‘Save New Jersey Homes Act of 2008’ Would Also Allow for Suspension of Foreclosure Process
TRENTON – In an effort to combat the foreclosure crisis affecting the nation, a bill sponsored by Senator Nia H. Gill which would provide protections for homeowners facing substantial mortgage interest rate increases or foreclosure was approved by the Senate today by a vote of 39-0, receiving final legislative approval.
“Today in New Jersey, homeowners are losing their homes due to the national mortgage crisis created by the practices of some subprime, predatory lenders,” said Senator Gill, D-Essex and Passaic, and Chair of the Senate Commerce Committee. “The State must provide some level of protection for our citizens who may be on the brink of, or already face, financial insolvency, trying to cope with soaring mortgage payments. Through this bill, we’re ensuring that our State property owners are given the notice and flexibility they need to survive crushing mortgage increases.”
The bill, S-1853, known as the “Save New Jersey Homes Act of 2008,” would require mortgage companies to notify borrowers at 60 and 30 days prior to the date that the interest rates on their home loans reset. These notices would include information regarding the current interest rate under the introductory terms of the mortgage, the date at which the interest rate resets, an explanation of how the reset interest rate would be calculated, and the best estimate by the creditor of the amount of the monthly payment after the reset date. The notice would also include a list of alternatives the borrower can pursue prior to the reset date, including refinancing or renegotiating with the creditor, or applying for an extension on the introductory interest rate.
“Mortgage rate increases shouldn’t be a mystery to those homeowners paying them,” said Senator Gill. “Notification of rate increases should be a common sense approach to ensure that borrowers have ample notice before the rate on their home loan is increased.”
Under the legislation, borrowers would be able to apply for an extension on the introductory mortgage interest rate, up to three years, if they could not afford the monthly mortgage payments after the interest rate resets. They would have to complete a certification of extension prior to the reset date, indicating that they do not have sufficient monthly income, after deductions for necessary living expenses, to pay the monthly payment on the post-reset mortgage, and that they agree to continue payments during the extension period of principal and interest calculated at the introductory rate. Eligible borrowers would still have to pay back the interest deferred during the extension when they sell their homes, and would forfeit the deferment of interest if the borrower fails to make regular payments during the extension.
“A three-year grace period from the interest rate reset would give homeowners a chance to weather massive increases in their monthly mortgage payments,” said Senator Gill. “Many borrowers are lured into a home loan with promises of a low introductory rate, only to see their out-of-pocket expenses sky-rocket after the interest rate resets. Rather than force people from their homes, we want to give our State’s residents the time and flexibility to find balance between their income and expenses.”
Finally, the bill would allow eligible foreclosed borrowers to obtain a three-year suspension on foreclosure proceedings on an introductory rate mortgage. Homeowners who had already exhausted their three-year extension of introductory mortgage interest rates would not be eligible for foreclosure suspension. Senator Gill noted that giving foreclosed homeowners a three-year window to straighten out their finances and pay off any costs of fees associated with foreclosure gives them a chance to avoid losing their home.
“Homeowners deserve every chance to avoid foreclosure, and by suspending the foreclosure process, we’re giving people a chance to do just that,” said Senator Gill. “We need to recognize that sometimes, responsible homeowners face financial crisis, and cannot meet their monthly mortgage obligations. For those willing to make a good faith effort on their mortgage payments, they need to be given a chance to correct their finances in the unfortunate event that they face the specter of foreclosure.”
The bill now Governor’s Desk to be signed into law. It was approved by the Assembly earlier today by a vote of 73-5 with one abstention.