Help Homeowners Avoid Foreclosure

Section 1. The private housing finance law is amended by adding a new article 28 to read as follows:

ARTICLE 28

HOME MORTGAGE BRIDGE LOAN

ASSISTANCE Section 1250. Short title.

1251. Legislative findings and purpose.

1252. Definitions.

1253. Home mortgage bridge loan assistance.

1254. Notice, timing and stay of proceeding requirements.

1255. Eligibility.

1256. Temporary payments of assistance.

§ 1250. Short title. This article shall be known and may be cited as the "home mortgage bridge loan assistance act of 2019".

§ 1251. Legislative findings and purpose. (1) Findings. The legislature hereby finds and declares that:

(a) this state and the United States have experienced the collapse of a sizeable primary and secondary real estate market bubble which few foresaw and many now suffer the wealth destructive effects of;

(b) this state and the United States are in consequence now suffering an economic slowdown as consumers trim spending and concentrate upon

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD05837-01-9

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paying down debt, while financial institutions and other business firms trim investment expenditures pending a return of consumer spending;

(c) the economic slowdown afflicting this state and the United States has driven large numbers of residents into temporary involuntary unemployment or underemployment, thereby lowering incomes, spending and investment yet further, while rendering debt payment correspondingly more difficult for many;

(d) there is in consequence a danger that many otherwise credit worthy homeowners' capacity to remain current on mortgage payments will deteriorate yet further, resulting in widespread default, multiple costly foreclosure proceedings, distress sales of homes, consequent further distress to financial institutions' balance sheets and solvency, growing rates of avoidable homelessness, and significant deterioration of abandoned housing stock and neighborhoods;

(e) foreclosed homes, abandoned housing stock and consequently deteriorating buildings and neighborhoods not only detrimentally affect those who needlessly lose their homes and the neighborhoods in which they reside, but also drain wealth from otherwise healthy lending institutions and non-distressed home mortgage borrowers, thereby harming the health of the broader economy yet further;

(f) while the current economic crisis demands immediate action to avoid unnecessary foreclosures, help revitalize and stabilize our communities and reinvigorate mortgage lending, business cycles are part of the economic fabric of the state and the nation and therefore, a temporary bridge loan mortgage payment assistance program would benefit home mortgage borrowers, lenders and neighborhoods not only in the current downturn, but also in future conventional economic downturns;

(g) empirical evidence reveals that many temporarily troubled mortgage borrowers prove able to retain their homes and pay off their mortgages without modification when offered bridge loan assistance until broader economic conditions improve, thereby staving off growing default, foreclosure, homelessness and neighborhood deterioration rates, as well as yet further worsening of economic conditions;

(h) temporary bridge loan mortgage assistance programs have accordingly proved highly successful in cost effectively limiting foreclosure rates and attendant economic and social ills in several states, most notably in Pennsylvania, Connecticut, Maryland and Nevada; and

(i) a temporary bridge loan mortgage payment assistance program is highly likely to redound in a cost effective manner to the benefit of home mortgage borrowers, lenders, neighborhoods, and the broader public of this state.

2. Purpose. The legislature declares that the purpose of this article shall be to establish a program to afford bridge loan assistance to home mortgage debtors facing temporary difficulties in remaining current on mortgage loan payments through no fault of their own so as to avoid many avoidable public and private ills.

§ 1252. Definitions. As used in this article, the following terms shall have the following meanings:

1. "Commissioner" means the commissioner of housing and community renewal.

2. "Division" means the division of housing and community renewal.

3. "Event" means a qualifying financial hardship beyond the mortgagor's control as defined in paragraph (a) of subdivision three of section twelve hundred fifty-three of this article.

4. "Gross household income" means the sum of the incomes of the applicant, his or her spouse and children residing in the same household as

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the applicant, as well as the incomes of any other residents of the household declared by the applicant to be dependents for federal personal income taxation purposes. Included in such term are all forms of monetary assistance received by such members of the applicant's household.

5. "Net effective income" means an applicant's gross household income less local, state and federal income and social security taxes.

6. "Total housing expenses" means the sum of the mortgagor's monthly mortgage payments, including escrows, utility costs, property hazard insurance premiums, real property taxes and homeowner's fees imposed for the maintenance of any common areas.

§ 1253. Home mortgage bridge loan assistance. 1. Authority. (a) The commissioner shall establish, within the division, a program to afford temporary supplemental mortgage payments of approved mortgagors. Such program shall be called the "home mortgage bridge loan assistance program". The assistance provided pursuant to this article shall be called "home mortgage bridge loan assistance".

(b) The commissioner shall promulgate such rules and forms as shall be necessary to implement the provisions of this article, and shall publish and enforce such rules.

(c) The aggregate amount of home mortgage bridge loan assistance provided to any mortgagor shall not exceed sixty thousand dollars, or extend beyond twenty-four or thirty-six months, and shall ultimately be recovered from beneficiaries after their employment resumes, as provided pursuant to this article.

(d) The division is authorized to provide home mortgage bridge loan assistance pursuant to this article only at such time as funds have been appropriated or made available for the home mortgage bridge loan assistance program.

