SENATE, No. 1052
STATE OF NEW JERSEY
INTRODUCED MAY 2, 1996
By Senators MacINNES, KENNY, Adler, Lipman, Rice, Codey, Girgenti, Sacco, O'Connor, Casey, Lesniak, Baer, McGreevey, Zane and Bryant
An Act providing emergency mortgage assistance for certain New Jersey homeowners, supplementing P.L.1983, c.530(C.55:14K-1 et seq.) and making an appropriation.
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 Homeowners Emergency Mortgage Assistance Act."
2. As used in the act:
"Agency" means the New Jersey Housing and Mortgage Finance Agency.
"Consumer credit counseling agency" means a nonprofit consumer credit counseling agency located in this State which is approved by the agency or a housing counseling agency certified by the United States Department of Housing and Urban Development.
"Fund" means the New Jersey Homeowners Emergency Mortgage Assistance Fund established pursuant to section 11 of this act.
"Gross household income" means the total income of a husband, wife and children residing in the same household as the applicant and any other resident of the household declared by the residential mortgage debtor as a dependent for federal tax purposes.
"Housing expense" means the sum of a residential mortgage debtor's maintenance, utility, hazard insurance expense, taxes and required mortgage payment, including escrows.
"Mortgagee" means any person, corporation or entity which makes or holds a residential mortgage, and any person, corporation or entity to which that residential mortgage is assigned.
"Mortgage loan" means a loan made to a natural person or persons to whom credit is offered or extended primarily for personal, family or household purposes and which is secured by a residential mortgage.
"Net effective income" means the gross household income less city, State and federal income and social security taxes.
"Noncorporate seller" means any person making or holding a residential mortgage who is not a bank, savings bank, savings and loan association, mortgage bank or other entity in the business of making or holding residential mortgages.
"Program" means the New Jersey Homeowners Emergency Mortgage Assistance Program established pursuant to this act.
"Residential mortgage" means a mortgage, security interest or the like, in which the security is a house, real property, condominium, or cooperative apartment, which is occupied, or is to be occupied, by the debtor, who is a natural person, or a member of the debtor's immediate family, as that person's residence. This act shall apply to all residential mortgages wherever made, which have as their security such a residence in the State, provided that the real property which is the subject of the mortgage shall not have more than two dwelling units, one of which shall be, or is planned to be, the primary residence of the debtor and is debtor-occupied at the time the loan is originated.
"Residential mortgage debtor" or "debtor" means any person shown on the record of the mortgagee as being obligated to pay the note secured by the residential mortgage.
3. a. There is established in the New Jersey Housing and Mortgage Finance Agency a program to provide emergency residential mortgage assistance for a residential mortgage debtor who meets all of the requirements set forth in subsections b. through g. of this section.
b. The residential mortgage debtor's property shall be:
(1) a one or two-family owner-occupied residence;
(2) secured by a residential mortgage, or other security interest in the case of a cooperative or condominium;
(3) the principal residence of the residential mortgage debtor; and
(4) located within this State.
c. The residential mortgage debtor's residential mortgage shall not be:
(1) insured under Title II of the National Housing Act (12 U.S.C. §1707 et seq.);
(2) one for which the property securing the residential mortgage is used primarily for commercial or business purposes; or
(3) held by a noncorporate seller, unless the noncorporate seller elects, in writing, in the residential mortgage or elsewhere, to be covered by the provisions of this act.
d. The residential mortgage debtor shall have received from a mortgagee, pursuant to section 5 of this act, a notice of the mortgagee's intent to foreclose or initiate other legal action to take possession of the residential mortgage debtor's secured real property.
e. (1) The residential mortgage debtor shall be:
(a) at least 60 days contractually delinquent in making payments under the residential mortgage;
(b) a permanent resident of this State;
(c) suffering financial hardship due to circumstances beyond the residential mortgage debtor's control which renders the residential mortgage debtor presently unable to correct the delinquencies within a reasonable time and unable to make full residential mortgage payments;
(2) The residential mortgage debtor shall have:
(a) a favorable residential mortgage credit history for the previous five years, except for the current delinquency, or if residential mortgage payments have been in arrears for more than three consecutive months within this five year period, the residential mortgage debtor shall be able to demonstrate that such prior delinquency was the result of financial hardship due to circumstances beyond the residential mortgage debtor's control;
(b) a reasonable prospect of resuming full residential mortgage payments within 36 months from the date the agency receives the application for emergency residential mortgage assistance and of being capable of making payments then remaining due on the residential mortgage in full by the maturity date or a later date to be agreed upon by the mortgagee.
