SENATE, No. 1566

STATE OF NEW JERSEY

215th LEGISLATURE

 

INTRODUCED FEBRUARY 9, 2012

 


 

Sponsored by:

Senator  RAYMOND J. LESNIAK

District 20 (Union)

Senator  BARBARA BUONO

District 18 (Middlesex)

 

Co-Sponsored by:

Senator Codey

 

 

 

 

SYNOPSIS

     Establishes the "New Jersey Residential Foreclosure Transformation Act"; provides expedited process for foreclosing abandoned residential properties.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning the foreclosure of residential properties, the transfer and dedication of foreclosed residential properties for affordable housing, and supplementing Title 2A of the New Jersey Statutes and Title 55 of the Revised Statutes.

 

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

 

     1.    This act shall be known and may be cited as the "New Jersey Residential Foreclosure Transformation Act."

 

     2.    The Legislature finds and declares that:

     a.     In recent years, there has been an enormous expansion in the number of mortgage foreclosure filings in New Jersey and across the nation.  The number of mortgage foreclosure actions filed in the New Jersey Courts grew from just over 20,000 in 2005 to more than 51,000 in 2008, 66,000 in 2009, and 58,000 in 2010. 

     b.    Preliminary information indicates a decline in the number of residential mortgage foreclosure filings over 2011.  However, this decline is largely attributable to actions undertaken by the New Jersey Judiciary which, in December of 2010, suspended the processing of uncontested residential foreclosures by the six biggest lenders in order to address "robo-signing" and other processing irregularities.

     c.     Despite this decline, it has been reported that more than one in 10 New Jersey mortgage loans are already in foreclosure or are 90 days or more in arrears.  Because of the large number of foreclosures filed during the 2009-2010 period, and the Judiciary's suspension of foreclosure processing, reports indicate that as of August 2011 more than 100,000 residential foreclosure cases were still open.  Now that the courts have resumed processing foreclosures for the big six lenders, it is widely believed that foreclosure filings will increase during 2012.  This is due in part to the large number of mortgages that are seriously delinquent, more than 90 days past due.  Reports have indicated that during the suspension period mortgage lenders were waiting to file more than 28,000 additional foreclosures and that another 55,000 mortgage loans were over 90 days delinquent.

     d.    Many of these foreclosed residential properties are vacant, undermining the health, safety, and economic vitality of neighborhoods, depressing their property values, and reducing revenues to municipalities.

     e.     It is the public policy of this State to encourage the production of low-income and moderate-income housing to serve the general welfare of all the State's residents.

     f.     The availability of tens of thousands of foreclosed residential properties presents a unique opportunity for the State to facilitate the purchase and dedication, or the rental, of housing units for low-income and moderate-income residents.

     g.     Establishment of a temporary State entity dedicated to the purpose of identifying foreclosed residential properties and facilitating their purchase and dedication for occupancy or their rental, including but not limited to low-income and moderate-income families, is in the public interest of the State.  

 

     3.    As used in this act:

     “Affordable” means a sales price or rent within the means of a low or moderate income household.

     "Agency" means the New Jersey Housing and Mortgage Finance Agency established pursuant to section 4 of P.L.1983, c.530 (C.55:14K-4).

     "Community development corporation" means a nonprofit community development corporation established pursuant to Title 15 of the Revised Statutes, Title 15A of the New Jersey Statutes, or other law of this State, with a focus on producing and operating affordable housing or housing with on-site social services for individuals with special needs.

     "Community development financial institution" means an entity designated and certified by the United States Department of the Treasury as a Community Development Financial Institution pursuant to 12 CFR 1805.

     "Contractor" means a qualified community development financial institution that enters into a contract or loan with the corporation pursuant to section 7 of this act.

     "Corporation" means the "New Jersey Foreclosure Relief Corporation" established pursuant to this act.

     "Eligible property" means any residential property that is owned by an institutional lender as the result of a mortgage foreclosure.

     "Institutional lender" or "lender" means any lawfully constituted mortgage lender, mortgage investor, or mortgage loan servicer that owns an eligible property including, but not limited to any agency or instrumentality of the United States, including, but not limited to, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Housing Administration, the Small Business Administration, the Resolution Trust Corporation, and the Federal Deposit Insurance Corporation.

     "Intercreditor agreement" means an agreement among creditors that sets forth the various lien positions and the rights and liabilities of each creditor and its impacts on the other creditors.

