but not allocated by the end of the fiscal year shall be available for allocation for these loans or grants in the subsequent fiscal year.

 

     6. (New section)  In allocating a grant to a qualified counseling entity, pursuant to subsection b. of section 5 of this act, the department shall provide for contractual guarantees and procedures by which the department ensures that the qualified counseling entity administers the entity’s loans made to homeowners in accordance with the following requirements.

     a. A qualified counseling entity that receives grant proceeds from the trust fund shall use the grant proceeds to provide emergency foreclosure prevention assistance loans to homeowners in situations in which the entity making the loan finds that:

     (1) the homeowner’s covered home loan is at risk of foreclosure;

     (2) the risk of foreclosure is the product of temporary conditions; and

     (3) the loan, if provided, creates a significant likelihood that the homeowner will be able to avoid foreclosure and retain ownership of the property.

     b.  The purposes for which a qualified counseling entity may provide emergency foreclosure prevention assistance loans may include, but shall not be not limited to:

     (1) paying the costs of a homeowner’s monthly mortgage payment of interest and principal; and

     (2) paying attorney’s fees and other fees and penalties, including prepayment penalties, associated with refinancing or restructuring a homeowner’s mortgage.

     c.  The maximum emergency foreclosure prevention assistance loan to a homeowner shall not exceed $5,000; provided, however, that with written approval of the department, a loan may be made up to a maximum of $10,000.

     d.  All monies disbursed by a qualified counseling entity for emergency foreclosure prevention assistance shall be in the form of a loan to a homeowner that shall be secured by a mortgage on the homeowner’s property, which mortgage shall be subordinate to existing mortgages. The homeowner shall not be required to make any payments during the term of the mortgage, but all amounts due on the mortgage shall be payable from the proceeds of sale at the time that the property is sold, which amounts shall include interest that shall be calculated in accordance with the rate of increase in the housing component of the National Consumer Price Index, New York-Northeastern New Jersey region, but in any event shall not be more than 4 percent per annum.

     e. Loan repayment shall be made by the homeowner to the qualified counseling entity that made the loan, provided, however, that if the entity is no longer active, or no longer providing foreclosure prevention services, repayment shall be made directly to the department, which shall deposit the proceeds into the trust fund.

     f.  A qualified counseling entity which receives repayment from a homeowner pursuant to subsection d. of this section, shall use any monies collected in the same manner and for the same emergency foreclosure prevention assistance purposes as set forth in this section.

     g.  A qualified counseling entity that receives an emergency foreclosure prevention assistance grant from the trust fund shall maintain records and provide reports on the disbursement of those funds as may be required by the department.

 

     7. (New section)  The department shall establish criteria for allocating grants and loans to non-profit entities pursuant to subsection c. of section 5 of this act, which criteria shall include:

     a. Giving priority in making loans or grants to non-profit entities that serve areas with a high incidence of foreclosures and a high risk of foreclosures that result in vacant or abandoned properties; and

     b. Procedures for determining the amount, terms, and conditions of the grant or loan.

 

     8. (New section)  a.  A creditor that issues a notice of intention to foreclose on a covered mortgage loan, pursuant to the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et. seq.), shall simultaneously transmit a certified check in the amount of $2,000 to the department, for deposit into the trust fund.  The creditor shall not add the amount paid to the department to the amount owed to the creditor by the borrower.

     b.  A motion by a creditor seeking a judgment of foreclosure as to a covered mortgage loan, pursuant to R.4:64-1 et seq. of the Rules Governing the Courts of the State of New Jersey, shall not be accepted by the court unless it is accompanied by evidence that the creditor bringing the motion has complied with subsection a. of this section.

     c.  A creditor that notifies a borrower of a covered mortgage loan pursuant to which, under the terms of the mortgage:

     (1) the interest rate on the mortgage is to increase; or

     (2) a mortgage payment is past due,

     shall simultaneously send the borrower notification of the availability of foreclosure prevention counseling available through qualified counseling entities, in such form of notification as the department shall establish.

 

     9. (New section)  a.  A creditor that issues, pursuant to the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.), a notice of intention to foreclose on a covered mortgage loan that contains an introductory rate or a prepayment penalty, upon receipt of a written request by the borrower within 30 days of the borrower’s receipt of the notice of intention to foreclose, shall grant the borrower a six month period of forbearance to pursue a loan workout, loan modification, refinancing, or other alternative.  The six month forbearance period shall commence at the time that the creditor receives the borrower’s request.  During the six month forbearance period, the interest rate on the covered mortgage loan shall not increase and the creditor shall take no further action to pursue foreclosure of the property.

