New Jersey-2024-S2763-Introduced

An Act concerning the transfer and dedication of foreclosed residential properties for affordable housing, supplementing Title 55 of the Revised Statutes, and amending Title 2A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) P.L. , c. (C. ) (pending before the Legislature as this bill) shall be known and may be cited as the "New Jersey Residential Foreclosure Transformation Act."

2. (New section) The Legislature finds and declares that:

a. Over the past decade there was an enormous expansion in the number of mortgage foreclosure filings in New Jersey and across the nation. The number of mortgage foreclosure actions filed in the New Jersey Courts grew from just over 20,000 in 2005 to more than 66,000 in 2009. Filings remained elevated for nearly a decade until recently returning to normal levels.

b. Many of these foreclosed residential properties remain vacant, undermining the health, safety, and economic vitality of neighborhoods, depressing their property values, and reducing revenues to municipalities.

c. It is the public policy of this State to encourage the production of low-income and moderate-income housing to serve the general welfare of all the State's residents.

d. The availability of tens of thousands of foreclosed residential properties presents a unique opportunity for the State to facilitate the purchase and dedication, or the rental, of housing units for low-income and moderate-income residents.

e. Establishment of a State program dedicated to the purpose of identifying foreclosed residential properties and facilitating their purchase and dedication for occupancy or their rental, including but not limited to low-income and moderate-income families, is in the public interest of the State.

3. (New section) As used in this P.L. , c. (C. ) (pending before the Legislature as this bill):

"Affordable" means a sales price or rent within the means of a low or moderate income household.

"Agency" means the New Jersey Housing and Mortgage Finance Agency established pursuant to section 4 of P.L.1983, c.530 (C.55:14K-4).

"Community development corporation" means a nonprofit community development corporation established pursuant to Title 15 of the Revised Statutes, Title 15A of the New Jersey Statutes, or other law of this State, with a focus on producing and operating affordable housing or housing with on-site social services for individuals with special needs.

"Community development financial institution" means an entity designated and certified by the United States Department of the Treasury as a Community Development Financial Institution pursuant to 12 CFR Part 1805.

"Contractor" means a qualified community development financial institution that enters into a contract or loan with the agency pursuant to section 5 of P.L.1983, c.530 (C.55:14K-5).

"Eligible property" means any residential property that is owned by an institutional lender as the result of a mortgage foreclosure judgment, or deed in lieu of foreclosure, owned by a municipality as the result of a tax foreclosure judgment or is subject to a nonperforming loan from an institutional lender.

"Individuals with special needs" means individuals with mental illness, physical or developmental disabilities, victims of domestic violence, ex-offenders, youth aging out of foster care, disabled and homeless veterans, individuals and households who are homeless, individuals with AIDS/HIV, and individuals in other emerging special needs groups identified by State agencies. Individuals shall be at least 18 years of age if not part of a household.

"Institutional lender" or "lender" means any lawfully constituted mortgage lender, mortgage investor, or mortgage loan servicer that owns an eligible property including, but not limited to any agency or instrumentality of the United States or the State, including, but not limited to, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Housing Administration, the Small Business Administration, the Resolution Funding Corporation, and the Federal Deposit Insurance Corporation.

"Intercreditor agreement" means an agreement among creditors that sets forth the various lien positions and the rights and liabilities of each creditor and its impacts on the other creditors.

"Low-income" means 50 percent or less of the median gross household income for households of the same size within the housing region in which the household is located, based upon the United States Department of Housing and Urban Development's (HUD) Section 8 Income Limits (uncapped) averaged across counties for the housing region.

"Low-income housing" means housing affordable according to United States Department of Housing and Urban Development or other recognized standards for home ownership and rental costs, and occupied or reserved for occupancy by households with a gross household income equal to 50 percent or less of the median gross household income for households of the same size within the housing region in which the housing is located.

"Market-rate units" means housing not restricted to low- and moderate-income households that may sell or rent at any price.