     "Low-income" means 50 percent or less of the median gross household income for households of the same size within the housing region in which the household is located, based upon the United States Department of Housing and Urban Development’s (HUD) Section 8 Income Limits (uncapped) averaged across counties for the housing region.

     "Low-income housing" means housing affordable according to United States Department of Housing and Urban Development or other recognized standards for home ownership and rental costs, and occupied or reserved for occupancy by households with a gross household income equal to 50 percent or less of the median gross household income for households of the same size within the housing region in which the housing is located.

     "Market-rate units" means housing not restricted to low- and moderate-income households that may sell or rent at any price.

     "Moderate-income" means more than 50 percent but less than 80 percent of the median gross household income for households of the same size within the housing region in which the household is located, based upon the United States Department of Housing and Urban Development's (HUD’s) Section 8 Income Limits (uncapped) averaged across counties for the housing region.

     "Moderate-income housing" means housing affordable according to United States Department of Housing and Urban Development or other recognized standards for home ownership and rental costs and occupied or reserved for occupancy by households with a gross household income equal to more than 50 percent but less than 80 percent of the median gross household income for households of the same size within the housing region in which the housing is located.

     "Permanent supportive housing" means affordable housing dedicated for persons with developmental disabilities or mental illness, designed as permanent housing, and regulated by the New Jersey Department of Human Services

     "Qualified community development financial institution" means a community development financial institution that has a minimum of $50 million in assets under management and a minimum of 2 years' experience in the financing and acquisition of real estate for affordable housing.

     "Qualifying household" means a very-low, low-, or moderate-income household, the head of which certifies in writing that the household intends to occupy the property as a principal residence for at least 12 months.

     "Supportive shared living housing" means permanent lease-based supportive housing that provides access to supportive services to individuals with special needs who maintain separate leases for bedrooms and share common living space.

     "Very-low-income" means 30 percent or less of the median gross household income for households of the same size within the housing region in which the household is located, based upon the United States Department of Housing and Urban Development’s (HUD) Section 8 Income Limits (uncapped) averaged across counties for the housing region.

     "Very-low-income housing" means housing affordable to, according to United States Department of Housing and Urban Development or other recognized standards for home ownership and rental costs, and occupied by, or reserved for occupancy by, households with a gross household income equal to 30 percent or less of the median gross household income for households of the same size within the housing region in which the housing is located.

 

     4.    a. There is established in the New Jersey Housing and Mortgage Finance Agency the "New Jersey Foreclosure Relief Corporation."

     b.    The corporation shall constitute a body corporate and politic and an instrumentality exercising public and essential governmental functions, and the exercise by the corporation of the powers conferred by this act shall be deemed and held to be an essential governmental function of the State.

     c.     The corporation shall be governed by a seven-member board, consisting of the Commissioner of Community Affairs, the Executive Director of the New Jersey Housing and Mortgage Finance Agency, the Commissioner of Banking and Insurance, and the State Treasurer, who shall be members ex officio, and three members appointed by the Governor.  Each ex officio member of the board may designate an officer or employee of his department to represent him at meetings of the board, and each such designee may lawfully vote and otherwise act on behalf of the member for whom he constitutes the designee.  Any such designation shall be in writing delivered to the secretary of the board and shall continue in effect until revoked or amended by writing delivered to the secretary of the board.

     d.    The three members appointed by the Governor shall be residents of the State and shall have knowledge in the areas of housing design, construction, or operation; mortgage banking, finance and foreclosure; or community development. Of the three members appointed by the Governor, one shall be a nominee of the Senate President and one shall be a nominee of the Speaker of the General Assembly.  No more than two of the members appointed by the Governor shall be members of the same political party. The members shall serve for two-year terms.  Each member shall hold office for the term of his appointment and until the appointment of his successor. A member of the board shall be eligible for reappointment. A member of the board may be removed from office by the Governor, for cause, after a public hearing and may be suspended by the Governor pending the completion of such a hearing.

     e.     (1) The Executive Director of the New Jersey Housing and Mortgage Finance Agency shall be the chairperson of the board. The chairperson shall appoint the secretary to the board. The chairperson shall convene an organizational meeting of the board as soon as possible after the appointment of its members. 

     (2) The board shall have the exclusive authority to approve all financial transactions of the corporation, to approve minutes of board meetings, and to make determinations concerning the corporation's governing structure.

