Talk of a bailout for homeowners facing foreclosure in the current sub prime mortgage crisis has sparked fears among New Jersey Realtors that some homeowners may abuse the bailout by intentionally defaulting on their mortgages.
State Senate President Dick Codey, D-Essex, met with around 200 Realtors last week, and after being informed of their concerns, issued a letter to the state Department of Banking and Insurance calling for some sort of intervention to prevent homeowners from purposefully defaulting, in order to take advantage of a mortgage restructuring or other financial assistance.
“A number of real estate representatives expressed concern that this threat is a very real possibility because many banks are telling their clients that they are unwilling to discuss restructuring unless they are already in default on their mortgage,” said Sen. Codey, in a statement. “This poses a serious concern for both homeowners and lending institutions. We need to investigate the severity of this threat and identify steps that can be taken both to prevent this practice and find a suitable compromise that will keep people in their homes and banks in business.”
In a related matter, state legislators have become concerned about a spike in the mortgage rates offered to first-time home buyers through the state Housing and Mortgage Finance Agency’s Smart Start program.
Rates for those first-time home buyers increased from 6.9 percent to 7.8 percent, sparking comment from state Realtors that the state program was becoming less lucrative for some buyers while pricing others out of purchasing a home.