The Star-Ledger

Bill Designed To Protect NJ Homeowners In Foreclosure

The Star-Ledger — Friday, May 13, 2011

By Star-Ledger Guest Columnist
Assemblyman Gary S. Schaer

New Jersey is the ninth state in the nation in the number of foreclosures occurring, up an average of more than 26 percent annually since 2007.

But that doesn't mean that families about to lose their homes should be preyed upon.

That is exactly what is happening, however, each and every day we fail to pass critical legislation protecting homeowners from unscrupulous real estate investors who call themselves foreclosure consultants.

In 2007, I introduced the Foreclosure Rescue Fraud Prevention Act, which has twice passed the Assembly by overwhelming bipartisan votes of 79-0 and 78-0. The bill, sponsored in the state Senate by Sen. Shirley Turner (D-Mercer), recently passed the Senate Commerce Committee and awaits a final vote by the full Senate.

New Jersey residents deserve the protection provided by this legislation.

Imagine having lost your job, exhausting your savings and retirement accounts, and being faced with the choice of feeding your children, paying for prescription drugs or making your mortgage payment. Now, imagine someone shows up on your doorstep telling you they have a way for you to remain in your home. The pressure to keep a roof over your family's head may lead you to believe outlandish promises.

Sadly, this scenario has become all too common in a cottage industry that does not have a homeowner's best interests in mind.

The schemes are well documented — phantom help, bailout, bait and switch. The state Attorney General's Office has sued "foreclosure consultants" and the FBI is investigating them. Nevertheless, without a new law, our state will remain the Wild West for foreclosure consultants; the state Legislature has not passed any laws that would bring transparency and rules to this industry.

In fact, hair stylists are required to undergo more government scrutiny than foreclosure consultants.

The proposed legislation brings foreclosure consultants into the sunshine by requiring them to obtain a license, post a bond and meet certain criteria in how they structure their contracts.

Most critically, the bill requires consultants to complete all of the services for which they were hired — prior to accepting one penny from a homeowner. In order to enforce this, we allow a homeowner a two-year window to come back and void the deal if any of the legislation's requirements are violated.

Another essential component is the requirement that homeowners receive at least 82 percent of fair market value for their property. Right now, we have seen instances of homeowners receiving pennies on the dollar, if they collect anything at all.

The 82 percent number is based on the generally accepted percentage banks try to recoup in a short sale.

If the big banks recover this much, so too should distressed homeowners.

The bill has received broad support from a wide coalition of organizations, including the New Jersey Bankers, Realtors and Land Title Associations, and has the backing of the consumer watchdog groups such as New Jersey Citizen Action and Legal Services of New Jersey.

I am also honored the bill has garnered bipartisan support from Gov. Chris Christie's Department of Banking and Insurance.

Further, similar legislation has been signed into law in Illinois and Minnesota by Democratic and Republican governors, respectively.

Throughout U.S. history, when the economy has not been at its best, fly-by-night industries have sprouted up to take advantage of other people's misfortune. That does not mean, however, that government should stay on the sidelines while innocent people are taken advantage of.

The Foreclosure Rescue Fraud Prevention Act would go a long way toward bringing necessary transparency, accountability and equity to a system many agree is, at best, predatory.

Assemblyman Gary S. Schaer (D-Passaic) is chairman of the Assembly Financial Institutions and Insurance Committee.

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