Cohen Unveils Comprehensive Plan to Save Family Homes from Foreclosure During National Mortgage Crisis

COHEN UNVEILS COMPREHENSIVE PLAN TO SAVE FAMILY HOMES FROM FORECLOSURE DURING NATIONAL MORTGAGE CRISIS

Provide Three-Year Payment Plan for Families in Foreclosure to Protect Their Homes; Bill Would Give Families More Notice of Changes to Interest Rates

(ROSELLE) - Assemblyman Neil M. Cohen, chairman of the Assembly Financial Institutions and Insurance Committee, today unveiled legislation he has crafted to help give the thousands of New Jersey families caught-up in the recent mortgage market upheaval an opportunity to retain their homes.

Cohen's bill aims to directly help three classes of homeowner/borrowers affected by the mortgage crisis:  homeowners whose mortgage interest rates are about to reset; borrowers who currently are in foreclosure proceedings and are awaiting issuance of a final judgment; and borrowers whose homes are slated for sale but who retain the "right to redemption" under the law.

"The national mortgage meltdown has turned countless dreams of home ownership into nightmares," said Cohen (D-Union). "We must toss a lifeline to families on the brink of losing their homes, so they can work to rebuild their finances and keep their loved ones secure. With the current economic uncertainty, families must be given every chance to reclaim their credit."

For homeowners whose rates are about to reset, Cohen's measure would require lenders to provide 120-day, 90-day, 60-day, and 30-day notices of the impending rate reset and the opportunity to refinance the loan.  The notices would note in plain language what the borrower's current payment is and what it would be after the interest rate change.

Cohen's bill would offer all borrowers the opportunity to continue their payments at the much lower pre-reset interest rate for up to three years.  Families whose cases have yet to reach the final foreclosure judgment stage would not see their cases decided unless the lender has offered the three-year window to keep making payments.

The bill also would create a "subordinate lien" provision for all three classes of homeowners.  A subordinate lien would consist of any existing arrears on the principal and interest payments at the pre-reset rate, and any costs or fees due to the lender - such as property taxes or homeowners insurance - without interest being charged.  A subordinate lien would not be collectible until the future sale or transfer of the property.

"This approach is a straight-forward and practical response to a complex issue," said Cohen. "For thousands of families, it could be a last-minute reprieve that staves off homelessness."

Cohen said homeowner/borrowers would benefit from this legislation, since they would be able to remain in their homes without disruption to their family or children and continue to pay a lower interest rate.  Moreover, any payment of arrears would not immediately be collectable by the lender.

Cohen's plan also would help municipalities that contain properties facing foreclosure.  Allowing borrowers facing foreclosure to continue living in their homes would keep the properties in question on the tax rolls, helping to preserve local financial resources while saving the municipalities the cost of maintaining abandoned and unused properties that otherwise would have become public eyesores and safety hazards.

Finally, mortgage lenders would benefit from having a continuing revenue source. Many lenders have had to close due to declining revenues linked to the loss of mortgage payments coupled by the additional expenses of having to own and maintain a foreclosed property. Cohen noted lenders do not want to be real estate owners, particularly since the drop in real estate values means many lenders cannot get back their original investment.

New Jersey law permits an owner who has been foreclosed six months to buy back their home. Cohen's proposed legislation would afford these individuals the opportunity in that six-month window to get their home back under pre-reset rates.

Cohen said his plan would assist everyone until the economy improves and the real estate market and lending markets stabilize.

According to published reports, foreclosure rates in February 2008 were up by 60 percent nationally over the same time from last year; a total of 223,651 homes received at least one notice from a lenders related to an overdue payment. Nearly half of the homes had slipped into default for the first time.

New Jersey saw 53,652 foreclosure filings in 2007, a 34 percent increase over 2006.

Nationwide, over 2.2 million foreclosure filings - including default notices, auction sale notices and bank repossessions - were reported on 1.3 million properties in 2007, a 75 percent increase over the prior year. In excess of 1 percent of all U.S. households were in some stage of foreclosure during the year.

"Foreclosure rates will continue to rise and more families will face the real prospect of losing their homes unless we take swift action," said Cohen. "This is a plan that would keep countless young families from facing economic ruin."

Cohen aims to introduce the bill when the Legislature returns in May from its annual budget break so that it may be taken up for immediate action.

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