     (3) The secretary to the board shall deliver a true copy of the minutes of every board meeting to the Governor.  No action taken at a board meeting shall have force or effect until the Governor approves the action or fails to veto the action within 10 business days after a true copy of the minutes were delivered.  During that 10-day period, the Governor may render any action taken by the board or any member thereof null and void by returning a copy of the minutes with a veto of the action to the board.

     f.     The corporation shall use employees (selected by the board) of the agency and the agency shall provide such personnel to the corporation for its use. In addition to persons otherwise employed by the agency, the agency shall employ, and shall provide to the corporation, such persons as the corporation may request from time to time.  Agency employees provided to the corporation shall be subject to the direction and control of the corporation and any of them may be returned to the agency at any time by the corporation in the discretion of the corporation. The corporation may use administrative services of the agency and, if it does so, shall reimburse the agency for the actual costs of providing such services.

     g.     With the agreement of an executive department or other executive agency, the corporation may utilize the personnel of that department or agency on a reimbursable basis to cover actual and reasonable expenses.

     h.     (1) On or before the last day of March in each year, the corporation shall make an annual report of its activities for the preceding calendar year, and its planned activities for the current and following calendar year, to the Governor and to the Legislature. 

     (2) Each annual report shall set forth the current nature and extent of foreclosure activity in New Jersey and shall depict changes in foreclosure activity from the prior calendar year.  The report shall set forth a complete operating and financial statement covering the corporation's operations, transactions and holdings during the preceding year, including but not limited to:

     (a) the total number of re-capitalized market rate units.

     (b) the total numbers of very-low-income, low-income, and moderate-income units that were produced for sale and for rental in the preceding year pursuant to this act, their locations by municipality, and the sources of financing used.

     (3) The corporation shall cause an audit of its books and accounts to be made at least once in each year by certified public accountants. The cost of the audit shall be considered an expense of the corporation and a copy thereof shall be filed with the State Treasurer.

     (4) The corporation shall provide copies of its annual reports and audits to the agency and the agency shall display the corporation's annual reports and audits on the agency's website.

     i.      The corporation shall cease its operations on December 31, 2017.  On that date, any assets, liabilities, properties, or funds held by the corporation shall transfer to the agency.  The corporation shall expire upon transmittal of the 2017 annual report.

 

     5.    The corporation shall have the following powers:

     a.     To adopt, alter, and use a corporate seal.

     b.    To enter into contracts and modify, or consent to the modification of, any contract or agreement to which the corporation is a party or in which the corporation has an interest under this act, with or without public bidding, notwithstanding the provisions of any other law.

     c.     To make advance, progress, or other payments.

     d.    To acquire, hold, lease, mortgage, maintain, or dispose of, at public or private sale, real and personal property, using any legally available private sector methods including without limitation, securitization of debt or equity, limited partnerships, mortgage investment conduits, and real estate investment trusts, and otherwise exercise all the usual incidents of ownership of property necessary and convenient to the operations of the corporation.

     e.     To sue and be sued in its corporate capacity in any court of competent jurisdiction.

     f.     To exercise any other power established under this section and such incidental powers as are necessary to carry out its duties and functions under this section. The corporation may indemnify the directors, officers, and employees of the corporation on such terms as the corporation deems proper against any liability under any civil suit pursuant to any statute or pursuant to common law with respect to any claim arising out of or resulting from any act or omission by such person within the scope of such person's employment in connection with any transaction entered into involving the disposition of assets (or any interests in any assets or any obligations backed by any assets) by the corporation. For purposes of this subsection, the terms "officers" and "employees" include officers and employees of the agency. The indemnification authorized by this subsection shall be in addition to and not in lieu of any immunities or other protections that may be available to such person under applicable law, and this provision does not affect any such immunities or other protections.

 

     6.    In addition to the powers of the corporation described in section 5 of P.L.    , c.    (C.    ) (pending before the Legislature as this bill), the corporation shall have the following powers:

     a.     The corporation may enter into contracts with any person, corporation, or entity which the corporation determines to be necessary or appropriate to carry out its responsibilities under this act. Such contracts shall be subject to the procedures adopted pursuant to section 7 of this act.

     b.    In carrying out the corporation's duties under this act, the corporation may utilize the services of private persons, including real estate and loan portfolio asset management, property management, auction marketing, and brokerage services, if such services are available in the private sector and the corporation determines utilization of such services are practicable and efficient.

     c.     Within 120 days after the adoption of this act, the corporation shall enter into an intercreditor agreement with the New Jersey Housing and Mortgage Finance Agency for the sole purpose of identifying underwriting standards, securitization of debt, and credit standards for the acquisition of foreclosed residential properties or mortgage assets.

