TRENTON – A bill has been introduced that would provide a grace period to help troubled homeowners prevent foreclosures for a period of time.
Sen. Ronald L. Rice, (D-28), Newark has introduced legislation designed to address New Jersey’s foreclosure crisis by creating a 6-month forbearance period.
The intent is to provide homeowners an opportunity to straighten out their finances before a foreclosure could proceed.
“New Jersey homeowners are facing the threat of foreclosure at an increasingly alarming rate,” Rice said in a release.
“Folks who are working hard and playing by the rules find themselves paying into an underwater home loan, and many, through no fault of their own, just can’t keep up.”
S1746 would require that, whenever a creditor seeks to foreclose on an underwater residential mortgage loan the creditor must grant a residential borrower a six-month period of forbearance in order to give them time to work out loan modifications which would be amenable to both the lender and the borrower.
Under the bill, the creditor would be required to notify the borrower of this option at the time they’re being served a summons and complaint in a foreclosure action.
Borrowers would be eligible if the property has been the borrower’s primary residence for two years prior to the foreclosure action, and if they owe a principle amount on a mortgage that is in excess of 110 percent of the fair market value of the property.
The lender and the borrower would work out mutually-amenable loan modifications through the Judiciary’s Foreclosure Mediation Program or some other means of finding common ground.
Under the bill, a creditor would be exempt from the forbearance requirement if, at the time of foreclosure, they offer a sustainable loan modification – a principal write-down or a reduction in the borrower’s monthly mortgage payment up to 30 percent or less of the borrower’s gross monthly income – that meets court approval.