A2123

An Act concerning the prevention of residential foreclosures and supplementing and amending P.L.2008, c.127.

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 Foreclosure Prevention and Neighborhood Stabilization Trust Fund Act.”

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

a. Many thousands of New Jersey residents have lost their homes and thousands of other homeowners are at risk of losing their homes in the immediate future as a result of the mortgage foreclosure crisis.

b. Foreclosure involves the loss of a family’s home, which is often the family’s most valuable asset, and foreclosure undermines the stability, health and economic vitality of neighborhoods, particularly the in urban neighborhoods where the a disproportionate share of foreclosures take place.

c. Foreclosures cost homeowners who own property close to foreclosed homes billions of dollars in lost property value and result in millions of dollars of additional expenses to State and local governments.

d. Foreclosures, particularly in urban neighborhoods, often result in abandonment and deterioration of the property, creating additional financial pressures on local governments and severely destabilizing the neighborhoods where the properties are located.

e. It is possible to reduce the number of foreclosures, and thus mitigate the negative secondary effects that result from foreclosures, by providing resources to both public and not-for-profit entities to assist individuals at risk of foreclosure, and to acquire, and rehabilitate or demolish vacant and abandoned properties resulting from foreclosures.

f. In light of the direct relationship between foreclosure and family and neighborhood instability the imposition of a fee on creditors filing foreclosure complaints will partially mitigate the harmful effects of foreclosures on the neighborhoods of the State.

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

“Department” means the Department of Community Affairs.

“Qualified foreclosure prevention entities” shall mean entities approved by the department based on their demonstrated experience in providing foreclosure prevention assistance to low and moderate income homeowners and on evidence that their employees have received training in foreclosure prevention counseling.

“Trust fund” shall mean the Foreclosure Prevention and Neighborhood Stabilization Revolving Trust Fund established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

4. (New section) a. There is established in the Department of Community Affairs a Foreclosure Prevention and Neighborhood Stabilization Revolving Trust Fund, for monies collected and accruing pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill) and such other monies as may be appropriated or otherwise made available to the trust fund by any agency of State government for the purpose of supporting the activities in this section.

b. The department may utilize up to five percent of the revenue deposited in the fund, or $500,000, whichever is less, annually for the purpose of contracting with qualified vendors to provide training for qualified foreclosure prevention entities to provide training and technical assistance to local governments and nonprofit entities conducting neighborhood stabilization activities, and to provide information, outreach, educational programs for borrowers at risk of foreclosure.

c. The department may utilize up to $500,000 in the first year that the trust fund is in effect, and up to $300,000 in each subsequent year that monies are deposited into the trust fund, for the purpose of collecting, analyzing and disseminating foreclosure data, including but not limited to the data collected pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill).

d. Except as otherwise provided for in this section, the first $10 million deposited into the fund during any fiscal year shall be allocated as grants to qualified foreclosure prevention entities for the purpose of maintaining or expanding their foreclosure prevention counseling and related activities, including but not limited to foreclosure mediation services, legal services related to the foreclosure process. Any monies deposited in the fund, but not allocated, by the end of the fiscal year shall be available for use in the next fiscal year.

e. The department shall require quarterly reports from entities receiving funds under this section, setting forth the use of the funds, including the number of households that received counseling or participated in mediation, and the number of mediations which were successful in modifying the terms of the loan.

f. The department, pursuant to the “Administrative Procedure Act,” P.L.1986, c.410 (C.52:14B-1 et seq.), shall adopt regulations necessary to effectuate the purpose of this section.

5. (New section) a. Any amount collected by the Foreclosure Prevention and Neighborhood Stabilization Revolving Trust Fund in excess of $10 million during any fiscal year shall be made available as loans or grants to public bodies, including local governments, public authorities, non-profit community development or housing organizations, or other entities capable of carrying out an or all of the activities set forth in this section in order to further the stabilization of neighborhoods destabilized by foreclosures and vacancies, including acquiring properties that have been foreclosed upon by creditors or purchasing vacant properties on which a notice of foreclosure has been served, restoring vacant properties for productive use, demolition of vacant properties in order to eliminate blight and public nuisance, maintenance of vacant properties, including all costs related to code enforcement and nuisance abatement activities by local government.

b. Whenever a local government utilizes monies from the fund for the purpose of code enforcement or nuisance abatement activities with respect to privately owned properties or properties for which a foreclosing creditor has the responsibility to maintain pursuant to section 17 of P.L.2008, c.127 (C.46:10B-51), the local units shall take all steps possible to recover those funds from the property owner or the foreclosing creditor, including but not limited to the recourse provided for in section 23 of P.L.2003, c.210 (C.55:19-100). Any such funds received by the local unit and any other funds recovered by the by any entity as a result of the sale of land or properties acquired or restored with funds provided under this section may be retained by the local unit, or other entity, solely for the purposes set forth in this section.

c. When allocating grants and loans pursuant to this section, the Department shall give priority to areas with high rates of foreclosure and vacancy in residential dwellings.

6. (New section) a. A temporary surcharge of $800 is imposed upon each complaint for foreclosure filed in the Superior Court of New Jersey. All money collected as a result of the surcharge shall be forwarded by the Clerk of Superior Court to the State Treasurer for deposit in the Foreclosure Prevention and Neighborhood Stabilization Revolving Trust Fund for use pursuant to sections 4 and 5 of P.L. , c. (C. ) (pending before the Legislature as this bill). The creditor shall not add the amount of the surcharge to the total amount owed by the borrower.

b. This section shall expire five years following its effective date, or until the number of residential mortgage foreclosure complaints filed in the State during a calendar year is less than 20,000, whichever shall occur sooner as determined by the department.

