NJ Law Closes ‘Loophole’ That Puts Affordable Housing At Risk

It’s heartbreaking when families lose their homes because of money troubles. But it’s even worse when it happens on a large scale because of a legal loophole, according to a state lawmaker who represents Essex County.

Last week, Gov. Phil Murphy signed S-362 into law, which “provides that deed restrictions on affordable housing units are not extinguished by foreclosure proceedings.”

Sen. Ronald Rice of the state’s 28th District – a primary sponsor of the legislation – said will close loopholes in the state’s foreclosure laws that are putting low and moderate-income properties across the state at risk.

“Last year, largely because of our state’s lengthy home foreclosure process, New Jersey finalized nearly 70,000 pending proceedings and led the country in the number of foreclosures,” Rice said.

“It’s heartbreaking to know so many families are losing their homes,” Rice continued. “But the situation is compounded when affordable housing properties go into foreclosure and are then stripped of the deed restriction that ensures their affordability. In times like this, when more and more New Jersey residents are faced with difficult economic conditions, we need more affordable housing protections… not less.”

Here's the problem, Rice explained in a statement:

“New Jersey is required to reserve a percentage of homes for low and moderate-income households with deed restrictions that ensure that affordable housing obligations are consistent throughout the state and that they are preserved. However, under current regulations, these deed restrictions are permitted to be extinguished during foreclosure proceedings. Given that a significant portion of properties under foreclosure are also a part of affordable housing obligations, the removal of these deed restrictions is inconsistent with the constitutional mandate to provide affordable housing throughout the state.”

According to Rice, the new law will amend the foreclosure law to require that the municipal clerk and the Commissioner of Community Affairs be made aware whenever a debtor is given notice that a foreclosure is pending on residential property that is a unit of affordable housing subject to affordability controls. The law will require a creditor serving a “Notice of Intention to Foreclose” on an affordable housing unit to serve a copy of the notice on the municipal affordable housing liaison.

Under the law, the foreclosing lender would also be required to furnish the debtor with the address and phone number of the municipal affordable housing manager and the New Jersey Housing and Mortgage Finance Agency. It will remove the ability of a foreclosing lender to use alternative methods of foreclosure not requiring a public sale when the housing unit involved is subject to affordability controls, Rice said.

Rice represents Bloomfield, Glen Ridge, Irvington, Newark and Nutley.

• See related article: Essex County Town Vs. Wells Fargo Bank: 'They Stole Our Wealth'
• See related article: Essex County Towns Have Among Worst Foreclosure Rates In N.J. - Is Your Town Here?
• See related article: Hundreds Of Section 8 Apartments Preserved In Newark's South Ward

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