Senate President Also Seeking DCA Intervention on Rising HMFA Mortgage Rates
TRENTON – Senate President Richard J. Codey (D-Essex) today sent a letter to the Commissioner of the New Jersey Department of Banking and Insurance (DOBI) seeking intervention to thwart a potentially new crisis looming on the horizon for troubled homeowners. During a meeting of roughly 200 members of the New Jersey Association of REALTORS last week, it was brought to Codey’s attention that a number of homeowners are now contemplating intentionally defaulting on their mortgages in order to qualify for a mortgage restructuring.
“A number of real estate representatives expressed concern today that this threat is a very real possibility because many banks are telling their clients that they are unwilling to discuss restructuring unless they are already in default on their mortgage,” said Codey. “This poses a serious concern for both homeowners and lending institutions. We need to investigate the severity of this threat and identify steps that can be taken both to prevent this practice and find a suitable compromise that will keep people in their homes and banks in business.”
Sen. Codey also sent a letter to Department of Community Affairs Commissioner Joseph Doria asking him to investigate the recent increases in mortgage rates offered to first-time homebuyers through the “Smart Start” program administered by the NJ Housing and Mortgage Finance Agency (HMFA). With rates jumping almost a full percentage point from 6.875 percent to 7.75 percent, realtors last week stressed that the increases have posed a significant burden on many prospective first-time homebuyers, even forcing some to forgo their dreams of homeownership at this time.
A full copy of the letters sent to DOBI and DCA today are included below:
October 29, 2008
Commissioner Steven M. Goldman
NJ Department of Banking & Insurance
20 West State Street – PO Box 325
Trenton, NJ 08625
Dear Commissioner Goldman:
I write to you about a very serious matter that was brought to my attention while attending a meeting of the New Jersey Association of REALTORS wherein we discussed the current crisis surrounding the housing market. One of the concerns, echoed by a number of representatives from the real estate industry, is that there is a new fraud potential on the horizon because of the lack of cooperation homeowners are receiving from banks when they attempt to restructure their mortgages.
Already, a number of real estate agents have had clients who were told by their banks that they cannot discuss mortgage restructuring with them unless they are already in default on their mortgage. One agent stressed that she had a client who was contemplating intentionally defaulting on their mortgage so that they could pursue a restructuring agreement with their bank. The fear by many in the real estate industry is that this might spawn a trend among homeowners who may see it as their only option to obtain a better mortgage rate.
With the breadth and scope of the current economic crisis still undetermined, this fear may very well be realized if the credit crunch continues, spawning an entirely new concern. It is with this in mind that I ask your department to investigate the matter and identify any possible means by which DOBI can intervene to help thwart this potential crisis.
Your attention to this matter is greatly appreciated.
Richard J. Codey
October 29, 2008
Commissioner Joseph V. Doria, Jr.
NJ Department of Community Affairs
101 South Broad Street – PO Box 800
Trenton, NJ 08625-0800
Dear Commissioner Doria:
As the ex officio chairman of the NJ Housing and Mortgage Finance Agency (HMFA), I am writing to you about a matter of significant concern, given the current housing and mortgage crisis. While attending a meeting of the New Jersey Association of REALTORS last week, it was brought to my attention that the interest rate for mortgages offered by the HMFA’s “Smart Start” first-time homebuyers program has increased twice in roughly the last month from 6.875 percent to 7.75 percent.
According to a number of real estate representatives, this increase has posed such a burden on first-time homebuyers that some fear they may be faced with foreclosure and others have been forced to forgo pursuing a home entirely at this time.
Given the current state of the housing market, it’s important that we do all we can to assist first-time homebuyers in their pursuit of the American dream. Homeownership benefits not only families, but the communities in which they invest.
At this time, I ask that you look into this matter to determine if, in fact, this is the best interest rate that can be offered to New Jersey’s first-time homebuyers. Your attention to this matter is greatly appreciated.
Richard J. Codey