"Moderate-income" means more than 50 percent but less than 80 percent of the median gross household income for households of the same size within the housing region in which the household is located, based upon the United States Department of Housing and Urban Development's (HUD's) Section 8 Income Limits (uncapped) averaged across counties for the housing region.

"Moderate-income housing" means housing affordable according to United States Department of Housing and Urban Development or other recognized standards for home ownership and rental costs and occupied or reserved for occupancy by households with a gross household income equal to more than 50 percent but less than 80 percent of the median gross household income for households of the same size within the housing region in which the housing is located.

"Permanent supportive housing" means a permanent lease based housing unit that provides access to supportive services for individuals with special needs and households with individuals with special needs who can benefit from housing with services.

"Program" means the "New Jersey Residential Foreclosure Transformation Program" established pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill).

"Qualified community development financial institution" means a community development financial institution that has a minimum of $50 million in assets under management and a minimum of 2 years' experience in the financing and acquisition of real estate for affordable housing.

"Qualifying household" means a very low, low-, or moderate-income household, the head of which certifies in writing that the household intends to occupy the property as a principal residence for at least 12 months.

"Supportive shared living housing" means permanent lease-based supportive housing that provides access to supportive services to individuals with special needs who maintain separate leases for bedrooms and share common living space.

"Very low income" means 30 percent or less of the median gross household income for households of the same size within the housing region in which the household is located, based upon the United States Department of Housing and Urban Development's (HUD) Section 8 Income Limits (uncapped) averaged across counties for the housing region.

"Very low-income housing" means housing affordable to, according to United States Department of Housing and Urban Development or other recognized standards for home ownership and rental costs, and occupied by, or reserved for occupancy by, households with a gross household income equal to 30 percent or less of the median gross household income for households of the same size within the housing region in which the housing is located.

4. (New section) a. There is established in the New Jersey Housing and Mortgage Finance Agency the "New Jersey Residential Foreclosure Transformation Program," which shall be subject to the powers of the agency, as designated pursuant to section 5 of P.L.1983, c.530 (C.55:14K-5).

b. As part of the annual report made by the agency pursuant to section 40 of P.L.1983, c.530 (C.55:14K-40), the agency shall include a section to set forth the current nature and extent of foreclosure activity in New Jersey and shall depict changes in foreclosure activity from the prior calendar year. The report shall set forth a complete operating and financial statement covering the program's operations, transactions and holdings during the preceding year, including but not limited to:

(1) the total number of re-capitalized market rate units.

(2) the total numbers of very low-income, low-income, and moderate-income units that were produced for sale and for rental in the preceding year pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), their locations by municipality, and the sources of financing used.

5. (New section) In addition to the powers of the agency described in section 5 of P.L.1983, c.530 (C.55:14K-5), the agency shall have the following powers:

a. The agency in furtherance of the program may enter into contracts with any person, corporation, or entity which the agency determines to be necessary or appropriate to carry out its responsibilities under P.L. , c. (C. ) (pending before the Legislature as this bill). Such contracts shall be subject to the procedures adopted pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. In carrying out the agency's duties under P.L. , c. (C. ) (pending before the Legislature as this bill), the agency may employ the consultingservices of real estate and loan portfolio asset management firms, property management firms, auction marketing firms , brokerage services firms, appraisers and such other consultants and employees required in the judgment of the agency, notwithstanding the provisions of Title 11A of the New Jersey Statutes.

c. (1) Within 180 days after the adoption of P.L. , c. (C. ) (pending before the Legislature as this bill), the agency shall adopt a funding plan for the program utilizing the "Foreclosure to Affordable Housing Transformation Fund" established pursuant to section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill). The agency may directly fund the program through revenue generated by the fund. The agency shall have the authority to alter its funding plan as the Executive Director of the agency deems necessary

(2) The funding plan as required by paragraph (1) of this subsection shall include but not be limited to identifying underwriting standards and credit standards for the acquisition of foreclosed residential properties or mortgage assets.

