Evictions in New Jersey occur at a very high rate. There were 160,000 eviction filings in New Jersey from July 2015 to June 2016, including 38,000 in Essex County alone,51 disproportionately affecting people of color and households struggling to get by.52
HELPING TENANTS WHO FACE EVICTION
Eviction creates instability for renters and makes it exceedingly more difficult for lower-income families to find their next apartment. In his groundbreaking 2016 book, Evicted, Matthew Desmond chronicles the vicious cycle of evictions from privately owned housing that disproportionately burdens women with children. The housing instability they suffer becomes chronic and, as a consequence, these women have fewer safe and sanitary housing choices with each eviction. In addition, frequent school turnover makes it harder for their children to learn.53
Move quickly to adequately fund New Jersey’s statewide Legal Services system to enable it to provide legal representation to low-income tenants facing eviction.
Legal representation, including court appearances when required, is essential to ensure that tenants’ rights are fully protected and enforced. In recent years both New York City and New York state have dramatically increased funding for civil legal services in a full range of civil cases, becoming the national leaders in providing such support. New York City has focused especially on housing—tenancy and foreclosure—to avoid the devastating human and social costs of housing loss on families and individuals, initiating a multi-year plan to increase funding by tens of millions of dollars. Early results suggest this funding has had great effect; one city official cited a 24% reduction in evictions since 2015.54
The situation is little better for lower-income homeowners in New Jersey facing mounting mortgage debt. Mortgage delinquency rates far outpace the national average55 and New Jersey leads the nation in foreclosures, which affect 2.8% of homes with a mortgage.56 In June 2017, one of every 607 homes in the state was in some stage of the foreclosure process, a rate 2½ times the national average.57 Foreclosure in New Jersey is not just a problem in cities: Salem, Sussex, Camden, Warren, and Atlantic counties led the state in the rate of foreclosures, a crisis that has hit rural, suburban, and urban areas and lower-income as well as middle-income families. Yet the foreclosure crisis disproportionately hurts families at the lower end of the income scale and people of color.
Policy reform can mitigate the risks of foreclosure.
The Judiciary’s Foreclosure Mediation Program should be funded and expanded to meet actual needs by establishing a permanent state funding source.
The New Jersey Judiciary administers the Foreclosure Mediation Program, which provides trained, court-sponsored mediators to help homeowners and lenders reach a resolution through mortgage modification and restructuring.58 These services are available at no cost to homeowners facing foreclosure action. If taken to scale, mediation has the potential to divert new foreclosures from the courts, empowering borrowers to renegotiate loan terms and streamlining the process for both borrowers and lenders. For this program to live up to its potential, the state will need to retain additional trained mediators.
Similar programs have helped reduce repeat foreclosures in a number of Pennsylvania counties.59
Amend the law governing the State Foreclosure Mediation Program to require lenders to consider loan modifications.
The program presently does not stop the foreclosure process; a lender may foreclose on a borrower at any point during the mediation. This gap puts borrowers at a tremendous disadvantage when negotiating and serves as a disincentive for them to participate in the process. The Home Ownership Security Act should be changed to suspend the foreclosure process during mediation.
Empower the state Department of Community Affairs (DCA) to partner with and fund nonprofit providers to help borrowers avoid foreclosure.
Although existing state foreclosure mitigation programs (e.g. New Jersey Home Saver and New Jersey HomeKeeper)60 provide short-term financial assistance to borrowers who are in default, they fail to connect existing mediation efforts to longer-term, sustainable solutions such as loan modifications. While nonprofit housing counseling agencies provide assistance to borrowers facing foreclosure, these counseling efforts are largely unfunded. Moreover, these nonprofits would be more effective if they could work with borrowers who pursue mediation through the county courts. The current fragmented approach harms borrowers and impedes long-term family financial stability. A more holistic, integrated approach to foreclosure prevention is needed.
REPURPOSING ABANDONED HOMES
New Jersey leads the country in “zombie” foreclosures, where no one can track the actual owner of a home to remedy property blight issues. These properties, which are often stuck in the “pre-foreclosure” stage for years, become vacant when a homeowner receives a notice of intent to foreclose, is unable to secure a modification of the loan or sell the house even at a loss, and, consequently, moves out. When a bank forecloses and then sells the mortgage, the property is stuck in legal limbo. This problem disproportionately affects urban areas, although rural and suburban locales are also hit hard. New Jersey accounts for one fifth of “zombie” properties nationwide.61
As of June 2016, there were more than 4,000 “zombie” properties throughout the state. Beyond the harm done to the household that was foreclosed upon, “zombie” properties cause collateral damage to their neighborhoods. Property values decline and vacant homes become health and safety hazards. The abandoned properties create a ripple effect that extends to the surrounding neighborhood.62
Create a state Housing and Mortgage Finance Agency (NJHMFA) program to purchase vacant foreclosed residential properties from institutional lenders for rehabilitation as necessary and occupancy as affordable homes.
The priority must be to keep people in their homes through mortgage modification and related strategies. But the reality is that 38,000 vacant and abandoned residential properties throughout the state63 create blight and nuisance. Although New Jersey has powerful laws enabling municipalities to reclaim such properties, there is no direct source of state funding to do so. NJHMFA should leverage its resources to create and fund a program to purchase such vacant foreclosed properties.