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Could New Jersey Help Abate Puerto Rico’s Foreclosure Crisis?

Hurricane MariaAs the island continues its long recovery from the devastating impact of Hurricane Maria, Puerto Rico is on the cusp of a dire foreclosure epidemic. According to a December 2017 report by The New York Times, around one third of Puerto Rico homeowners were behind on their mortgage payments as 2017 wound down. Tens of thousands have not made payments for months, and around 90,000 borrowers became delinquent as a consequence of Hurricane Maria, as reported by the data firm Black Knight Inc. But what could the State of New Jersey possibly have to do with any of that?

According to reporting by NJ.com, advocates for Puerto Rican homeowners have asked New Jersey to use investor leverage to buy more time for island homeowners to remain in their homes while they attempt to catch up or recover from the aftermath of the storms. Jim Baker of the Private Equity Stakeholder Project has asked the New Jersey State Investment Council to intercede on behalf of Puerto Rican homeowners with private equity firms Blackstone Group and TPG Capital, two of the firms positioned to foreclose on many of the affected Puerto Rican mortgagors.

At the direction of the Federal Housing Authority, there are currently foreclosure moratoriums in place for affected homeowners in Puerto Rico, however this moratorium is due to expire on March 19. Baker asked the Jersey State Investment Council to halt further investments in Blackstone and TPG in hopes they will extend the foreclosure moratoriums. According to NJ.com, Blackstone has already agreed to a meeting with the advocates.

In a January 12 letter, however, Kristen Sieffert, President of Finance of America's reverse mortgage division (a Blackstone affiliate), told advocacy groups that Finance of America had “virtually no discretion about whether or not to initiate foreclosure proceedings,” due to having to follow HUD guidelines on their FHA-backed reverse mortgages.

"Given that [Finance of America's reverse mortgage division] does not have control over foreclosure timelines with respect to insured loans, we believe the best outcome for homeowners in this area would be an extension of HUD's foreclosure moratorium and intend to advocate for this extension directly to HUD,” Sieffert said in the letter.

TPG Spokesman said in a statement that “We are committed to continuing to act with care and understanding during this difficult time." He added that TPG had instructed the company that services its mortgages in Puerto Rico freeze foreclosures and grant forbearance requests in the meantime.

On February 1, HUD announced it was awarding more than $1.5 billion in aid to help Puerto Rico recover from the damages wrought by Hurricanes Irma and Maria last year. In late January, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency announced a joint plan to give favorable consideration under the Community Reinvestment Act (CRA) regulations to banks located outside of the most heavily impacted areas who work to help revitalize and stabilize the damaged locales.

About Author: David Wharton

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