     The notice of intention to foreclose shall contain in a prominent location a statement indicating:

     (1) whether the loan meets the criteria set forth in this section;

     (2) that in the event the loan meets the criteria, the borrower has a right to request a six month forbearance period within 30 days of receipt of the notice; and

     (3) the full address and other contact information to which a request to initiate the six month forbearance period may be sent.

     b. If the borrower ceases to occupy the property at any time subsequent to initiating a period of forbearance under this section, the creditor may notify the court, and upon notification the period of forbearance shall be deemed to have ended.

 

     10. (New section)  a.  A creditor filing a notice of intention to foreclose on a covered mortgage loan, pursuant to the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.), shall file within 30 days of that notice an initial foreclosure report with the Department of Banking and Insurance on a form prescribed by the department by regulation, which shall include but not be limited to:

     (1) the terms of the mortgage, including interest rate, rate adjustments, prepayment fees, negative amortization, and such other terms as the department may specify;

     (2) the date of the mortgage;

     (3) the maker of the mortgage;

     (4) the current holder and servicer of the mortgage, including contact information for a responsible individual employed by the servicer;

     (5) all efforts made by the creditor to negotiate any modifications to the mortgage or payments required under it with the borrower; and

     (6) the amount due on the mortgage, including interest and penalties.

     b.  A creditor filing an initial foreclosure report as required by subsection a. of this section shall file a quarterly supplementary foreclosure report on each quarterly anniversary of filing the notice of intention to foreclose, up until the entry of judgment of foreclosure.  The quarterly supplemental report shall set forth:

     (1) the status of foreclosure proceedings;

     (2) the amount due on the mortgage, including interest and penalties;

     (3) a description of all efforts made by the creditor during the preceding 90 days to negotiate any modifications to the mortgage or payments required under it with the borrower; and

     (4) any alternatives to foreclosure, including any sales or conveyances, and any modifications to the mortgage or payments required under it, entered into between the creditor and the borrower.

     c.  The creditor shall provide a copy of the initial foreclosure report and the quarterly supplemental foreclosure report to the court and to the borrower, and shall also provide a copy of the reports to a qualified counseling entity upon submission by the entity of a letter signed by the borrower authorizing release of the reports to the entity.

     d.  Within three months of the effective date of this act, the Department of Banking and Insurance shall adopt and promulgate forms for the initial and supplementary foreclosure reports required under this section.

     e.  Within six months of the effective date of this act, the Department of Banking and Insurance shall make regularly updated information on foreclosure activity for each census tract in the State available to the public on its website.

 

     11. (New section)  a.  A creditor serving a notice of intention to foreclose on a mortgage on residential property in this State shall serve the public officer of the municipality in which the property is located, or, if the municipality has not designated a public officer pursuant to P.L.1942, c.112 (C.40:48-2.3 et seq.), the municipal clerk, with a copy of the notice at the same time it is served on the owner of the property. The copy served on the public officer or municipal clerk shall include the full name and contact information of an individual located within the State who is authorized to accept service on behalf of the creditor.

     b.  If a residential property becomes vacant at any point subsequent to the creditor’s filing the notice of intention to foreclose, but prior to vesting of title in the creditor or any other third party, and the property is found to be a nuisance or in violation of any applicable State or local code, the local public officer or municipal clerk shall notify the creditor, which shall have the responsibility to abate the nuisance or correct the violation in the same manner and to the same extent as the title owner of the property, to such standard or specification as may be required by the public officer or municipal clerk.

     c.  If the municipality expends public funds in order to abate a nuisance or correct a violation on a residential property in situations in which the creditor was given notice pursuant to the provisions of subsection b. of this section but failed to abate the nuisance or correct the violation as directed, the public officer or municipal clerk shall have the same recourse against the creditor as it would have against the title owner of the property, including but not limited to the recourse provided under section 23 of P.L.2003, c.210 (C.55:19-100).

 

     12. (New section)  A consumer reporting agency or any other business entity shall not sell to, or exchange with, a third party, unless the third party holds an existing mortgage loan on the property, the existence of a credit inquiry arising from a consumer mortgage loan application when the sale or exchange is triggered by an inquiry made in response to an application for credit. This section shall not apply to information provided by a mortgage originator or servicer to a third party providing services in connection with the mortgage loan origination or servicing; a proposed or actual securitization; secondary market sale, including sales of servicing rights; or similar transaction related to the consumer mortgage loan.