f. The mortgagee shall not be prevented by law from foreclosing upon the residential mortgage.
g. The residential mortgage debtor shall meet any other procedural requirements established by the agency.
For the purposes of subparagraph (c) of paragraph (1) and subparagraph (a) of paragraph (2) of subsection e. of this section, in order to determine whether financial hardship is due to circumstances beyond the residential mortgage debtor's control, the agency may consider, but shall not be limited to considering, information regarding the residential mortgage debtor's employment record, credit history, assets, net worth and past and current income.
4. a. Before any mortgagee may accelerate the maturity of any residential mortgage obligation covered under this act, commence any legal action including mortgage foreclosure to recover under that obligation, or take possession of any security of the residential mortgage debtor for that residential mortgage obligation, the mortgagee shall give the residential mortgage debtor notice as required pursuant to section 5 of this act. No mortgagee may enter judgment by confession pursuant to a note accompanying a residential mortgage loan, and may not proceed to enforce that obligation pursuant to applicable rules of civil procedure without giving the notice required pursuant to section 5 of this act and following the procedures required under this act.
b. A mortgagee shall not accelerate the maturity of any residential mortgage obligation covered under this act, commence any legal action including mortgage foreclosure to recover under that obligation, or take possession of any security of the residential mortgage debtor for that residential mortgage obligation until a determination has been made on a residential mortgage debtor's application for emergency residential mortgage assistance payments, or the applicable time periods provided for in sections 5 and 6 of this act have expired, whichever occurs first.
c. All pending legal actions by mortgagees on residential mortgages covered by this act for which sheriff's sales have not been consummated on the effective date of this act shall be temporarily stayed. The notice required pursuant to section 5 of this act shall be given to all residential mortgage debtors against whom such legal actions are pending on the effective date of this act. Such stay shall continue until the applicable time limits provided for in sections 5 and 6 have expired or a residential mortgage debtor's request for emergency residential mortgage assistance has been denied by the agency, whichever occurs first.
5. Provided that a residential mortgage debtor shall be at least 30 days contractually delinquent in residential mortgage loan payments or be in violation of any other provision of the residential mortgage loan agreement, a mortgagee who desires to foreclose upon a residential mortgage loan shall give the residential mortgage debtor written notice of that intention pursuant to section 4 of P.L.1995, c.244 (C.2A:50-56). In addition to the information contained in notices required pursuant to that section, the lender shall provide:
a. A list of consumer credit counseling agencies approved by the agency;
b. a statement that if the residential mortgage debtor is unable to resolve the delinquency or default within 30 days of the residential mortgage debtor's first contact with the mortgagee or a consumer credit counseling agency, the residential mortgage debtor may apply to the New Jersey Homeowners Emergency Mortgage Assistance Program; and
c. the address and phone number of the agency or its duly authorized agent from whom the residential mortgage debtor may obtain an application and information regarding the program.
6. a. If, upon receiving notice pursuant to section 5 of this act, the residential mortgage debtor meets with a consumer credit counseling agency, the consumer credit counseling agency shall notify, within five business days, any mortgagee whose residential mortgage loan is secured by the residential mortgage debtor's real property, and any mortgagee so notified shall not commence any legal action against the residential mortgage debtor's real property for a period not to exceed 35 calendar days from the date that the residential mortgage debtor first meets with the consumer credit counseling agency. The notice sent to a mortgagee shall include a statement informing the mortgagee that, if a residential mortgage debtor is unable to resolve the delinquency or default within 30 days of the residential mortgage debtor's first contact with either the mortgagee or a consumer credit counseling agency, the residential mortgage debtor may apply to the agency or its duly authorized agent at the address and phone number listed in the notice in order to obtain an application and information regarding the program.