2. Eligible mortgages. Except as otherwise provided in subdivision four of section twelve hundred fifty-four of this article the division shall make home mortgage bridge loan assistance available for the payment of mortgages only on one, two, three and four family residences and for single family residences in condominiums, housing cooperatives or manufactured homes in connection with which:

(a) the mortgaged property is the mortgagor's principal place of residence;

(b) the mortgaged property is located in this state;

(c) the mortgagor, prior to the occurrence of an event had a total pre-event income that was less than one hundred twenty percent of the median family income for the metropolitan statistical area or statewide nonmetropolitan area where the property is located, as most recently determined and published by the department of housing and urban development;

(d) the mortgagor does not own other residential property that is subject to a mortgage lien;

(e) the mortgagee has given the mortgagor notice, pursuant to section twelve hundred fifty-four of this article, that it intends to foreclose on the mortgage;

(f) the mortgagor has applied to the division for assistance pursuant to section twelve hundred fifty-five of this article;

(g) at least two full monthly installments due upon the mortgagor's mortgage remain unpaid after application of any partial payments that might have been accepted by the mortgagee but not yet applied to the mortgagor's account;

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(h) the mortgagor is suffering temporary financial hardship owing to circumstances beyond his or her control, as defined in subdivision three of this section, which renders the mortgagor unable to bring his or her account current within the sixty day period commencing with receipt of the mortgagee's notice of intention to foreclose;

(i) the mortgagor has not been more than sixty days delinquent on a residential mortgage within the five-year interval preceding the delinquency or the filing for unemployment insurance under subdivision four of section twelve hundred fifty-four of this article in connection with which assistance is requested of the division, unless the mortgagor demonstrates that the prior delinquency also resulted from an event; and

(j) there is a reasonable likelihood that the mortgagor will be able to resume full mortgage payments not later than twenty-four months (or not later than thirty-six months, in periods of high unemployment, as determined from time-to-time by the commissioner) after the commencement of home mortgage bridge loan assistance payments by the division to the mortgagee, and that the mortgagor will pay the mortgage in full either by its maturity date or by a later date agreed to with the mortgagee.

3. Temporary financial hardship beyond control of mortgagor. The commissioner shall determine whether that financial hardship which impedes timely mortgage payment may be temporary and beyond the control of the mortgagor by reference to verified impediments.

(a) Qualifying financial hardship beyond the mortgagor's control. Circumstances beyond the mortgagor's control, not including termination from paid employment, which result in financial hardship to the mortgagor include:

(i) involuntary loss of employment by the mortgagor;

(ii) involuntary reduction of salary, wage or other earnings on the part of the mortgagor; or

(iii) any other financial hardship determined by regulation to be beyond the mortgagor's control.

(b) Determination as to whether financial hardship may be temporary. Factors that the commissioner shall consider when evaluating whether the mortgagor has a reasonable prospect of resuming full mortgage payments within twenty-four or thirty-six months, from the commencement of home mortgage bridge loan assistance payments, and of being able to pay the mortgage in full by maturity or by a later date agreed to by the mortgagee include:

(i) prior work history, experience, training, opportunities for retraining and similar factors which may affect future employment opportunities;

(ii) debt reduction or other income changes sufficient to enable the mortgagor to resume full mortgage payments;

(iii) noncash benefits that may reduce household expenses, such as food stamps or free medical services for military or low-income families;

(iv) changes in income or recurring expenses that may be affected by changes in the age, composition or employment of members of the household;

(v) potential for repayment of short-term or installment debt;

(vi) delinquencies in other debts which seriously jeopardize continued ownership of the home, which cannot be cured by a mortgage assistance loan;

(vii) a favorable work and credit history;

(viii) a history of timely mortgage payments when employed;

(ix) lack of an impediment or disability that prevents reemployment;

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(x) evidence that the mortgagor is actively seeking work; and

(xi) any other consideration determined by the commissioner to be relevant to evaluating whether the mortgagor's financial hardship is temporary.

§ 1254. Notice, timing and stay of proceeding requirements. 1. Requirements. No mortgagee or agent thereof, or any mortgage servicer, may accelerate any eligible mortgage obligation as defined in subdivision two of section twelve hundred fifty-three of this article, or commence any legal action, including mortgage foreclosure, to recover on such obligation, or take possession of any security of the mortgagor for such mortgage obligation, until: (a) the mortgagor is notified as prescribed in subdivision two of this section, pursuant to such form and in such manner as the commissioner shall prescribe by rule; and (b) the commissioner has made a determination not to extend home mortgage bridge loan assistance, or until the applicable time periods prescribed in subdivisions two and three of this section have expired, whichever is earlier.

2. Timing and notice requirements. (a) Timing. No mortgagee or agent thereof, or any mortgage servicer, may accelerate any eligible mortgage obligation as defined in subdivision two of section twelve hundred fifty-three of this article, or commence any legal action, including mortgage foreclosure, to recover on such obligation, or take possession of any security of the mortgagor for such mortgage obligation, until the mortgagor is at least sixty days contractually delinquent in making his or her mortgage payments, or in violation of some other contractual provision of such mortgage.