Foreclosure is never easy, and it might get a lot more painful for banks and mortgage lenders in the state of New Jersey.
A new bill, the New Jersey Home Ownership Preservation Act, was approved today by the state’s budget committee by a vote of 8 to 3, which among other things, would require lenders to pay $2,000 to the state before foreclosing on a property.
The money would be deposited into a trust fund to help pay for housing counselors assisting borrowers with workout arrangements.
The move is designed to stem the recent rise in completed foreclosures, which nearly doubled from the first to second quarter of the year.
While it may seem harsh, proponents of the bill noted that it’s much cheaper than the typical $60,000 price tag associated with a completed foreclosure (though $62,000 is greater than $60,000).
The bill would also require mortgage lenders to give borrowers six months to iron out a loan modification or alternative solution before foreclosing on a property.
Opponents of the bill, including MBA executive director Robert Levy, argued that the bill would just extend the misery and place an additional burden on already stressed lenders.
The bill is now headed to the full Assembly for a vote to determine if it will become law.
Back in mid-June, Massachusetts extended the time period lenders must wait before initiating foreclosure proceedings from 30 to 90 days, effectively lowering the number of new filings (Philadelphia took similar action).
The question remains whether these initiatives will simply delay the problem or actually provide meaningful change.