 

     7.    a.  (1) The corporation shall enter into contracts or loans, or both, with no more than two qualified community development financial institutions to negotiate, bid for, and purchase eligible properties and mortgage assets from institutional lenders for the purpose of producing affordable housing.  In selecting contractors from among qualified community development financial institutions, the corporation shall accord a strong preference to qualified community development financial institutions that have substantial experience in lending in New Jersey and substantial knowledge of New Jersey real estate markets.  The corporation may enter into contracts or loans, or both, with a partnership or consortia of organizations, as long as a qualified community development financial institution is the lead entity, or a partnership or consortia of multiple qualified community development financial institutions.

     (2) The contracts shall specify the amounts, schedules, and types of funding to be provided by the corporation to the qualified community development financial institutions, the repayment schedule for the portion of that funding to be repaid, and targeted goals of affordable housing to be produced.  The corporation may condition funding and goals upon the availability of funds to the corporation. The contracts shall specify reasonable administrative costs sufficient to enable the qualified community development financial institutions to exercise their obligations pursuant to this act.  The contracts shall set forth criteria for instances when the purchase, sale, lease, and conveyance of properties as market-rate units furthers the purposes of this act.

     b.    (1) Upon purchase of an eligible property or mortgage asset for use as affordable housing by the corporation or its contractors, the municipality in which the property is located shall be afforded a 45-day period of time within which the municipal governing body may opt to purchase the property in lieu of the corporation in accordance with the provisions set forth in this act. The municipality may waive this right through written notice to the corporation or, if so designated by the corporation, its contractors, prior to the expiration of the 45-day period.

     (2) Those eligible properties purchased by the qualified community development financial institutions and designated pursuant to this act for use as affordable housing shall be restricted for occupancy as affordable housing for a period of 30 years.  The restriction shall be set forth in the deed and recorded in the office of the county recording officer of the county wherein the real estate is situated.  Affordability controls shall be imposed upon purchase and maintained upon transfer in accordance with the provisions of the Uniform Housing Affordability Controls promulgated by the agency.

     c.     (1) As soon as possible after entering into a contract to purchase an eligible property, but not less than five days after the date the corporation or its contractors enters into the contract, the corporation or its contractors shall provide written notice by personal service or certified mail to the governing body of the municipality within which the eligible property is located.  The notice shall inform the governing body of the municipality's opportunity to purchase the eligible property, the municipality's right of first refusal to purchase the property, and the municipality's right to use monies deposited in its affordable housing trust fund.

     (2) As soon as possible after entering into a contract to purchase an eligible property, but not less than five days after the date the corporation or its contractors enters into the contract, the corporation or its contractors shall list the property on the Department of the Treasury's website.  The listing shall contain basic information about the property, including but not limited to location, condition, and information relating to the estimated fair market value of the property.  The corporation or its contractors shall make information about the listing available to the agency and, upon request, to municipalities, other public agencies, community development corporations, developers, and qualifying households.

     (3) The corporation or its contractors shall allow public agencies, community development corporations, developers, and qualifying households reasonable access to an eligible property for purposes of inspection.

     d.    (1) In order to exercise its right to purchase an eligible property, the governing body of the municipality shall provide written notice to the chairperson of the corporation or, if so designated by the corporation, its contractors, within 45 days of the municipality's receipt of the notice required pursuant to subsection c. of this section.  

     (2) The governing body of a municipality may adopt a resolution authorizing the mayor or other designated municipal official to respond to notices received pursuant to subsection c. of this section.  The resolution may establish parameters for that exercise of authority, including but not limited to the total amount of funds that may be expended and the amount that may be expended for each unit of housing. 

     (3) A municipality may use any available funding sources to purchase eligible properties or mortgage assets through the corporation pursuant to this act, except for funds that are dedicated to another purpose by law, covenant, or other obligation.