 

     13. a.  Notwithstanding any other provision of law to the contrary, a homeowner who is a borrower under a covered mortgage loan and who loses title as a result of foreclosure may remain in possession of the property as a tenant in possession subject to the provisions of this section, unless the entity taking title through foreclosure requires the property for their personal use and occupancy, or the entity taking title through foreclosure subsequently conveys the property to another entity which requires the property for their personal use and occupancy, in which case the tenant in possession shall be required to vacate the property upon 90 days notice.

     b.  A tenant in possession pursuant to subsection a. of this section shall pay the title holder a fair market rent for the property. The title holder shall provide the tenant with notice of the fair market rent for the property, and the information that the title owner used as a basis to determine the rent for the property, which shall include rental income for comparable properties in the same area.

     c.  The title holder may evict the tenant in possession for cause as set forth in the section 2 of P.L.1974, c.49 (C.2A:18-61.1 et seq.).

     d.  Simultaneously with serving the notice of intention to foreclose on a covered mortgage loan on a borrower who is the owner-occupant of the property, the creditor shall send the borrower by certified mail a notice that shall identify the property and that shall include the following information prominently displayed:

 

NOTICE TO BORROWER:

 

      YOU HAVE THE RIGHT TO REMAIN IN THIS PROPERTY DURING THE  FORECLOSURE PROCEEDINGS AND AFTER THE SHERIFF’S SALE UNLESS THE PROPERTY IS ACQUIRED BY AN INDIVIDUAL WHO PLANS TO OCCUPY THE PROPERTY.

 

     IF [NAME OF CREDITOR] ACQUIRES THE PROPERTY AT SHERIFF’S SALE, YOU MAY REMAIN IN THE PROPERTY AS A TENANT UNTIL [NAME OF CREDITOR] SELLS THE PROPERTY TO AN INDIVIDUAL WHO PLANS TO OCCUPY THE PROPERTY. YOU MUST PAY A FAIR MARKET RENT AND KEEP THE PROPERTY IN GOOD CONDITION.

 

     14.  Section 2 of P.L.1974, c.49 (C.2A:18-61.1) is amended to read as follows:

     2.  No lessee or tenant or the assigns, under-tenants or legal representatives of such lessee or tenant may be removed by the Superior Court from any house, building, mobile home or land in a mobile home park or tenement leased for residential purposes, other than (1) owner-occupied premises with not more than two rental units or a hotel, motel or other guest house or part thereof rented to a transient guest or seasonal tenant; (2) a dwelling unit which is held in trust on behalf of a member of the immediate family of the person or persons establishing the trust, provided that the member of the immediate family on whose behalf the trust is established permanently occupies the unit; and (3) a dwelling unit which is permanently occupied by a member of the immediate family of the owner of that unit, provided, however, that exception (1) shall not apply where the owner-occupant has been the subject of a foreclosure proceeding as a result of which title has passed by sheriff’s sale to another party; exception (2)  or (3) shall apply only in cases in which the member of the immediate family has a developmental disability, except upon establishment of one of the following grounds as good cause:

     a.     The person fails to pay rent due and owing under the lease whether the same be oral or written; provided that, for the purposes of this section, any portion of rent unpaid by a tenant to a landlord but utilized by the tenant to continue utility service to the rental premises after receiving notice from an electric, gas, water or sewer public utility that such service was in danger of discontinuance based on nonpayment by the landlord, shall not be deemed to be unpaid rent.

     b.    The person has continued to be, after written notice to cease, so disorderly as to destroy the peace and quiet of the occupants or other tenants living in said house or neighborhood.

     c.     The person has willfully or by reason of gross negligence caused or allowed destruction, damage or injury to the premises.

     d.    The person has continued, after written notice to cease, to substantially violate or breach any of the landlord's rules and regulations governing said premises, provided such rules and regulations are reasonable and have been accepted in writing by the tenant or made a part of the lease at the beginning of the lease term.

     e. (1) The person has continued, after written notice to cease, to substantially violate or breach any of the covenants or agreements contained in the lease for the premises where a right of reentry is reserved to the landlord in the lease for a violation of such covenant or agreement, provided that such covenant or agreement is reasonable and was contained in the lease at the beginning of the lease term.

