This New Jersey Bill is Going to Boost Homeownership Among Low-Income Families and Bidders
New Jersey (NJ) has consistently been in the news because several of its counties have seen some of the highest foreclosure rates in recent times. According to a report from ATTOM, In May 2022, Garden State in NJ (New Jersey) had 1 out of every 2,346 houses in foreclosure – second only to Illinois.
Now, the great news is that New Jersey’s state legislature has recently (29th June, 2022) passed a bill–NJ A793–that offers first bidding rights on auction homes or properties to those who have previously experienced foreclosures over independent investors – who usually just buy and flip them instead. This ruling boosts the chances for lower-income families, lower-income bidders, and community non-profits to purchase previously foreclosed houses and properties.
The bill has already been sent to Gov. Phil Murphy. It is essentially a rework of the sheriff’s sale process that enables the common people more flexibility and rights in terms of reclaiming their lost properties or simply buying previously foreclosed ones.
According to the Community Wealth Preservation Program, people from New Jersey with foreclosure histories (or their nominees or next of kin) would get the first rights to place their bids on previously foreclosed properties that go up at auctions.
If an interested candidate can’t assemble their finances to place their bids in the auctions, they can request any of their community development groups of non-profits to buy their desired property instead. If a non-profit group wins their bid, it would be mandatory for them to restore and sell the house back to the interested candidate (or to another lower-income group family) at no more than 120% of the county’s median income, or else rent the home to a family making below 100% of the county’s median income.
Why Does Something Need to Be Done?
A report published by the House Financial Services Committee showed that ever since the 2008 housing crisis, private investors and private financial institutions purchased several properties in foreclosure (more so in black counties) nationwide. A recent Rutgers study showed that nearly half the residential property sales in Newark went to private institutional investors. According to the study’s authors, this contributed to, “rapidly rising rents, decreased homeownership, higher barriers to affordable housing production goals, renter displacement, and less stable communities.”
According to assemblywoman Britnee Timberlake, who sponsored the bill, “It’s really to keep the wealth in the community, to empower residents through homeownership and not just serve as low hanging fruit to outside investors who are trying to come in and capture these properties for pennies on the dollar.”
How Does the Bill Work?
(According to Northjersey.com)
The New Jersey bill will seek to reduce the impact of private investors on the ongoing housing crisis within the community. Once the bill is signed, the winning bidder would only have to pay a deposit of 3.5% of the overall amount instead of 20% (which is the current rate).
Bidders intending to live in the property for seven years 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.
Under the bill, bidders can buy the property using financing if they provide documentation showing they were pre-approved by a financial institution regulated by the Department of Banking and Insurance. They must also prove they have completed eight hours of homebuyer education counseling through the U.S. Department of Housing and Urban Development.
If the buyer finances the bid and doesn’t live in the property for the required seven years, he can be fined $100,000, except in extenuating circumstances, like if the bidder or close family member died or became disabled.
If a community nonprofit wins the bid and intends to sell the property, the house must include a 30-year deed restriction that keeps the sale price affordable for low-income families to live in.
As of now, Gov. Phil Murphy is yet to comment on whether or not he is going to sign the bill into law. The bill was passed by the full Senate during a marathon session held on Wednesday – 29th June, 2022. This session also included discussions on dozens of other bills and the state budget.
Are you looking for information or services related to the foreclosure of your property or home?
At NJ Foreclosure Rescue, we offer various services that can help you before, during, and after foreclosures. Some of our services are collecting and filing documents, short sales, renovation loans, mortgage forgiveness, home equity lines, and a lot more. We always want to help you find the best solutions to save your property or home! For more information, visit our website or give us a call today!
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