b. If the residential mortgage debtor applies to the agency for emergency residential mortgage assistance, the agency shall notify, within five business days, each mortgagee whose residential mortgage loan is secured by the residential mortgage debtor's real property. The notice shall provide information necessary to identify the residential mortgage debtor and the residential mortgage loan and shall inform the mortgagee that the agency will make a determination concerning the residential mortgage debtor's eligibility for emergency residential mortgage assistance within 60 calendar days of the date the agency receives the residential mortgage debtor's application and that during this 60-day period no mortgagee may commence legal action to foreclose upon its residential mortgage with the residential mortgage debtor's.
c. If, after an in-person meeting, the residential mortgage debtor and the mortgagee reach an agreement to resolve the delinquency or default and if, because of circumstances beyond the residential mortgage debtor's control, the residential mortgage debtor is unable to fulfill the obligations of that agreement, the residential mortgage debtor may apply to the agency or its duly authorized agent for emergency residential mortgage assistance under this act within 30 days of any default in payment under the agreement previously reached. The mortgagee shall include this information with the agreement to resolve the delinquency or default. The mortgagee shall not be required to send any additional notice pursuant to this act.
d. Upon notification pursuant to section 5 of this act, if a residential mortgage debtor fails to meet with a mortgagee or consumer credit counseling agency or meet any of the time limitations specified in the notice, or if the residential mortgage debtor's application to the agency for emergency residential mortgage assistance is denied, a mortgagee may, at any time thereafter, take any legal action to enforce the residential mortgage loan without any further restriction or requirements under this act, provided however, that any action taken shall be in compliance with the provisions of P.L.1995, c.244 (C.2A:50-53 et seq.).
7. a. The agency shall make a determination of a residential mortgage debtor's eligibility within 60 calendar days of receipt of the residential mortgage debtor's application. During the time that the application is pending, no mortgagee may commence legal action to foreclose upon its residential mortgage with the residential mortgage debtor.
b. Upon a determination by the agency that a residential mortgage debtor has met the requirements for eligibility for emergency residential mortgage assistance established pursuant to subsections b. through g. of section 3 of this act and if money is available in the fund, the residential mortgage debtor shall be eligible for emergency residential mortgage assistance as set forth in section 7 of this act.
c. If the agency determines that a residential mortgage debtor has not met the conditions necessary to be eligible for emergency residential mortgage assistance established pursuant to subsections b. through g. of section 3 of this act:
(1) the residential mortgage debtor shall be prohibited from reapplying for emergency residential mortgage assistance under this act for a period of six months from the date of that determination unless there is a material change in the residential mortgage debtor's circumstances; and
(2) a mortgagee may commence legal action to enforce the residential mortgage loan agreement without any further restriction or requirement under this act, provided, however, that any action taken shall be in compliance with the provisions of P.L.1995, c.244 (C.2A:50-53 et seq.).
d. State or federally chartered or licensed banks, savings banks, savings and loan associations, credit unions or mortgage bankers shall not be the duly authorized agents of the agency for the purpose of making any decision on the approval of emergency residential mortgage assistance under this act.
8. a. If the agency determines that a residential mortgage debtor is eligible for emergency residential mortgage assistance under this act, the agency shall make payments on behalf of the residential mortgage debtor directly to each mortgagee secured by the residential mortgage debtor's real property. The agency shall pay to each mortgagee the full amount then due to that mortgagee pursuant to the terms of the residential mortgage without regard to any acceleration under the residential mortgage, or the full amount of any alternative residential mortgage payments agreed to by the mortgagee and the residential mortgage debtor. This amount shall be an amount which makes each residential mortgage current and shall include, but not be limited to, the amount of principal, interest, taxes, assessments, ground rents, hazard insurance, any residential mortgage insurance or credit premium insurance, and reasonable costs and attorneys' fees already incurred by the mortgagee.