     (4) Whenever a municipality does not exercise an option to purchase an eligible property under this section, the corporation  or its contractors may lease the property for occupancy as affordable housing subject to a 30-year deed restriction or convey the property for occupancy as affordable housing subject to a 30-year deed restriction to another public agency, a community development corporation, a developer, or a qualifying household. The corporation or its contractors may use monies deposited in that municipality's affordable housing trust fund, up to and including the negotiated purchase price of the eligible property, and apply those funds to the purchase of the eligible property.

     e.     Notwithstanding any other provision of this section to the contrary, the corporation and, if authorized by contract, its contractors, may purchase, sell, lease, and convey market rate-units without offering those units to the municipality and without imposing affordability controls upon the property if the purchase, sale, lease, and conveyance of those properties as market-rate units satisfy criteria established pursuant to contract in accordance with subsection a. of this section and does not violate the terms of any other provision of law or requirement, including those governing the use of funds used to make the purchase.

     f.     All purchases, sales, leases, and conveyances of property by qualified community development financial institutions exercised pursuant to this section shall be deemed to lessen the burdens of government in furthering the purposes of this act.

 

     8.    a. A municipality that purchases an eligible property pursuant to this act shall sell and convey or lease the housing unit or units acquired within 60 days of the date of purchase, unless it is not possible to do so due to practical or market conditions.  In the event that an eligible property is not conveyed or leased within 180 days of the date of purchase, or remains vacant for a 180-day period during the pendency of affordability controls, the corporation, or the agency as successor to the corporation, may commence proceedings to take control of the property and to sell and convey or lease the property in furtherance of the purposes of this act and deed restrictions of record. 

     b.    The governing body of a municipality that purchases an eligible property pursuant to this act may, by resolution, authorize the private sale and conveyance or the lease of a housing unit or units acquired pursuant to this act.  Every deed and rental agreement shall contain a provision specifying the requirement that the housing unit or units shall remain available to low- and moderate-income households for a period of at least 30 years.

     c.     A municipality that purchases an eligible property pursuant to this act from monies deposited in its municipal affordable housing trust fund and dedicates the property for affordable housing, as required by this act, shall receive:

     (1) two units of credit towards its affordable housing obligation for:

     (a) each eligible property sold or conveyed as a for-sale unit or leased as rental housing, and

     (b) each new bedroom dedicated for permanent supportive housing other than supportive shared living housing.

     (2) one and one-quarter units of credit towards its affordable housing obligation for each new bedroom dedicated in supportive shared living housing.

 

     9.    The corporation and the State Treasurer shall prioritize the allocation of tax-exempt private activity bonds in the amount necessary to effectuate the purposes of this act in each year until the corporation ceases operation, provided that the proceeds of tax-exempt private activity bonds to support the purposes of this act shall be limited to contracts with and loans to qualified community development financial institutions pursuant to section 7 of this act.

 

     10.  a.  For the purposes of this section:

     "Foreclosure-impacted municipality" means a municipality that documents a minimum of 10 units of housing that have been foreclosed upon and have remained unsold on a Multiple Listing Service for at least 60 days; and

     "Units of housing" means units of housing that are not age-restricted and are habitable year-round, including but not limited to, single family homes, condominium units, cooperative units, and mobile homes with at least two bedrooms.

     b.    (1) Prior to the date that a foreclosure-impacted municipality's development fees or payments-in-lieu fees are scheduled to transfer to the "New Jersey Affordable Housing Trust Fund" pursuant to section 8 of P.L.2008, c.46 (C.52:27D-329.2) or section 9 of P.L.2008, c.46 (C.52:27D-329.3), the municipality may adopt a resolution committing the expenditure of municipal affordable housing trust fund monies for the purposes of this act.  The resolution shall authorize the transfer of a minimum of $150,000 from the municipality's municipal affordable housing trust fund to the "Foreclosure to Affordable Housing Transformation Fund" for use by the corporation or its contractors for the provision of affordable housing pursuant to this section and the procedures specified in section 7 of this act.  

     (2)  The resolution may authorize the mayor or other designated municipal official to exercise the municipal powers described in section 7 of this act.  The resolution may establish parameters for that exercise of authority, including but not limited to purchase price levels for the exercise of that power.

     c.     (1) The corporation or its contractors may use funds transferred pursuant to subsection a. of this section in any manner designed to further the purposes of this act, provided that the corporation or its contractors shall use its best efforts to produce very-low, low-, and moderate-income housing within the municipality transferring funds pursuant to this section, with a deed restriction specifying that the housing unit or units shall remain available to low- and moderate-income households for a period of at least 30 years, and may target the acquisition of eligible property towards such municipalities to further that end.