6. (New section) a. (1) The agency may enter into contracts or loans, or both, with no more than two qualified community development financial institutions to negotiate, bid for, and purchase eligible properties and mortgage assets for the purpose of producing affordable housing as part of the program. In selecting contractors from among qualified community development financial institutions, the agency shall accord a strong preference to qualified community development financial institutions that have substantial experience in lending in New Jersey and substantial knowledge of New Jersey real estate markets. The agency may enter into contracts or loans, or both, with a partnership or consortia of organizations, as long as a qualified community development financial institution is the lead entity, or a partnership or consortia of multiple qualified community development financial institutions.

(2) Should the agency contract with a community development financial institution for the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), the contracts shall specify the amounts, schedules, and types of funding to be provided by the agency to the qualified community development financial institutions, the repayment schedule for the portion of that funding to be repaid, and targeted goals of affordable housing to be produced. The agency may condition funding and goals upon the availability of funds to the program. The contracts shall specify reasonable administrative costs sufficient to enable the qualified community development financial institutions to exercise their obligations pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill). The contracts shall set forth criteria for instances when the purchase, sale, lease, and conveyance of properties as market-rate units furthers the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. (1) As soon as possible after entering into a contract to purchase an eligible property or mortgage asset for use as affordable housing by the agency or its contractors, the municipality in which the property is located, unless the eligible property is already owned by the municipality as a result of a tax foreclosure judgment, shall be afforded a 45-day period of time within which the municipal governing body may opt to purchase the property in lieu of the agency in accordance with the provisions set forth in P.L. , c. (C. ) (pending before the Legislature as this bill). The municipality may waive this right through written notice to the agency or, if so designated by the agency, its contractors, prior to the expiration of the 45-day period.

(2) Those eligible properties purchased by the qualified community development financial institutions or the agency and designated pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) for use as affordable housing shall be restricted for occupancy as affordable housing for a period of up to 30 years. The restriction shall be set forth in the deed and recorded in the office of the county recording officer of the county wherein the real estate is situated. Affordability controls shall be imposed upon purchase and maintained upon transfer in accordance with the provisions of the Uniform Housing Affordability Controls promulgated by the agency.

c. (1) As soon as possible after entering into a contract to purchase an eligible property, but not less than ten business days after the date the agency or its contractors enters into the contract, the agency or its contractors shall provide written notice by personal service or certified mail to the governing body of the municipality within which the eligible property is located. The notice shall inform the governing body of the municipality's opportunity to purchase the eligible property, the municipality's right of first refusal to purchase the property, and the municipality's right to use monies deposited in its affordable housing trust fund, except that the written notice shall not be required if the eligible property is already owned by the municipality as a result of a tax foreclosure judgment.

(2) As soon as possible after entering into a contract to purchase an eligible property, but not less than ten business days after the date the agency or its contractors enters into the contract, the agency or its contractors shall list the property on agency's website. The listing shall contain basic information about the property, including but not limited to location, condition, and information relating to the estimated fair market value of the property.

(3) The agency or its contractors, after entering into a contract to purchase an eligible property, shall allow public agencies, community development corporations, developers, and qualifying households reasonable access to the eligible property for purposes of inspection.

d. (1) In order to exercise its right to purchase an eligible property, the governing body of the municipality shall provide written notice to the agency or, if so designated by the agency, its contractors, within 45 days of the municipality's receipt of the notice required pursuant to subsection c. of this section.

(2) The governing body of a municipality may adopt a resolution authorizing the mayor or other designated municipal official to respond to notices received pursuant to subsection c. of this section. The resolution may establish parameters for that exercise of authority, including but not limited to the total amount of funds that may be expended and the amount that may be expended for each unit of housing.

(3) A municipality may use any available funding sources to purchase eligible properties or mortgage assets through the agency pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), except for funds that are dedicated to another purpose by law, covenant, or other obligation.