b. If a residential mortgage debtor is eligible for emergency residential mortgage assistance payments in addition to payments made for any and all arrearages pursuant to subsection a. of this section, the agency shall make such payments, on a monthly basis, directly to each mortgagee for the full amount due. A residential mortgage debtor on whose behalf the agency is making monthly emergency mortgage assistance payments shall, in turn, make monthly payments to the agency. Such payments shall be in an amount which will not cause the residential mortgage debtor's total housing expense to exceed 35% of the residential mortgage debtor's net effective income. This shall be the maximum amount the residential mortgage debtor can be required to pay during the 36 months a residential mortgage debtor is eligible for emergency residential mortgage assistance. The residential mortgage debtor shall make the payment in the amount determined pursuant to this subsection b. to the agency at least seven days before each residential mortgage payment is due to each mortgagee. Upon receipt of this payment from the residential mortgage debtor, the agency or its duly authorized agent shall send the total residential mortgage payment directly to each mortgagee. If the residential mortgage debtor is receiving emergency residential mortgage assistance under a program other than that established pursuant to this act, the amount of the payment the residential mortgage debtor is required to make to the agency under this act shall take into consideration the amount of assistance the residential mortgage debtor is receiving under other programs.
c. The amount by which the emergency residential mortgage assistance payments made by the agency to all mortgagees exceeds the amount of payments made by the residential mortgage debtor to the agency, pursuant to subsection b. of this section, shall be a loan in that amount by the agency to the residential mortgage debtor. The loan shall be evidenced by such documents as the agency shall determine and shall be subject to repayment with interest and secured as provided pursuant to subsection g. of this section.
d. If the residential mortgage debtor fails to pay to the agency any amounts due directly from the residential mortgage debtor under this section within 15 days of the due date, the agency shall review the residential mortgage debtor's financial circumstances as provided in subsection f. of this section to determine whether the delinquency is the result of a change in the residential mortgage debtor's financial circumstances. If the delinquency is not the result of a change in the residential mortgage debtor's financial circumstances, the agency shall terminate the emergency residential mortgage assistance payments and any mortgagee may, at any time thereafter, take any legal action to enforce its residential mortgage without any further restrictions or requirements under this act, provided, however, that any action taken shall be in compliance with the provisions of P.L.1995, c.244 (C.2A:50-53 et seq.). If the delinquency is the result of a change in the residential mortgage debtor's financial circumstances, the agency shall modify the residential mortgage debtor's required payments to the agency as the agency shall determine.
e. If a mortgagee scheduled to receive payments from the agency pursuant to this act fails to receive the full amount of such payment from the agency within 30 days of the scheduled due date, or if a residential mortgage debtor receiving emergency residential mortgage assistance pursuant to this act fails to observe and perform all the terms, covenants and conditions of the residential mortgage, a mortgagee may, at any time thereafter, take any legal action to enforce the mortgage without any further restriction or requirement under this act, provided, however, that any action taken shall be in compliance with the provisions of P.L.1995, c.244 (C.2A:50-53 et seq.).
f. Payments under this act shall be provided for a period not to exceed 36 months, either consecutively or nonconsecutively. The agency shall establish procedures for periodic review of the residential mortgage debtor's financial circumstances for the purpose of determining the necessity of continuation, termination, or adjustment of the amount of the payments. Payments shall be discontinued when the agency determines that, because of changes in the residential mortgage debtor's financial circumstances, the payments are no longer necessary.
g. Repayment of amounts owed to the agency from a residential mortgage debtor shall be secured by a mortgage lien on the residential mortgage debtor's property and by such other obligation as the agency may require. The priority of any lien obtained by the agency under this act shall be determined in the same manner as the lien of a general secured creditor of the residential mortgage debtor. The lien or other security interest of the agency shall not be deemed to take priority over any other secured interest in effect against the residential mortgage debtor's property on the date emergency residential mortgage assistance payments begin. The agency may allow subordination of the emergency residential mortgage assistance lien if such subordination is necessary to permit the residential mortgage debtor to obtain a home improvement loan for repairs necessary to preserve the property. In cases of joint residential mortgage debtors who are husband and wife, where only one spouse who is an occupant of the mortgaged premises makes application for and receives emergency residential mortgage assistance under this act, the lien to secure repayment as aforesaid shall be a lien on the property of like force and effect as a lien under the "Construction Lien Law," P.L.1993, c.318 (C.2A:44A-1 et seq.).