     (2)   In public housing under the control of a public housing authority or redevelopment agency, the person has substantially violated or breached any of the covenants or agreements contained in the lease for the premises pertaining to illegal uses of controlled dangerous substances, or other illegal activities, whether or not a right of reentry is reserved to the landlord in the lease for a violation of such covenant or agreement, provided that such covenant or agreement conforms to federal guidelines regarding such lease provisions and was contained in the lease at the beginning of the lease term.

     f.     The person has failed to pay rent after a valid notice to quit and notice of increase of said rent, provided the increase in rent is not unconscionable and complies with any and all other laws or municipal ordinances governing rent increases.

     g.     The landlord or owner (1) seeks to permanently board up or demolish the premises because he has been cited by local or State housing inspectors for substantial violations affecting the health and safety of tenants and it is economically unfeasible for the owner to eliminate the violations; (2) seeks to comply with local or State housing inspectors who have cited him for substantial violations affecting the health and safety of tenants and it is unfeasible to so comply without removing the tenant; simultaneously with service of notice of eviction pursuant to this clause, the landlord shall notify the Department of Community Affairs of the intention to institute proceedings and shall provide the department with such other information as it may require pursuant to rules and regulations.  The department shall inform all parties and the court of its view with respect to the feasibility of compliance without removal of the tenant and may in its discretion appear and present evidence; (3) seeks to correct an illegal occupancy because he has been cited by local or State housing inspectors or zoning officers and it is unfeasible to correct such illegal occupancy without removing the tenant; or (4) is a governmental agency which seeks to permanently retire the premises from the rental market pursuant to a redevelopment or land clearance plan in a blighted area. In those cases where the tenant is being removed for any reason specified in this subsection, no warrant for possession shall be issued until P.L.1967, c.79 (C.52:31B-1 et seq.) and P.L.1971, c.362 (C.20:4-1 et seq.) have been complied with.

     h.     The owner seeks to retire permanently the residential building or the mobile home park from residential use or use as a mobile home park, provided this subsection shall not apply to circumstances covered under subsection g. of this section.

     i.      The landlord or owner proposes, at the termination of a lease, reasonable changes of substance in the terms and conditions of the lease, including specifically any change in the term thereof, which the tenant, after written notice, refuses to accept; provided that in cases where a tenant has received a notice of termination pursuant to subsection g. of section 3 of P.L.1974, c.49 (C.2A:18-61.2), or has a protected tenancy status pursuant to section 9 of the "Senior Citizens and Disabled Protected Tenancy Act," P.L.1981, c.226 (C.2A:18-61.30), or pursuant to the "Tenant Protection Act of 1992," P.L.1991, c.509 (C.2A:18-61.40 et al.), the landlord or owner shall have the burden of proving that any change in the terms and conditions of the lease, rental or regulations both is reasonable and does not substantially reduce the rights and privileges to which the tenant was entitled prior to the conversion.

     j.     The person, after written notice to cease, has habitually and without legal justification failed to pay rent which is due and owing.

     k.    The landlord or owner of the building or mobile home park is converting from the rental market to a condominium, cooperative or fee simple ownership of two or more dwelling units or park sites, except as hereinafter provided in subsection l. of this section. Where the tenant is being removed pursuant to this subsection, no warrant for possession shall be issued until this act has been complied with.  No action for possession shall be brought pursuant to this subsection against a senior citizen tenant or disabled tenant with protected tenancy status pursuant to the "Senior Citizens and Disabled Protected Tenancy Act," P.L.1981, c.226 (C.2A:18-61.22 et al.), or against a qualified tenant under the "Tenant Protection Act of 1992," P.L.1991, c.509 (C.2A:18-61.40 et al.), as long as the agency has not terminated the protected tenancy status or the protected tenancy period has not expired.

     l. (1) The owner of a building or mobile home park, which is constructed as or being converted to a condominium, cooperative or fee simple ownership, seeks to evict a tenant or sublessee whose initial tenancy began after the master deed, agreement establishing the cooperative or subdivision plat was recorded, because the owner has contracted to sell the unit to a buyer who seeks to personally occupy it and the contract for sale calls for the unit to be vacant at the time of closing.  However, no action shall be brought against a tenant under this paragraph unless the tenant was given a statement in accordance with section 6 of P.L.1975, c.311 (C.2A:18-61.9);

