SENATE, No. 1022

STATE OF NEW JERSEY

215th LEGISLATURE

 

INTRODUCED JANUARY 17, 2012

 


 

Sponsored by:

Senator  RAYMOND J. LESNIAK

District 20 (Union)

 

 

 

 

SYNOPSIS

     Establishes the "New Jersey Foreclosure to Affordable Housing Transformation Act."

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning the purchase of foreclosed residential property and the transfer and dedication of the property for affordable housing, supplementing 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 Foreclosure to Affordable Housing 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 significant decline in the number of residential mortgage foreclosure filings during 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 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 by 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.

     "Corporation" means the "New Jersey Foreclosure Relief Corporation" established pursuant to section 4 of this act.

     "Eligible property" means any residential property that is owned by an institutional lender as the result of a mortgage foreclosure and satisfies eligibility criteria established by the agency pursuant to section 11 of this act.

     “Individuals with special needs” means individuals with mental illness, individuals with physical or developmental disabilities, and individuals in other emerging special needs groups identified by State agencies, who are at least 18 years of age if not part of a household. Special needs populations also include victims of domestic violence; ex-offenders; youth aging out of foster care; individuals and households who are homeless; and individuals with AIDS/HIV.

     "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 Student Loan Marketing Association, 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, or the Federal Deposit Insurance Corporation.

     “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.

     "Maximum income limit" means a household income that does not exceed 120% of the area median income, as defined for New Jersey in guidelines published annually by the United States Department of Housing and Urban Development, or that does not exceed the New Jersey Housing and Mortgage Finance Agency's Mortgage Revenue Bond Program income limits, whichever is greater.

     “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.

     "Qualifying household" means a household (i) which intends to occupy eligible property as a principal residence; (ii) which agrees to occupy the property as a principal residence for at least 12 months; (iii) which certifies in writing that the household intends to occupy the property as a principal residence for at least 12 months; and (iv) the income of which does not exceed the maximum income limit.

     “Supportive and special needs housing” means a structure or structures in which individuals or households reside and includes, but is not limited to: residential health care facilities as licensed or regulated by the Department of Community Affairs or the New Jersey Department of Health and Senior Services if the facility is located with, and operated by, a licensed health care facility; group homes for people with developmental disabilities and mental illness as licensed or regulated by the New Jersey Department of Human Services; permanent supportive housing; and supportive shared living housing. Long term health care facilities including nursing homes, and Class A, B, C, D, and E boarding homes do not qualify as supportive and special needs housing.

     “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 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 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 Commissioner of Banking and Insurance, and the State Treasurer, who shall be members ex officio, and four 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 four 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 four 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.     The Commissioner of Community Affairs 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.

     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.     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 to the Governor and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1).  Each report shall set forth a complete operating and financial statement covering its operations, transactions and holdings during the year.  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.

     i.      The corporation shall cease its operations on December 31, 2017.  On that date, any assets, 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 this act, 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.

 

     7.    a.  The corporation shall have the power to negotiate, bid for, and purchase eligible property from institutional lenders for the purpose of producing affordable housing. 

     b.    (1) Every contract negotiated by the corporation shall provide that the closing shall not occur until the municipality in which the property is located has been afforded a 60-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.

     (2)   Every eligible property purchased pursuant to this act 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 situate.  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 enters into the contract, the corporation 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 enters into the contract, the corporation shall list the property on the State's Housing Resource Center 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 shall make information about the listing available to the agency and, upon request, to other public agencies, community development corporations, developers, and qualifying households.  

     (3)   The corporation 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 secretary of the corporation within 45 days of the municipality's receipt of the notice required pursuant to subsection c. of this section.

     (2)   Whenever a municipality does not exercise an option to purchase an eligible property under subsection c. of this section, 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, in which case 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. 

     e.     Notwithstanding any other provision of this section to the contrary, the corporation may purchase, sell, and convey market-rate units without offering those units to the municipality and without imposing affordability controls upon the property if the corporation determines that the purchase, sale, and conveyance furthers the purposes of this act 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.

 

     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.     Except as provided in subsection d. of this section, a municipality that purchases an eligible property pursuant to this act and dedicates it for affordable housing as required by this act shall receive two units of credit towards its affordable housing obligation for each eligible property sold and conveyed or leased.

     d.    A municipality that purchases an eligible property pursuant to this act shall receive three units of credit towards its affordable housing obligation for each eligible property sold and conveyed or leased that is restricted to occupancy by a very low income household or as supportive and special needs housing.

 

     9.    All property of the corporation is hereby declared to be public property devoted to an essential public and governmental function and purpose and shall be exempt from all taxes and special assessments of the State or any subdivision thereof. 

 

     10.  The corporation shall have the power and is hereby authorized from time to time to issue bonds in such principal amounts as in the opinion of the corporation shall be necessary to provide sufficient funds for achieving any of its corporate purposes, including those of the agency as set forth in section 20 of P.L.1983, c.530 (C.55:14K-20).


     11.  a.  The agency shall promulgate rules and regulations, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the provisions of this act.

     b.    In developing these regulations the agency shall:

     (1)   formulate criteria and procedures to govern the selection of eligible properties appropriate for dedication as affordable housing, taking into account relevant factors including acquisition costs and regional need for the production of low and moderate income housing;

     (2)   establish housing affordability controls, resale limitations, and recoup provisions to ensure eligible properties purchased in accordance with the provisions of this act remain affordable for the periods of time set forth herein and in deed restrictions of record.

 

     12.  a.  There is established within the agency a "Foreclosure to Affordable Housing Transformation Fund," which shall be a nonlapsing, 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 by the agency that may be used for the production of affordable housing and that is needed by the corporation for the purchase of eligible property.

     c.     Notwithstanding any provision of law to the contrary, the commissioner may transfer into the "Foreclosure to Affordable Housing Transformation Fund" amounts held for the production of affordable housing, 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.

     d.    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.

     e.     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.

 

     13.  This act shall take effect immediately.

STATEMENT

 

     This bill, the "New Jersey Foreclosure to Affordable Housing 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 Commissioner of Banking and Insurance, and the State Treasurer, ex officio, and four 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 from institutional lenders in order to produce affordable housing and dedicate it as such for 30 years.  The corporation 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 two units of credit towards its affordable housing obligation per property, however, if the municipality restricts occupancy to very low income households or develops the property as supportive and special needs affordable housing, it would receive three units of credit towards its affordable housing obligation.

     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. 

     If the corporation determines that the purchase, sale, and conveyance of certain property furthers its purposes, and does not violate the terms of any other provision of law or requirement, the corporation may purchase, sell, and convey market-rate units without offering those units to the municipality and without imposing affordability controls upon the property.

     Property of the corporation would be exempt from all taxes and special assessments.  The bill authorizes the corporation to issue bonds in amounts it deems necessary to provide sufficient funds for achieving any of its corporate purposes, including those of the HMFA.

     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.  The bill authorizes the Commissioner of Community Affairs to transfer into the fund 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.