Gov. Chris Christie’s latest rejection of legislation to make vacant foreclosed homes available as affordable housing has left a broad coalition of proponents scratching their heads about what to try next to deal with New Jersey’s foreclosure crisis.
In twin vetoes, the governor suggested he would try to divert some federal foreclosure relief funding into Hurricane Sandy aid and would continue to fight to use municipal affordable- housing money to patch holes in the state budget.
Michael Cerra, legislative analyst for the New Jersey League of Municipalities, acknowledged that while the news was not good, he and other advocates are still trying to decipher what the governor’s words mean for future legislation and the state housing market.
“Everyone knows that foreclosure is a major issue, an issue for municipalities,” Cerra said. “We’re still suffering the effects of a real-estate downturn,” that has left New Jersey with the nation’s second-highest foreclosure rate after Florida.
The league was part of an unusually broad coalition of housing and business groups that supported one of the measures rejected by the governor on Monday, S2157, the Residential Foreclosure Transformation Act. Christie rejected a previous version of the bill, which aimed to help municipalities and community groups turn vacant foreclosed properties into affordable housing.
This time, Christie classified his new veto of RFTA as “conditional,” allowing for legislative changes.
But state Sen. Raymond Lesniak (D-Union), a principal sponsor, called the veto “absolute” because the governor’s conditions “don’t make any sense.”
“Whoever wrote that veto message did not understand the legislation or the federal program,” Lesniak said. Proponents said they were particularly confused because Christie mistakenly used similar language to conditionally veto another Lesniak bill, S2202. While also related to foreclosure, that bill addressed a federally funded program, not state housing policy.
That bill, S2202, directed the state Housing and Mortgage Finance Agency to show more flexibility in spending $300.5 million in federal aid, making sure it went for the intended purpose of helping struggling homeowners keep their properties.
As one of the states hardest hit by high unemployment and a high foreclosure rate, New Jersey received the funds from the U.S. Department of the Treasury. The program, launched in 2010, has succeeded in some of the target states and has been augmented to a total of $7.3 billion.
New Jersey’s program, called HomeKeeper, lagged behind those in other states, approving only 56 loans in 2011. In October 2012, Community Affairs Commissioner Richard Constable 3d told a legislative hearing that he had replaced program managers and relaxed loan criteria.
A U.S. Treasury Department report found that through the third quarter of 2012, New Jersey had spent $9.6 million of the money on assistance and just under $7 million on administration, outreach and counseling. Cumulatively, the eligible states spent $742 million on assistance and just under $200 million on the other categories.
S2202 would have required HomeKeeper to use $50 million of the money toward principal reductions of mortgages. In conditionally vetoing that bill, Christie said HMFA “will use the federal funds to create other foreclosure prevention programs” such as mortgage modifications.
But the governor also suggested spending the foreclosure money on people “in arrears to a temporary hardship other than un- or under-employment,” key criteria for the federal aid, “such as recovering from a natural disaster.”
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