     (2)   The owner of three or less condominium or cooperative units seeks to evict a tenant whose initial tenancy began by rental from an owner of three or less units after the master deed or agreement establishing the cooperative was recorded, because the owner seeks to personally occupy the unit, or has contracted to sell the unit to a buyer who seeks to personally occupy it and the contract for sale calls for the unit to be vacant at the time of closing;

     (3)   The owner of a building of three residential units or less seeks to personally occupy a unit, or has contracted to sell the residential unit to a buyer who wishes to personally occupy it and the contract for sale calls for the unit to be vacant at the time of closing.

     m.    The landlord or owner conditioned the tenancy upon and in consideration for the tenant's employment by the landlord or owner as superintendent, janitor or in some other capacity and such employment is being terminated.

     n.     The person has been convicted of or pleaded guilty to, or if a juvenile, has been adjudicated delinquent on the basis of an act which if committed by an adult would constitute an offense under the "Comprehensive Drug Reform Act of 1987," N.J.S.2C:35-1 et al. involving the use, possession, manufacture, dispensing or distribution of a controlled dangerous substance, controlled dangerous substance analog or drug paraphernalia within the meaning of that act within or upon the leased premises or the building or complex of buildings and land appurtenant thereto, or the mobile home park, in which those premises are located, and has not in connection with his sentence for that offense either (1) successfully completed or (2) been admitted to and continued upon probation while completing, a drug rehabilitation program pursuant to N.J.S.2C:35-14; or, being the tenant or lessee of such leased premises, knowingly harbors or harbored therein a person who has been so convicted or has so pleaded, or otherwise permits or permitted such a person to occupy those premises for residential purposes, whether continuously or intermittently, except that this subsection shall not apply to a person harboring or permitting a juvenile to occupy the premises if the juvenile has been adjudicated delinquent upon the basis of an act which if committed by an adult would constitute the offense of use or possession under the said act. No action for removal may be brought pursuant to this subsection more than two years after the date of the adjudication or conviction or more than two years after the person's release from incarceration whichever is the later.

     o.    The person has been convicted of or pleaded guilty to, or if a juvenile, has been adjudicated delinquent on the basis of an act which if committed by an adult would constitute an offense under N.J.S.2C:12-1 or N.J.S.2C:12-3 involving assault, or terroristic threats against the landlord, a member of the landlord's family or an employee of the landlord; or, being the tenant or lessee of such leased premises, knowingly harbors or harbored therein a person who has been so convicted or has so pleaded, or otherwise permits or permitted such a person to occupy those premises for residential purposes, whether continuously or intermittently. No action for removal may be brought pursuant to this subsection more than two years after the adjudication or conviction or more than two years after the person's release from incarceration whichever is the later.

     p.    The person has been found, by a preponderance of the evidence, liable in a civil action for removal commenced under this act for an offense under N.J.S.2C:20-1 et al. involving theft of property located on the leased premises from the landlord, the leased premises or other tenants residing in the leased premises, or N.J.S.2C:12-1 or N.J.S.2C:12-3 involving assault or terroristic threats against the landlord, a member of the landlord's family or an employee of the landlord, or under the "Comprehensive Drug Reform Act of 1987," N.J.S.2C:35-1 et al., involving the use, possession, manufacture, dispensing or distribution of a controlled dangerous substance, controlled dangerous substance analog or drug paraphernalia within the meaning of that act within or upon the leased premises or the building or complex of buildings and land appurtenant thereto, or the mobile home park, in which those premises are located, and has not in connection with his sentence for that offense either (1) successfully completed or (2) been admitted to and continued upon probation while completing a drug rehabilitation program pursuant to N.J.S.2C:35-14; or, being the tenant or lessee of such leased premises, knowingly harbors or harbored therein a person who committed such an offense, or otherwise permits or permitted such a person to occupy those premises for residential purposes, whether continuously or intermittently, except that this subsection shall not apply to a person who harbors or permits a juvenile to occupy the premises if the juvenile has been adjudicated delinquent upon the basis of an act which if committed by an adult would constitute the offense of use or possession under the said "Comprehensive Drug Reform Act of 1987."

     q.    The person has been convicted of or pleaded guilty to, or if a juvenile, has been adjudicated delinquent on the basis of an act which if committed by an adult would constitute an offense under N.J.S.2C:20-1 et al. involving theft of property from the landlord, the leased premises or other tenants residing in the same building or complex; or, being the tenant or lessee of such leased premises, knowingly harbors therein a person who has been so convicted or has so pleaded, or otherwise permits such a person to occupy those premises for residential purposes, whether continuously or intermittently.