9. Upon approving a residential mortgage debtor for emergency residential mortgage assistance, the agency shall enter into an agreement with the residential mortgage debtor for repayment of all emergency residential mortgage assistance payments made by the agency plus interest as provided in subsection e. of this section. The agreement shall provide for monthly payments by the residential mortgage debtor and be subject to the following forbearance provisions:
a. If the residential mortgage debtor's total housing expense is less than 35% of the residential mortgage debtor's net effective income, the residential mortgage debtor shall pay to the agency the difference between 35% of the residential mortgage debtor's net effective income and the residential mortgage debtor's total housing expense unless determined otherwise by the agency after examining the residential mortgage debtor's financial circumstances and ability to contribute to repayment of the emergency residential mortgage assistance.
b. If the residential mortgage debtor's total housing expense is more than 35% of the residential mortgage debtor's net effective income, repayment of the emergency residential mortgage assistance shall be deferred until the residential mortgage debtor's total housing expense is less than 35% of the residential mortgage debtor's net effective income.
c. If repayment of the emergency residential mortgage assistance loan is not completed by the date any residential mortgage is redeemed, paid and satisfied, the residential mortgage debtor shall make emergency residential mortgage assistance repayments in an amount not less than the residential mortgage payment until the emergency residential mortgage assistance loan is repaid.
d. The agency shall establish procedures for periodic review of the residential mortgage debtor's financial circumstances to determine the amounts of repayment required under this section.
e. Interest shall accrue on all emergency residential mortgage assistance made by the agency at the rate established biannually by the agency, which rate shall be reasonably related to current interest rates. Interest shall start to accrue when the residential mortgage debtor begins to make repayment under this section and shall continue to accrue only during the period in which the residential mortgage debtor is required to make repayment under this section. When any residential mortgage for which emergency mortgage assistance was made is redeemed, paid and satisfied, interest shall then accrue on all emergency residential mortgage assistance due and owing at the same rate and on the same basis as the interest on the residential mortgage loan for which the emergency residential mortgage assistance payments were made by the agency.
f. All moneys received from a residential mortgage debtor for repayment of emergency residential mortgage assistance shall be deposited in the fund.
10. A mortgagee shall not be deemed to be in violation of any statute, regulation or rule of supervisory authorities by reason of any agreement, forbearance or modification of the payment or other terms of a residential mortgage loan as a result of the emergency residential mortgage assistance program or by reason of actions taken or not taken pursuant to this program. No residential mortgage loan for which emergency residential mortgage assistance payments are being made shall be deemed to be delinquent or classified as such by supervisory authorities during the continuance of emergency residential mortgage assistance payments.
11. The New Jersey Homeowners Emergency Mortgage Assistance Fund is created as a separate account within the agency for the sole purpose of implementing the provisions of this act. No other agency funds, moneys or interest earnings shall be utilized for the purpose of this act. The fund shall be utilized only for the purposes provided in this act whenever funds are specifically authorized and appropriated by the Legislature. All moneys paid by residential mortgage debtors to the agency to repay loans provided by the agency shall be accounted for and lapsed into or transferred back to the source from which the funds were appropriated unless the funds cannot be lapsed or transferred pursuant to any other act of the Legislature. The investment and interest earnings on moneys from this fund may be used by the agency for the administrative costs of the program.
12. The provisions of the act shall not apply to any residential mortgage which becomes delinquent at any time when the agency does not have money currently available in the fund to approve applications for emergency residential mortgage assistance or to continue making emergency residential mortgage assistance payments on behalf of residential mortgages previously approved. The State Treasurer shall advise the agency of the amount available in the fund not less frequently than once each calendar quarter. In the event the amount in the fund becomes insufficient to approve applications for emergency residential mortgage assistance or to continue making emergency residential mortgage assistance payments on behalf of residential mortgage debtors previously approved, the agency shall immediately notify mortgagees that they shall no longer be subject to the provisions of this act and that they may, at any time thereafter, take legal action to enforce a residential mortgage without any further restriction or requirement under this act, provided, however, that any action taken shall be in compliance with the provisions of P.L.1995, c.244 (C.2A:50-53 et seq.).