     (2) If the corporation or its contractors are unable to utilize some or all of the funds provided to produce affordable housing within the municipality within two years of the transfer of such funds to the "Foreclosure to Affordable Housing Transformation Fund," the funds shall be returned to the municipality as soon as practicable after the two-year anniversary of such transfer.  From the date any such funds are returned to the municipality, the municipality shall be required to commit the funds in accordance with section 8 of P.L.2008, c.46 (C.52:27D-329.2) or section 9 of P.L.2008, c.46 (C.52:27D-329.3), as applicable, within the time constraints set forth in those sections or within six months after the date of transfer of funds back to the municipality, whichever is later.

     d.    Affordable housing created through the "Foreclosure to Affordable Housing Transformation Fund" pursuant to this section shall receive bonus affordable housing credit as set forth in subsection c. of section 8 of this act, even if the municipality does not exercise its right to purchase the property.

     e.     No agency of the State of New Jersey shall take any action to transfer funds from a municipal affordable housing trust fund to the "New Jersey Affordable Housing Trust Fund" established pursuant to section 20 of P.L.1985, c.222 (C.52:27D-320) when such funds are designated to effectuate the purposes of this act during the timeframes established in this section.

 

     11.  a.  There is established within the agency a "Foreclosure to Affordable Housing Transformation Fund," which shall be a non-lapsing, revolving fund and which shall be the repository for funds appropriated or otherwise made available for the purposes of this act, and any interest earned thereon.  The fund shall be administered by the agency, in accordance with its authority under section 5 of P.L.1983, c.530 (C.55:14K-5) to manage funds for housing programs. 

     b.    The agency may transfer into the "Foreclosure to Affordable Housing Transformation Fund" any amounts held or received by the agency that may be used for the production of affordable housing and that is needed by the corporation or its contractors for the purchase of eligible property.

     c.     In any year in which the proceeds from the receipts of the additional fee collected pursuant to paragraph (2) of subsection a. of section 3 of P.L.1968, c.49 (C.46:15-7) exceeds $75 million, the first $10 million above the $75 million collected shall be transferred into the "Foreclosure to Affordable Housing Transformation Fund” for the purposes of the production of affordable housing.

     d.    Notwithstanding any provision of law to the contrary, the Commissioner of Community Affairs may transfer into the "Foreclosure to Affordable Housing Transformation Fund" amounts held for the production of affordable housing and not designated for a specific purpose beyond the overall production of affordable housing by the annual budget, including but not limited to monies deposited in the "New Jersey Affordable Housing Trust Fund," which amounts are needed by the corporation for the purchase of eligible property.  The commissioner shall consider the transfer of funds from the "New Jersey Affordable Housing Trust Fund" to the "Foreclosure to Affordable Housing Transformation Fund" as a priority for funding until the corporation ceases its operations.

     e.     All amounts deposited into the "Foreclosure to Affordable Housing Transformation Fund" that are derived from federal funding sources or are otherwise dedicated to the production of affordable housing shall be used exclusively for the production of affordable housing.  The corporation may use other funds for the production of affordable housing or market rate housing.

     f.     The corporation may use annually up to three percent of the monies available in the fund for the payment of any necessary administrative costs related to the administration of this act.

 

     12.  a.  In an uncontested action to enforce a residential mortgage governed by the "Fair Foreclosure Act," P.L.1995, c.244 (C. 2A:50-53 et seq.), against vacant and abandoned real property, the lender may file a Motion for Expedited Judgment and Sale.  The motion shall be accompanied by an affidavit from a person having personal knowledge of the contents and shall plead the specific facts upon which the finding of vacancy and abandonment is based, consistent with subsection b. of this section.  If the Superior Court finds the motion and affidavit to be in compliance with the provisions of this section, the Superior Court shall enter final judgment in foreclosure and direct issuance of a writ of execution to the sheriff of the county in which the real property is situate, or to a receiver appointed by the Superior Court, for the sale of the property within 45 days after entry of final judgment.

     b.    Real property shall be presumed vacant and abandoned under this section if there has been no legal resident or tenant for a period of 45 or more consecutive days. Vacancy and abandonment may also be evidenced by the presence of any condition that on its own, or in combination with other conditions present, would lead a reasonable person to believe that the property is vacant and abandoned, including: (1) the failure to pay taxes; (2) a failure to claim certified mail; (3) the filing of a change of address form; (4) overgrown or dead vegetation; (5) accumulation of flyers, mail, or trash; (6) disconnected utilities; (7) the absence of window coverings or furniture; (8) statements of neighbors, delivery persons, or government employees that are consistent with vacancy and abandonment.

