Trenton – Legislation to establish the “Mortgage Assistance Pilot Program”, which would help a homeowner reduce the remaining amount of money owed on a mortgage, cleared the Senate today. The bill, S-2034, is sponsored by Senator Troy Singleton and Senator Nilsa Cruz-Perez.
“Over the course of American history, slumps in the housing market have proven to be the most significant brake on economic recovery and expansion. During bad economic times, the major impediment to housing market recovery is the negative equity that homeowners have,” said Senator Singleton (D-Burlington).
“However, private sector experiences suggest that a carefully conceived principal reduction program could achieve significant cost savings and preserve communities by reducing foreclosures,” continued Singleton. “To achieve this, S-2034 creates a “short sale” back to existing homeowners in exchange for the State to secure a percentage of equity in their property. This approach is different than foreclosures or traditional short sales because it supports home prices, lowers default risk, preserves the market value of the home, and can save taxpayers money.”
“New Jersey’s housing market, especially in our urban areas, have struggled mightily since the Recession and are threatened with taking an even bigger hurt during the COVID-19 pandemic,” said Senator Cruz-Perez (Camden/Gloucester). “In order to prevent this from happening, we want to set up a system that will give homeowners the tools they need to default on their mortgages and prevent them from becoming homeless.”
Under the pilot program, the New Jersey Housing and Mortgage Finance Agency (NJHMFA) would offer a homeowner, whose mortgage is owned by the agency, an agreement that would reduce the remaining money owed on the mortgage. The mortgage would have to be the sole mortgage on the property. The aim of the legislation is to help homeowners restructure their mortgages.
In order to qualify for the program, the homeowner’s mortgage must have a balance greater than the current value of the mortgaged property. The bill would conclude after three years.
The bill was released from the Senate by a vote of 40-0.