Governor Corzine has signed into law legislation that imposes additional requirements on lenders and provides for financial assistance to homeowners through establishment of the Mortgage Stabilization Program and the Housing Assistance and Recovery Program.

Most provisions of the law – enacted when Governor Corzine signed Senate Bill No. 1599 on January 9, 2009 – take effect April 1, 2009. The New Jersey Housing and Mortgage Finance Agency is charged with creating rules for implementation of the homeowner assistance programs.

Under the new law, among other provisions, creditors who move to foreclose on certain loans must:

  • Submit quarterly reports to the state

  • Be subject to a six-month forbearance period for "high-risk mortgages," as defined by the law, in the two years following enactment

  • Notify the municipality of an intention to foreclose on a residential mortgage within that municipality

Through the Mortgage Stabilization Program, for first mortgage loans in "imminent danger of foreclosure," the state will provide a non-amortizing stabilization loan of up to $25,000, to be matched by a lender loan. The lender will finance the latter for the remaining outstanding balance of the original loan. Both loans are to be repaid from net proceeds from the sale of the property. Homeowner eligibility is subject to certain conditions, including income limitations.

The Housing Assistance and Recovery Program provides for the execution of lease-purchase agreements between homeowners and "sponsors." Under this provision, the state will provide financing to certain nonprofit and public entities, or "sponsors," to whom homeowners will convey their property and then pay affordable rent for the period of a lease. Ultimately, the homeowner will buy the property back from the sponsor. Sponsors, selected through application to the program, must meet certain requirements and conditions.

Requirements for admission to housing projects have also been modified as part of this law.

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This newsletter is a periodic publication of Ballard Spahr LLP and is intended to alert the recipients to new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and specific legal questions you have.