(4) Whenever a municipality does not exercise an option to purchase an eligible property under this section, the agency or its contractors may convey the property for occupancy as affordable housing subject to a 30-year maximum deed restriction to another public agency, a community development corporation, a developer, or a qualifying household or the contractors may lease the property for occupancy as affordable housing subject to a 30-year maximum deed restriction. A municipality that does not exercise an option to purchase an eligible property under this section may adopt a resolution authorizing the agency or its contractors to use monies deposited in that municipality's affordable housing trust fund, up to and including the negotiated purchase price of the eligible property, and apply those funds to the purchase of the eligible property.

e. Notwithstanding any other provision of this section to the contrary, the agency and, if authorized by contract, its contractors, may purchase, sell, lease, and convey market rate-units without offering those units to the municipality and without imposing affordability controls upon the property if the purchase, sale, lease, and conveyance of those properties as market-rate units satisfy criteria established pursuant to contract in accordance with subsection a. of this section and does not violate the terms of any other provision of law or requirement, including those governing the use of funds used to make the purchase.

f. All purchases, sales, leases, and conveyances of property by qualified community development financial institutions exercised pursuant to this section shall be deemed to lessen the burdens of government in furthering the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

7. (New section) a. A municipality that purchases an eligible property pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) shall sell and convey, or lease, the housing unit or units acquired within 60 days of the date of purchase, unless it is not possible to do so due to practical or market conditions. In the event that an eligible property is not conveyed or leased within 180 days of the date of purchase, or remains vacant for a 180-day period during the pendency of affordability controls, the agency may commence proceedings to take control of the property and to sell and convey or lease the property in furtherance of the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill) and deed restrictions of record.

b. The governing body of a municipality that purchases an eligible property pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) may, by resolution, authorize the private sale and conveyance, or the lease, of a housing unit or units acquired pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill). Every deed and rental agreement shall contain a provision specifying the requirement that the housing unit or units shall remain available to low- and moderate-income households for a period of at least 30 years.

c. Except as provided in subsection d. of this section, whenever the agency, its contractors, or a municipality purchases an eligible property pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) from monies deposited in the municipality's affordable housing trust fund and dedicates the property for affordable housing, as required by P.L. , c. (C. ) (pending before the Legislature as this bill), that municipality shall receive two units of credit towards its affordable housing obligation for:

(1) each eligible property sold or conveyed as a for-sale unit or leased as rental housing;

(2) each unit of affordable housing dedicated for permanent supportive housing other than supportive shared living housing; and (3) each new bedroom dedicated in supportive shared living housing.

d. The total number of additional units of credit beyond the actual units of housing provided pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), when combined with any additional credits that may apply towards a municipality's affordable housing obligation, shall not exceed 25 percent of whatever the municipality's total cumulative new construction affordable housing obligation may be. No unit or bedroom shall receive the additional units of credit described in P.L. , c. (C. ) (pending before the Legislature as this bill) in addition to any other type of additional units of credit that may be available towards a municipality's affordable housing obligation.

8. (New section) a. For the purposes of this section:

"Foreclosure-impacted municipality" means a municipality that documents a minimum of 10 units of housing that have been foreclosed upon and have remained unsold on a Multiple Listing Service for at least 60 days; and

"Units of housing" means units of housing that are not age-restricted and are habitable year-round, including but not limited to, single family homes, condominium units, cooperative units, and mobile homes with at least two bedrooms.

b. (1) Prior to the date that a foreclosure-impacted municipality's development fees or payments-in-lieu fees are scheduled to transfer to the "New Jersey Affordable Housing Trust Fund" pursuant to section 8 of P.L.2008, c.46 (C.52:27D-329.2) or section 9 of P.L.2008, c.46 (C.52:27D-329.3), the municipality may adopt a resolution committing the expenditure of municipal affordable housing trust fund monies. These funds shall be used to produce very low-income, low-income, and moderate-income housing. The resolution shall authorize the transfer of a minimum of $150,000 from the municipality's municipal affordable housing trust fund to the "Foreclosure to Affordable Housing Transformation Fund" for use by the agency or its contractors for the provision of affordable housing pursuant to this section and the procedures specified in section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill).

