New Jersey is looking to preserve affordable housing through new foreclosure law, NJ Spotlight reports. Governor Phil Murphy recently signed a law which would require mortgage holders to notify the municipality where the home is located when foreclosure proceedings on a home that is deed-restricted as affordable begin. The goal is to give municipalities option to buy homes that are deed-restricted for low- and moderate-income purchasers.
“We feel it is critical New Jersey does not lose any affordable homes,” said Nina Rainiero, a Spokeswoman for the Housing and Community Development Network of New Jersey on NJ Spotlight . “Public funds were invested into making these homes affordable and this bill ensures that public investment will not be lost because of foreclosure. Plus, it provides another family an opportunity to live in a home that’s affordable.”
According to Governor Murphy, the bill did not go as far as originally intended. Murphy had conditionally vetoed the measure, S-362, last May, stating that Federal Housing Administration (FHA) regulations expressly prohibit the use of FHA loans to purchase a property whose deed restriction will not expire with a foreclosure.
“This bill may actually hurt the very low- and moderate-income families it is intended to benefit by making it more difficult for these families to obtain a mortgage,” Murphy wrote in a statement. “This bill would effectively preclude all prospective affordable unit homeowners from accessing any FHA loan or insurance products.”
Murphy stated that the plan would “further disadvantage” prospective purchasers of affordable units because they would no longer qualify for a financial assistance program offered by the New Jersey Housing and Mortgage Finance Agency that includes a 3.5 percent down payment option and $10,000 to cover the down payment and closing costs.
According to Murphy, the current legislation puts the question of trying to maintain a low-cost unit in the hands of local officials, ensuring “that municipalities do not miss an opportunity to intervene in foreclosure proceedings and, where appropriate, preserve a home’s affordability controls,” Murphy wrote in the conditional veto.