NJ’s Community Wealth Preservation Program Plans to Give Citizens a Helping Hand to Buy Foreclosures

New Jersey is trying to make it easier for family members or low-income buyers to purchase foreclosed homes.

NJ bill tries to keep foreclosed homes within families and discourage investor flipping

DEC 3, 2021 | REPUBLISHED BY LIT: DEC 4, 2021

New Jersey is trying to make it easier for family members or low-income buyers to purchase foreclosed homes by removing barriers during sheriff’s sales — and discourage big investors from flipping foreclosed homes — under a bill that passed through committees this legislative session.

Currently, a winning bidder must pay 20% of the purchase price of the property at the end of a sheriff’s sale. The bill, A1834/S2130, would lower that deposit amount to 3.5% for those intending to live in the home for at least seven years.

Bidders would also have more than the current 30 days to put the rest of the money down. Under the bill, buyers could take up to 90 business days to complete a sale, and interest would not accrue on the balance for the first 60 days after a sale. If bidders can’t complete the sale through no fault of their own — such as when the appraised value is less than what they purchased the property for — they won’t be responsible for penalties or fees.

“A lot of investors will come in from out of town and they are able to purchase the properties because they have deep pockets of cash and that’s their line of business,” said Assemblywoman Britnee Timberlake, D-Essex, the bill’s sponsor. “This is about creating equity for that person who wants to save their home. It allows people who want to purchase not for the purposes of flipping, but to live in the community and to be invested in the community.”

New Jersey consistently sits near the top of rankings for having the highest number of foreclosures in the country. The Garden State ranked fourth in the nation with one out of every 1,667 properties up for foreclosure in the third quarter of 2021, according to an analysis of filings from Attom Data Solutions.

Sheriff’s sales mostly halted through Nov. 15, 2021 under the state’s foreclosure moratorium. New Jersey had 8,860 pending foreclosure cases as of mid-November.

It’s unclear whether the full Senate and Assembly will hear the bill during the lame duck period — each chamber has at least one more voting session scheduled. The legislation has moved slowly and faces opposition from banking and sheriffs lobbies.

It first passed a Senate committee last July and an Assembly committee in November, after expiring during the previous session. Gov. Phil Murphy’s office declined comment on whether the governor would sign the bill if it makes it to his desk.

Under the potential “Community Wealth Preservation Program,” the bill would give the foreclosed-upon New Jerseyans or their next of kin the first shot when the property goes up for auction, or the right of first refusal at the bid price.

“This legislation creates opportunities for local residents to achieve the dream of home ownership and the associated wealth generation it can provide which they have been systematically prevented from previously achieving through decades of discriminatory housing lending policy and practices,” said Scott Millard, CEO of Paterson Habitat for Humanity. “Local residents cannot compete against for-profit landlords — who have almost no interest beyond profit — in bidding wars for properties. This legislation helps to address all of these issues.”

Bidders could also get pre-approval from residential mortgage lenders if they plan to live in the home.

To receive the financial incentives, the bill requires buyers to live in the house as their primary residence for seven years, with exceptions if the bidder or their spouse dies, becomes disabled, divorces, is deployed by the military, or is foreclosed on. Next of kin would not need to follow that occupancy rule. People who violate the requirement could be fined $100,000.

Half of any fines and fees collected will be given to the town where the foreclosed property is located to use on low- and moderate-income housing programs; the other half would be spent on enforcement and administrative matters.

The Sheriff’s Association of New Jersey “strongly supports the premise” of the bill, but additional oversight in the legislation would be “troublesome” for sheriffs offices to implement, said Morris County Sheriff James Gannon. For instance, sheriffs would be required to check that the buyers live in the homes for seven years as required.

“We are concerned it will just add costs to the system and that it will not further the goals of the sponsor to keep families in family homes,” said Michael Affuso, executive vice president of the New Jersey Bankers Association. “The result will nearly always be a slower sheriff’s sale and a more cumbersome process.”

Affuso said there could be other ways to protect distressed homeowners, such as creating or beefing up programs within the state Housing and Mortgage Finance Agency to provide financing to save homes at risk of foreclosure.

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