13. The agency shall report annually to the Legislature on the effectiveness of the New Jersey Homeowners Emergency Mortgage Assistance Program.
14. The agency shall, within 90 days of enactment, promulgate regulations pursuant to the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), necessary to implement the provisions of this act.
15. There is appropriated $25,000,000 to the New Jersey Housing and Mortgage Finance Agency from the General Fund to effectuate the purposes of this act.
16. This act shall take effect on the 90th day after enactment.
STATEMENT
This bill establishes a program for providing emergency residential mortgage assistance payments on behalf of a residential mortgage debtor who is suffering financial hardship due to circumstance beyond the residential mortgage debtor's control. The bill appropriates $25,000,000 from General Fund revenues to begin the program. The New Jersey Homeowners Emergency Mortgage Assistance Program and Fund would be located in the New Jersey Housing and Mortgage Finance Agency. The agency would be responsible for managing the program, including the promulgation of regulations and procedures.
The bill establishes certain criteria concerning an existing residential mortgage loan and the situation of the residential mortgage debtor which are to be used to determine eligibility for emergency residential mortgage assistance payments. Eligibility requirements include the following: the property securing the existing residential mortgage loan has to be the principle residence of the residential mortgage debtor and is limited to a one or two-family owner-occupied residence; the existing residential mortgage loan cannot be insured by the Federal Housing Administration or made by a noncorporate seller, unless a noncorporate seller elects in writing, in the residential mortgage or elsewhere, to be covered under the act; the mortgagee has indicated to the residential mortgage debtor its intent to foreclose and payments under any residential mortgage agreement have been contractually delinquent for at least 30 days; the residential mortgage debtor is a permanent resident of the State and is suffering financial hardship due to circumstances beyond the residential mortgage debtor's control, making it impossible for the residential mortgage debtor to correct the delinquency within a reasonable time and make full residential mortgage payments; the residential mortgage debtor has applied to the agency for emergency residential mortgage assistance as required under the bill and supplied full and accurate information regarding assets and liabilities of the residential mortgage debtor; the agency determines that there is a reasonable prospect that the residential mortgage debtor will be able to resume full residential mortgage payments within 36 months after the beginning of the period for which emergency residential mortgage assistance payments are provided under the bill; the residential mortgagee is not prevented by law from foreclosing upon the residential mortgage; the agency has determined, based on the residential mortgage debtor's financial statement, that the residential mortgage debtor needs such assistance; the residential mortgage debtor has a favorable residential mortgage credit history for the previous five years, except for the current delinquency; and the residential mortgage debtor meets any other procedural requirements established by the agency.
If the agency determines that a residential mortgage debtor is eligible for emergency residential mortgage assistance, the agency will make whatever payments are necessary directly to the mortgagee to bring the residential mortgage loan current, including reasonable attorneys' fees and costs already incurred by the mortgagee. If the residential mortgage debtor is eligible for assistance beyond that required to bring the residential mortgage current, monthly payments will be made directly to the mortgagee by the agency. Payments may be made for a maximum of 36 months consecutively or nonconsecutively. During this time, the residential mortgage debtor is required to make monthly payments to the agency. The amount of the monthly payment is determined by calculating how much of household income goes toward household expenses. If household expenses are less than 35% of household income, the amount of monthly payment due the agency is equal to the amount it takes to bring household expenses up to 35% of household income. If household expenses equal or exceed 35% of household income, the residential mortgage debtor will not be required to make a monthly payment. Any amounts paid by the agency over the amount paid to the agency by the residential mortgage debtor is considered a loan and is secured by a lien on the real property of the residential mortgage debtor. Its priority is the same as any secured creditor as of the time the first payments are made by the agency on behalf of the residential mortgage debtor.
The bill appropriates $25,000,000 from General Fund revenues to start up the program. Any money received in repayment on loans made by the agency is to be lapsed back into General Fund unless otherwise specifically directed by law.
Enacts the "New Jersey Emergency Mortgage Assistance Act," appropriates $25,000,000.