     c.     If a tenant occupied all or a portion of the property prior to the mailing of a default notice by the lender, and the tenant is paying fair market value rent to the landlord or debtor pursuant to a valid assignment of rents, then a presumption shall exist that the property has not been abandoned for the purposes of this section.  If a debtor enters into a lease agreement with a tenant after the mailing of a default notice from the lender, then a presumption that the property has not been abandoned shall not be made, but shall be weighed against other factors as to whether or not the property has been abandoned.

     d.    Nothing in this section shall be construed to affect the rights of a tenant to possession of a leasehold interest under the Anti-Eviction Act, P.L.1974, c.49 (C.2A:18-61.1 et seq.), the "New Jersey Foreclosure Fairness Act," P.L.2009, c.296 (C.2A:50-69 et seq.), or any other applicable law.

     e.     A Motion for Expedited Judgment and Sale filed pursuant to this section shall be deemed to be constructive notice to all persons and entities with an interest in the property that is properly recorded with the county clerk or county registrar prior to the recording of the notice of lis pendens in the foreclosure action, whether or not the person or entity entered an appearance or answered the foreclosure complaint.  Pursuant to the New Jersey Rules of Court, any interested party may present a defense to rebut a claim of abandonment that shall be accompanied by an affidavit stating that the defense is not made for the purpose of delaying the relief requested pursuant to the Motion for Expedited Judgment and Sale.

 

     13.  This act shall take effect immediately.


STATEMENT

 

     This bill, the "New Jersey Residential Foreclosure Transformation Act," establishes the "New Jersey Foreclosure Relief Corporation," which will be dedicated to the purpose of purchasing foreclosed residential properties from institutional lenders and dedicating them for occupancy as affordable housing.  Although the Legislature has adopted various measures over the past few years that have helped families who were unable to afford to pay their home mortgages to stay in their homes, current economic realities are forcing many families to default on their mortgages.  It has been reported that more than 100,000 New Jersey homeowners are dealing with foreclosures.

     The residential mortgage foreclosure crisis results in numerous problems for families, for communities, for businesses, and for government.  Families that have lost their homes through foreclosure need a place to live despite limited financial ability.  Foreclosures are concentrated in certain, usually disadvantaged, neighborhoods.  When numerous properties in a neighborhood remain vacant for a prolonged period, there is a heightened risk of the neighborhood becoming blighted.  A vast number of foreclosed residential properties are owned by banks and other lenders.  Maintaining this excessive inventory of deteriorating homes inhibits the ability of lenders and developers to take action to reinvigorate the economy.  All of these factors exacerbate the difficulties governments face in trying to continue to provide vital services to the public.

     Despite these formidable problems, the current economic climate presents our State with a unique opportunity.  This bill will take advantage of the glut of vacant foreclosed residential properties and historically low interest rates in order to address one of the most intractable problems New Jersey faces, the creation and preservation of housing for individuals and families of limited means.

     The bill would establish the "Foreclosure Relief Corporation" as a temporary entity within the New Jersey Housing and Mortgage Finance Agency (HMFA).  The corporation would be governed by a seven-member board, consisting of the Commissioner of Community Affairs, the Executive Director of the New Jersey Housing and Mortgage Finance Agency, the Commissioner of Banking and Insurance, and the State Treasurer, ex officio, and three New Jersey residents, appointed by the Governor, who have knowledge in the areas of housing design, construction, or operation; mortgage banking, finance, and foreclosure; or community development.  The Senate President and the Speaker of the General Assembly would each nominate one member for appointment by the Governor.

     The corporation would make an annual report of its activities to the Governor and to the Legislature, setting forth a complete operating and financial statement covering its operations, transactions, and holdings during the year.  The corporation's books and accounts would be audited at least once in each year by certified public accountants.

     The corporation would cease its operations on December 31, 2017.  On that date, any assets, properties, or funds held by the corporation would transfer to the HMFA.

     The bill empowers the corporation to purchase foreclosed residential property and mortgage assets from institutional lenders in order to produce affordable housing and dedicate it as such for 30 years.  The bill directs the corporation to enter into contracts or loans, or both, with no more than two experienced, financially sophisticated, community development financial institutions to enhance the ability of the corporation to fulfill its purpose of producing affordable housing. 

