As many as 16,500 New Jersey homeowners with subprime loans will face foreclosure this year.
That's why State Sen. Ronald Rice (D., Essex) and Assembly Majority Leader Bonnie Watson-Coleman (D., Essex) want a six-month moratorium on foreclosures. Their bill also provides counseling services and loans to consumers up to $5,000.
The program would be paid for with $1 million from the state Housing and Mortgage Finance Agency, plus funds generated by making lenders pay a $2,000 fee to foreclose on a house.
The fee is a risky move in a high-tax state that's already seeing companies move out. But the sentiment is understandable.
Lenders won't be so quick to make risky subprime loans leading to foreclosure if they know it may cost them such a penalty.
The new program would allow persons whose home is lost to foreclosure to stay as renters until it is purchased. It also requires the purchasers to live in the house. The aim is to discourage speculators who buy up foreclosed homes to use as rental property.
Rice and Watson-Coleman also want to save neighborhoods from becoming blighted with vacant houses left by families who could no longer afford the mortgages.
The New Jersey legislation, if enacted, could be a good accompaniment to the federal government's bailout plan that aims to prevent foreclosure for up to 1.2 million homeowners by freezing their loan rates or refinancing their mortgages.
In Pennsylvania, Gov. Rendell has begun two programs for strapped homeowners that include refinancing options, credit counseling, and financial management education. And the Pennsylvania Senate last week approved six bills aimed at predatory and other questionable mortgage-lending practices.
As economists debate whether America is in a recession, steps should be taken to help families.