     For purposes of this section, (1) "developmental disability" means any disability which is defined as such pursuant to section 3 of P.L.1977, c.82 (C.30:6D-3); (2) "member of the immediate family" means a person's spouse, parent, child or sibling, or a spouse, parent, child or sibling of any of them; and (3) "permanently" occupies or occupied means that the occupant maintains no other domicile at which the occupant votes, pays rent or property taxes or at which rent or property taxes are paid on the occupant's behalf.

(cf: P.L.2000, c.113, s.3)

 

     15.  Immediately upon the effective date of this act, the New Jersey Housing and Mortgage Finance Agency shall provide the amount of $1,000,000 from its reserves or administrative monies to the department for the purpose of establishing the initial revenues for the trust fund established under section 4 of this act.

 

     16.  The Department of Community Affairs, in consultation with the Department of Banking and Insurance, shall adopt, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to effectuate the purposes of this act.

 

     17.  This act shall take effect immediately upon enactment.

 

 

STATEMENT

 

     This bill, entitled the “New Jersey Homeownership Preservation Act," provides for a trust fund, the Foreclosure Prevention Revolving Trust Fund, to be established in the Department of Community Affairs for the purpose of providing relief to homeowners in this State who are at risk of mortgage foreclosure. The bill also places certain requirements on creditors who initiate foreclosure proceedings against homeowners who have “covered mortgage loans,” which, as defined in the bill, are loans normally associated with the subprime lending market.

     The trust fund established by the bill is comprised of monies collected from a $2,000 fee applied to each creditor who initiates a foreclosure action against a borrower under a covered mortgage loan, and a $1 million appropriation from the reserves or administrative monies of the New Jersey Housing and Mortgage Finance Agency.

     The bill directs the department to use the trust fund to provide certain grants and loans, in accordance with a schedule set forth in the bill, to qualified counseling agencies, as defined in the bill, and non-profit agencies. Qualified counseling agencies must use the funding to assist homeowners by providing foreclosure prevention counseling services and making emergency foreclosure prevention assistance loans. The non-profit agencies must use the funding to assist homeowners by restructuring covered mortgage loans acquired from creditors or restoring properties acquired from creditors. The bill applies certain conditions as to the allocated funds, including requirements for the department to use contractual guarantees and to establish procedures, to ensure that the qualified counseling agencies and non-profits use the funds to effectively assist financially distressed homeowners who are most at risk for foreclosure.

     The bill also applies certain requirements to creditors who initiate foreclosure proceedings as to a covered mortgage loan pursuant to the “Fair Foreclosure Act” P.L.1995, c.244 (C.2A:50-53) by issuing a notice of intention to foreclose.

     Under certain circumstances, the creditor must:

     (1)   grant the borrower, upon the borrower’s request, a six month period of forbearance so that the borrower may pursue a loan workout, loan modification, refinancing, or other alternative. During the period of forbearance, the interest rate cannot increase and the creditor cannot take any further action to foreclose on the property, beyond issuing the notice of intention; and

     (2)   file certain reports with the Department of Banking and Insurance, indicating the status of the foreclosure and any attempts to work out the mortgage payments with the borrower.

     Further, the bill requires a creditor that issues a notice of intention to foreclose mortgage on residential property, to notify the municipality by providing a copy of the notice to the public officer or municipal clerk of the municipality. In certain circumstances, the bill makes the creditor responsible to abate any nuisance or correct any violations related to the property, and provides the municipality with recourse against the creditor for failure to do so.

     The bill also provides that a consumer reporting agency or any other business entity may not sell to, or exchange with, a third party, unless the third party holds an existing mortgage loan on the property, the existence of a credit inquiry arising from a consumer mortgage loan application when the sale or exchange is triggered by an inquiry made in response to an application for credit. That section shall not apply to information provided by a mortgage originator or servicer to a third party providing services in connection with the mortgage loan origination or servicing; a proposed or actual securitization; secondary market sale, including sales of servicing rights; or similar transaction related to the consumer mortgage loan.

     The bill also provides that a homeowner who is a borrower under a covered mortgage loan and who loses the home to foreclosure, may remain in possession of the property as a tenant in possession, under certain circumstances, provided the homeowner pays fair market rent to the owner of the property.

     Finally, the bill provides that the Department of Community Affairs, in consultation with the Department of Banking and Insurance, shall adopt, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to effectuate the purposes of the bill.