     The corporation or, if applicable, one of its contractors, would give the municipality in which the property is located a right of first refusal to purchase the property and dedicate it as affordable housing.  A municipality that exercises this right and dedicates the property for affordable housing would receive bonus credits towards its affordable housing obligations.  Under the bill, a municipality would receive two units of credit for each eligible property sold or conveyed as a for-sale unit or leased as rental housing, and for each new bedroom dedicated for permanent supportive housing other than supportive shared living housing.  A municipality would receive one and one-quarter units of credit towards its affordable housing obligation for each new bedroom dedicated in supportive shared living housing.

     Whenever a municipality does not exercise its right of first refusal to purchase a property, the corporation may purchase the property and convey it for occupancy as affordable housing subject to a 30-year deed restriction to another public agency, a community development corporation, a developer, or a qualifying household.  If a municipality does not exercise its right to purchase a property, the corporation may use monies deposited in that municipality's affordable housing trust fund, up to and including the negotiated purchase price of the eligible property, and apply those funds to the purchase of the eligible property. 

     The bill establishes a mechanism through which a "foreclosure-impacted municipality," one that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days, can insulate its affordable housing trust funds from the laws that will require the transfer of its trust fund monies to the "New Jersey Affordable Housing Trust Fund."  A foreclosure-impacted municipality can accomplish this by adopting a resolution committing the expenditure of its municipal affordable housing trust fund monies for the purchase of foreclosed properties from the corporation and pledging, and transferring, at least $150,000 of its municipal trust fund monies to the corporation for the corporation to use to produce affordable housing. 

     The corporation could use funds transferred from a foreclosure-impacted municipality for any purpose authorized under this bill but would exercise best efforts to produce affordable housing in the foreclosure-impacted municipality.  If the corporation is unable to use all of the transferred funds within two years of the date of transfer, the remaining funds would be returned to the municipality and the municipality would have at least six months from the date the funds are returned to commit the funds in accordance with other provisions of law.  During this period of time, all municipal trust fund monies designated for the purchase of foreclosed properties would be protected from transfer to the State.  A municipality would receive bonus credits, as otherwise provided in the bill, for affordable housing produced by the corporation or by one of its contractors pursuant to this mechanism.

     The bill would allow the corporation to establish criteria to identify the circumstances when the purchase, sale, lease, or conveyance of market-rate units further the purposes of the corporation.  The corporation itself, or through its contractors, would be able to purchase, sell, lease, or convey market-rate units in accordance with those criteria without imposing affordability controls upon the property as long as the transaction does not violate the terms of any other provision of law or requirement.

     The bill establishes the "Foreclosure to Affordable Housing Transformation Fund," a nonlapsing, revolving fund to serve as the repository for funds appropriated or otherwise made available for the corporation to fulfill its purposes.  The HMFA would administer the fund and would be authorized to transfer into the fund any amounts it has that may be used for the production of affordable housing.  Under the bill, in any year in which the proceeds from the Realty Transfer Fee additional fee, paid pursuant to paragraph (2) of subsection a. of section 3 of P.L.1968, c.49 (C.46:15-7), exceeds $75 million, the first $10 million above the $75 million collected will be transferred into the "Foreclosure to Affordable Housing Transformation Fund” for the purposes of the production of affordable housing.  The bill authorizes the Commissioner of Community Affairs to transfer into the fund certain amounts held for the production of affordable housing, including but not limited to monies deposited in the "New Jersey Affordable Housing Trust Fund."

     The bill provides that amounts deposited in the fund that are derived from federal funding sources or are otherwise dedicated to the production of affordable housing must be used for the production of affordable housing.  However, the bill allows the corporation to use other funds for the production of affordable housing or market-rate housing and allows the corporation to use annually up to three percent of fund monies for administrative cost.

     Finally, the bill would establish an expedited foreclosure procedure for uncontested actions to enforce residential mortgage liens against vacant and abandoned real property.  If a residential mortgage lender’s action to foreclose a mortgage on abandoned real property is uncontested, the lender may file a Motion for Expedited Judgment and Sale and a declaration that the debtor has abandoned the real property, supported by affidavit.  Upon a finding that the motion and affidavit are satisfactory, the Superior Court would enter final judgment in foreclosure and direct issuance of a writ of execution to the sheriff of the county in which the property is located, or to a receiver appointed by the court, for the sale of the property within 45 days after entry of final judgment.

     The bill sets forth standards for determining when property is vacant and abandoned, including presumptions to be used to determine whether property being occupied by tenants has been abandoned.