| New Jersey S1599 Mortgage Stabilization and Relief Act |
| Wednesday, 25 March 2009 | |
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As previously advised, New Jersey S1599, the Mortgage Stabilization and Relief Act (the "Act") passed the Senate on 12/15/2008 and was approved on January 9, 2009. As the primary provisions that impact the servcing industry take effect on April 1, 2009, we are providing the following review.
1. The Act amends New Jersey Laws, Sec. 46:10B-51 to require a lender that issues a notice of intention to foreclose on residential property to notify the municipality where the property is located by providing a copy of the notice to its designated public officer or municipal clerk. In addition, the lender must provide name and contact information for an in-state party that will accept service of process on behalf of the lender. The lender must also state whether the property is an "affordable housing unit." If the property becomes vacant at any point after the creditor files the notice of intention to foreclose, but before the creditor or any other third party acquires title, the bill makes the lender responsible to abate any nuisance or correct any violations related to the property, including a duty to repair any cited violations. The municipality has recourse against the creditor for failure to repair, abate and correct any violations, just as if the lender was the owner. The Act imposes quarterly reporting requirements on the lender. The reports must be filed with the New Jersey Department of Banking and Insurance. The Department is charged with creating and issuing the reporting form and any necessary instructions for lenders to comply. It is anticipated that the report will request the number of foreclosures started in the first quarter, broken down by loan type and any information the Department will be tracking. The Department website is: http://www.state.nj.us/dobi/index.html Finally, the Act requires lenders to place foreclosure actions on hold for (6) six month, after the summons and complaint is filed if it meets the criteria for a "high risk mortgage loan" under the Act. Note also that a lender may not increase the interest rate of any covered mortgage during the forbearance period. However, if the borrower vacates the property, the lender can notify the court and proceed with foreclosure. "
High Risk Mortgage Loan" is a first lien mortgage loan on owner occupied property; with one of the following characteristics: Although the Act is intended to cover "subprime" loans, no definition or guidance has been provided regarding what is a subpime loan for purposes of the Act. We anticipate that regulations will be issued at some point to clarify this gap. To view the full text of the Bill, please click here.
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