7. Section 15 of P.L.2008, c.127 (C.46:10B-49) is amended to read as follows:

15. a. (1) Except as provided in paragraph (2) of this subsection, a creditor that institutes a mortgage foreclosure action in the Superior Court of New Jersey shall report to the Department of Banking and Insurance, on a quarterly basis and on a form promulgated by the department, information about the number of mortgage foreclosure actions filed by the creditor in the State. The report shall also include, but not be limited to, information, segregated by county and municipality, pertaining to the status and disposition of each foreclosure action specifying whether such action was disposed of through sheriff’s sale, short sale, or loan modification, and the terms of the modification, refinancing, or any other outcome. The report shall be provided by the creditor no later than 30 days following the end of each quarter.

A copy of the quarterly report also shall be submitted to the Department of Community Affairs in the same manner and time as prescribed herein for submission to the Department of Banking and Insurance.

(2) When a creditor or other person is required by any Rule of Court or otherwise by law to file electronically with the Superior Court of New Jersey pleadings in an action to foreclose on a mortgage, and the Administrative Office of the Courts is capable of collecting and transmitting the data set forth in paragraphs (1) through (8) of subsection b. of this section in electronic form, the creditor or other person shall transmit the data to the Superior Court, in a manner prescribed by the Superior Court, as part of the pleadings in an action to foreclose a mortgage. The Administrative Office of the Courts shall collect the electronically submitted data and transmit it to the Department of Banking and Insurance, which shall produce and make available on its website quarterly reports, as set forth in subsection b. of this section.

b. The Department of Banking and Insurance shall produce a report, on a quarterly basis, detailing information about mortgage foreclosures filed by creditors and the status and disposition of foreclosure actions in each county and in each municipality of the State, and shall make the report available to the public on its website. The report shall [describe the type of mortgage] identify each mortgage being foreclosed on by county, municipality, status, and disposition based on the following categories:

(1) prime rate mortgages [foreclosed upon];

(2) subprime rate mortgages [foreclosed upon];

(3) fixed rate mortgages [foreclosed upon];

(4) adjustable rate mortgages [foreclosed upon];

(5) nonconforming mortgages, as defined by Fannie Mae, Freddie Mac, or their successors;

(6) mortgages insured by the Federal Housing Administration [foreclosed upon];

(7) mortgages insured by the Veteran's Administration [foreclosed upon]; and

(8) any other category of classification the department deems appropriate to effectuate the purpose of this section.

c. The Department of Banking and Insurance, pursuant to the "Administrative Procedure Act," P.L.1986, c.410 (C.52:14B-1 et seq.) shall adopt regulations necessary to effectuate the purpose of this section. Following the enactment of P.L.2009, c.296 (C.2A:50-69 et al.), the department, in consultation with the Administrative Office of the Courts, shall adopt regulations necessary to effectuate the purpose of this section.

(cf: P.L.2009, c.296, s.4)

8. This act shall take effect on the first day of the second month next following enactment.

STATEMENT

This bill establishes a Foreclosure Prevention and Neighborhood Stabilization Trust Fund in the Department of Community Affairs. Money allocated to the fund will be utilized for foreclosure prevention activities, such as legal services to low and moderate income homeowners in danger of losing their homes to foreclosure, mediation services, and training for non-governmental groups who assist homeowners in addressing the foreclosure process. The fund will be financed through a temporary $800 surcharge placed on each foreclosure complaint filed in the State. The surcharge will expire five years after the effective date of this bill, or when the annual number of foreclosure complaints filed Statewide is less than 20,0000, whichever occurs first.

The Department of Community Affairs shall provide up to $500,000 from the fund to train qualified vendors to provide training to local governments and non-profit entities undertaking neighborhood stabilization efforts. The department may utilize $500,000 in the first year of the fund, and $300,000 each year thereafter, for the purpose of collecting and disseminating foreclosure data. Following these disbursements from the fund, the next $10 million collected during the fiscal year shall be allocated to qualified non-profit entities for the purpose of maintaining or expanding their foreclosure prevention programs. Entities receiving these funds shall issue quarterly reports detailing the success of their foreclosure prevention programs.

Any funds disbursed in excess of $10 million shall be provided to local governments, public authorities, or non-profit community development or housing organizations to mitigate the negative secondary effects of foreclosures in residential neighborhoods. These funds may be used to purchase, repair, or demolish vacant properties on which a notice of foreclosure has been served. This legislation requires a municipality that utilizes money from the fund for code enforcement or nuisance abatement purposes to make a diligent effort to recover the expended funds from the property owner or the creditor seeking to foreclose on the property.

The bill requires creditors that report to the department on a quarterly basis to also provide information, segregated by county and municipality, pertaining to the status and disposition of each foreclosure action and specifying whether such action was disposed of through sheriff’s sale, short sale, or loan modification, and the terms of the modification, refinancing, or any other outcome. Under the provisions of the bill, the report shall be provided by the creditor no later than 30 days following the end of each quarter and a copy of the quarterly report also shall be submitted to the Department of Community Affairs in the same manner and time as prescribed for submission to the Department of Banking and Insurance.