New Jersey Examines Possible Bad Credit Mortgage Assistance

In an echo of the savings-and-loan industry collapse of the 1980s, a growing number of lawmakers and consumer groups are calling for measures to bail out New Jersey mortgage holders who are at risk of losing their homes in foreclosure.

Late last week, it was New Jersey Assemblyman Neil Cohen’s turn to take a whack at what is fast becoming an increasingly controversial topic: Just how far should the government go to rescue homeowners who many believe were lured into bad credit mortgages by lenders who concealed the risks?

Should taxpayers foot the bill? Private industry?

Cohen, a Union County Democrat who chairs the Assembly’s committee on financial institutions and insurance, held a special hearing in Trenton yesterday to address those questions. Judging by the often-conflicting views shared by industry and state officials and consumer groups who testified, there are no easy answers.

“What’s going on in the subprime market affects nearly every segment of the economy, whether you live in Montclair or Passaic or Vineland or Cape May,” said Cohen. “Something has to be done immediately in order to get ahead of the curve.

“The subprime market was wonderful when it was good, and now there are problems with it and there is an enormous rippling effect that could cause a meltdown in the state.”

Earlier this month, Cohen called upon the state’s attorney general to impose a 180-day moratorium on subprime mortgage loan foreclosures, to give the New Jersey housing market time to investigate and address the problems.

The moratorium would involve lenders that are going out of business, such as New Century Financial Corp., Accredited Home Lenders Holding Co., as well as firms that are in jeopardy of closing or “wherever there are suspect problems,” Cohen said. Exactly how the state would decide which lenders would be covered by the moratorium was not clear.

According to New Jersey Citizen Action, a consumer watchdog group, three of New Jersey’s Metropolitan Statistical Areas, including Camden, Newark and Edison, were ranked in the top 50 in the country in terms of the most home mortgage defaults in 2006.

“Blaming the borrower for the foreclosures and calling the current crisis a mere market correction as lenders have done is unconscionable,” said Phyllis Salowe-Kaye, the executive director of Citizen Action.

She said that while 7.6 percent of the subprime loans originated in New Jersey between 1998 and 2001 ended in foreclosure, a recent study predicts that 19.6 percent of the state’s subprime loans originated in 2006 will end in foreclosure.

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