(2) The resolution may authorize the mayor or other designated municipal official to exercise the municipal powers set forth in section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill). The resolution may establish parameters for that exercise of authority, including but not limited to purchase price levels for the exercise of that power.

c. (1) The agency or its contractors shall use funds transferred pursuant to subsection b. of this section to produce very low-, low-, and moderate-income housing within the municipality transferring funds pursuant to this section, with a deed restriction specifying that the housing unit or units shall remain available to low- and moderate-income households for a period up to 30 years.

(2) If the agency or its contractors are unable to utilize some or all of the funds provided to produce affordable housing within the municipality within two years of the transfer of such funds to the "Foreclosure to Affordable Housing Transformation Fund," the funds shall be returned to the municipality as soon as practicable after the two-year anniversary of such transfer. From the date any such funds are returned to the municipality, the municipality shall be required to commit the funds in accordance with section 8 of P.L.2008, c.46 (C.52:27D-329.2) or section 9 of P.L.2008, c.46 (C.52:27D-329.3), as applicable, within the time constraints set forth in those sections or within six months after the date of transfer of funds back to the municipality, whichever is later.

d. Affordable housing created through the "Foreclosure to Affordable Housing Transformation Fund" pursuant to this section shall receive bonus affordable housing credit as set forth in subsection c. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), even if the municipality does not exercise its right to purchase the property.

e. No agency of the State of New Jersey shall take any action to transfer funds from a municipal affordable housing trust fund to the "New Jersey Affordable Housing Trust Fund" established pursuant to section 20 of P.L.1985, c.222 (C.52:27D-320) when such funds are designated to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill) during the timeframes established in this section.

9. (New section) a. There is established within the agency a "Foreclosure to Affordable Housing Transformation Fund," which shall be a non-lapsing, revolving fund and which shall be the repository for funds appropriated or otherwise made available for the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), and any interest earned thereon. The fund shall be administered by the agency, in accordance with its authority under section 5 of P.L.1983, c.530 (C.55:14K-5) to manage funds for housing programs.

b. The agency may transfer into the "Foreclosure to Affordable Housing Transformation Fund" any amounts held or received by the agency that may be used for the production of affordable housing and that is needed by the agency or its contractors for the purchase of eligible property.

c. The agency may use annually up to fifteen percent of the monies available in the fund for the payment of any necessary administrative costs related to the administration of this program.

d. Revenue generated through the mechanisms established pursuant to section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill) exceeding the funding plan developed pursuant to subsection c. of section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill) may be appropriated by the agency for additional foreclosure prevention programs.

10. N.J.S.2A:17-38 is amended to read as follows:

2A:17-38. a. When a sheriff or other officer makes a sale by virtue of an execution or executions to the sheriff or officer directed, the sheriff or officer shall, within 30 days thereafter, make and file, with his bill of costs or execution fees, in the office of the clerk of the court out of which the execution or executions issued, a true statement and calculation, in order of time, of the execution or executions by virtue of which the sale was made, the amount or amounts due thereon, respectively, at the time of the sale, the time or times of sale and the amount of the sales.

b. (1) When calculating the amount due thereon, as described in subsection a. of this section, the sheriff or officer shall additionally collect $350 per sale to be utilized by the [fund] "Foreclosure to Affordable Housing Transformation Fund" within the New Jersey Housing and Mortgage Finance Agency [established in section 6 of P.L.2021, c.34 (C.55:14K-99)] as established in section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill).

(2) The revenues obtained from these increased amounts, after deduction of any actual administrative costs incurred by the sheriff or officer in carrying out the provisions of this subsection, shall be transmitted no later than the first day of each quarter by the sheriff or officer to the [fund] "Foreclosure to Affordable Housing Transformation Fund" within the New Jersey Housing and Mortgage Finance Agency as established in section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill) with an accounting of collections and foreclosure actions during the corresponding quarter.

