NJ may bill mortgage lenders $2,000 per foreclosure

By Jon Hurdle

TRENTON, New Jersey, Oct 6 (Reuters) - A panel of New Jersey legislators on Monday approved a measure to make mortgage lenders pay $2,000 before taking a homeowner into foreclosure.

The measure, which is opposed by some banks, is believed to be the first of its kind. It joins a growing list of local and national efforts to stem a tide of home foreclosures.

The proposal was part of a bill designed to slow a surge in foreclosures hitting the state because borrowers cannot afford their subprime loans amid the wider economic damage inflicted by a dramatic tightening in credit availability.

Foreclosure filings by New Jersey mortgage lenders rose 22 percent from a year ago to over 44,000 in the January-to-August period, while the number of completed foreclosures rose to 1,862 in the second quarter from 1,117 in the first three months.

These increases echoed the national trend.

Staci Berger of the nonprofit Housing and Community Development Network of New Jersey noted the $2,000 fee is much lower than the $60,000 that her organization estimates a lender has to pay to foreclose a loan.

The legislation was one of a number of bills discussed during a special session of nine assembly committees to combat the economic damage inflicted on a state so heavily dependent on the financial industry of neighboring New York City.

"We needed to take this historic step to deal with this unprecedented crisis," Assembly Speaker Joseph Roberts, a Democrat, told the committee.

"These are very, very tough times and there's every indication that it's going to become more challenging," he said on a day when global stock markets went into tailspins.

Speaking to reporters, Roberts said the special session was taking a "holistic" approach, addressing jobs, energy costs and tax policy in addition to the housing and credit crises.

MORE TAX BREAKS FOR BUSINESS

In other efforts to shield business from the economic downturn, lawmakers also approved bills that would extend the period in which businesses can write down operating losses from seven years to 20 years, and would cut New Jersey's share of taxes on an interstate company's income.

The budget committee of the Democrat-controlled state Assembly voted by 8 to 3 with one abstention to approve the New Jersey Home Ownership Preservation Act that will force lenders to pay $2,000 into a trust fund to help pay for counselors to seek agreement between borrowers and lenders.

Robert Levy, executive director of the Mortgage Bankers Association in New Jersey and Pennsylvania, and one of a number of bankers opposing the bill, said it would do more harm than good because it would extend the length of time and would impose an additional burden on lenders to pay the $2,000.

"It's a dangerous time to regulate because you end up with unintended consequences," Levy said.