(3) The provisions of paragraphs (1) and (2) of this subsection shall not be applied when the purchaser is financing the sale through the use of a first-time homebuyer loan insured by the Federal Housing Administration.

c. The statement shall be certified under the hand of the officer making and filing it, and shall be conclusive against the officer only. If there be more sales than one, the statement shall be made and filed within 30 days after the final sale.

(cf: P.L.2021, c.34, s.9)

11. This act shall take effect immediately.

STATEMENT

This bill, the "New Jersey Residential Foreclosure Transformation Act," establishes the "New Jersey Residential Foreclosure Transformation Program" within the New Jersey Housing and Mortgage Finance Agency (HMFA) for the purpose of purchasing eligible properties, including foreclosed residential properties from institutional lenders, properties owned by municipalities as a result of tax foreclosure, and certain properties subject to a nonperforming loan, and dedicating the properties for occupancy as affordable housing.

The bill requires HMFA to include in its existing annual report a section to set forth the current nature and extent of foreclosure activity in the State, and a complete operating and financial statement covering the program's operations, transactions, and holdings during the year.

The bill empowers HMFA to purchase eligible properties to produce affordable housing and dedicate it for those purposes for up to 30 years. The bill authorizes HMFA to enter into contracts or loans, or both, with no more than two experienced, financially sophisticated, community development financial institutions to enhance the ability of the corporation to fulfill its purpose of producing affordable housing.

If HMFA or its contractors purchase an eligible property from monies deposited in a municipality's affordable housing trust fund, the municipality would receive two units of bonus credit against its fair share affordable housing obligation for each eligible property sold or conveyed as a for-sale unit or leased as rental housing; for each unit of affordable housing dedicated for permanent supportive housing, other than supportive shared living housing; and for each new bedroom dedicated in supportive shared living housing.

The bill provides that the number of additional units of credit that a municipality may receive towards its affordable housing obligation for property purchased and dedicated as affordable housing under the bill cannot exceed 25 percent of the municipality's affordable housing obligation. The bill specifies that a municipality cannot receive both additional units of credit for producing a unit of affordable housing under this bill, and additional units of credit for that unit under another provision of law.

The bill establishes a mechanism through which a "foreclosure-impacted municipality," one that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days, can insulate its affordable housing trust funds from the laws that require the transfer of its trust fund monies to the "New Jersey Affordable Housing Trust Fund." A foreclosure-impacted municipality can accomplish this by adopting a resolution committing the expenditure of its municipal affordable housing trust fund monies for the production of affordable housing and authorizing the transfer of at least $150,000 of its municipal affordable housing trust fund monies to HMFA for the production of affordable housing.

The bill requires HMFA to use funds transferred from a foreclosure-impacted municipality to produce affordable housing within that municipality. If the corporation is unable to use all of the transferred funds within two years of the date of transfer, HMFA will return the remaining funds to the municipality and the municipality will have at least six months from the date the funds are returned to commit the funds in accordance with other provisions of law. During this period, all municipal trust fund monies designated for the purchase of foreclosed properties will be protected from transfer to the State. A municipality will receive bonus credits, as otherwise provided by the bill, for affordable housing produced by the corporation or by one of its contractors pursuant to this mechanism.

The bill allows HMFA to establish criteria to identify the circumstances when the purchase, sale, lease, or conveyance of market-rate units furthers the purposes of the program. The corporation, or its contractors, will be able to purchase, sell, lease, or convey market-rate units in accordance with those criteria without imposing affordability controls upon the property provided the transaction does not violate any other law or requirement.

The bill establishes the "Foreclosure to Affordable Housing Transformation Fund," to be administered by HMFA, and to serve as the repository for funds appropriated or made available for the program. The bill require the sheriff or officer, when calculating the amount due at the sheriff's sale, to consider an additional $350 per sale for certain sales, to be utilized by the fund, or by other foreclosure prevention programs as determined by HMFA.