Homeowners and renters in New Jersey could have more breathing room to pay mortgage and rent bills they weren’t able to cover during the pandemic if a bill under consideration by the state Legislature passes.
The bill — S2340/A4034 — was introduced in April, and went through months of negotiations between housing experts and landlord associations which resulted in a number of amendments. Gov. Phil Murphy has called on lawmakers to pass it so he can sign it into law.
The ball is in the Senate's court. After introducing new amendments in late October, the chamber still needs to pass the bill and send it to the Assembly, so it can agree to the changes. Senate President Stephen Sweeney, D-Gloucester, said there were "issues" with the bill, and said he would consider putting it up for a vote in December if “we could get some kind of commonality."
Currently, New Jerseyans are protected from being locked out of their homes for up to two months after the end of a public health emergency, and during the COVID crisis Murphy has renewed the emergency monthly. But once that moratorium ends, tenants face immediate eviction and homeowners face foreclosure in many cases if they can't pay back all missed payments at once.
This bill aims to create a process to make up missed payments, while providing protections for landlords who depend on rental income, the bill's sponsors and supporters say.
Landlords associations argue it is too punitive to landlords and doesn't provide substantive relief to building owners. They argue thatNew Jersey should wait to see if the federal government provides direct rental assistance under a new Biden administration.
Here’s what the latest version of the legislation — nicknamed the "People's Bill" — would do if passed with Senate amendments included:
How does this help homeowners?
Homeowners hurt by the coronavirus pandemic can ask their lender for mortgage forbearance, or to delay principal and interest payments on a primary residence for a minimum of 90 days. The program can cover missed payments dating back to March 9, 2020.
The lender would be able to tack on the missed payments to the end of their mortgage period without additional fees or penalties, as opposed to owing all missed payments in one chunk at the end of the protection period. Homeowners could also choose to make the payments earlier.
This bill does not cover property tax or insurance payments. A homeowner is eligible for forbearance on his or her primary residence, or on a property he rents to a tenant that is the tenant's primary residence.
Currently, more than 150 financial institutions made a deal with Murphy to provide mortgage forbearance through the public health emergency. But it doesn't guarantee homeowners won't have to make up missed payments all at once as soon as the pandemic is over.
How can someone take advantage of this?
A homeowner must request forbearance from his or her mortgage creditor in writing or verbally and show they suffered financial hardship due to the pandemic. They must show they meet one of the following criteria:
- Lost job hours, income or a job due to COVID-19
- Have to pay more for child care after schools were closed or because they had to care for family members with the coronavirus or who are quarantining because they were exposed to the virus
- Are paying funeral costs due to COVID-19
There is also another financial threshold one has to meet — a homeowner’s household income can’t be more than 150% of the area median income, as defined by the federal Department of Housing and Urban Development.
For example, Bergen County’s median family income is $104,200, according to HUD, so a family can’t make more than $156,300 to be eligible. However, a creditor can waive this requirement if they choose.
Additionally, a homeowner’s bank accounts must have less than six months worth of 2019 income. For instance, if your family earned $100,000 last year, you can’t have more than $50,000 in your bank account. A creditor can ask for a “cash asset certification” form for proof.
Can this harm me financially?
A creditor can’t report to a debt collector, credit reporting agency or data collection facility if a homeowner is receiving mortgage forbearance.
What if my creditor reports this information to a credit reporting agency anyway?
If a creditor violates the law, a homeowner can file a complaint with the state attorney general, which could lead to a fine of up to $5,000 per violation. The creditor would have to take steps to fix the credit record of a homeowner within 30 days of an order from the attorney general and pay lawyers fees and damages to a homeowner.
What if a creditor denies forbearance?
If a homeowner is denied forbearance, and the creditor is licensed by the Department of Banking and Insurance, the homeowner can file a complaint under the banking agency. The agency will investigate the complaint and order the creditor to grant forbearance to a homeowner if they are eligible.
How does this help renters?
Under current law, the day the eviction moratorium ends a landlord with a court order can kick out a tenant if they are missing rent payments. So far, landlords have filed more than 45,600 eviction filings in court from March to October to jumpstart the process, according to the Administrative Office of the Courts.
The People’s Bill requires that a landlord give their tenant the option of a repayment schedule if they missed rent checks after March 9, 2020.
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How do renters qualify?
A renter must have lost money due to the pandemic in one of the following ways:
- Lost income or a job due to COVID-19
- Are paying funeral costs due to COVID-19
- Have to pay more for child care after schools were closed or because a person has to care for family members with the coronavirus or who are quarantining because they were exposed to someone with COVID-19
Additionally, a tenant must not make more than 100% of the area median income, a stricter requirement than for homeowners requesting forbearance, or have more than six months of income from 2019 in their bank accounts.
What happens next?
Thirty days after the public health emergency period ends, a landlord must calculate the rent owed, as well as any credits a tenant could apply.
A landlord is supposed to offer an addendum to a renter’s lease agreement, provided in writing, certified mail, text message, or email.
The Department of Community Affairs will be required to post the rights that impacted tenants and landlords have under the bill, as well as an affidavit that all tenants will use to show they are eligible for the relief. The agency will also post a repayment plan template. The forms will be printed in English, Spanish, Arabic, French, Russian, Korean, Chinese and Vietnamese.
Landlords must give their tenants the forms within 30 days of receiving them from the state, and can’t demand payment from renters until they do so.
What if tenants and landlords can't agree on a repayment schedule?
If the tenant and landlord can’t agree on a repayment schedule, the bill offers a default plan that gives a renter six months to repay each month of missed rent.
For example, if you missed two months of rent, you would have one year to make up those payments in equal installments, while still paying your current rent payments. If your rent is $1,200, and you owe $2,400 in missed payments, you would pay $200 each month over the course of a year, on top of your regular $1,200 a month.
There is a cap. If you didn’t pay five months or more of rent, you will only have two and a half years to make up those payments.
What if a renter doesn’t make his payments according to the plan?
If renters don’t make the agreed-upon payments, a landlord can file for eviction.
Can renters face financial consequences?
Landlords can’t charge renters a late fee, or tell a debt collection or credit reporting agency the tenant is participating in the program.
What happens if a landlord violates the agreement?
A tenant can file a complaint with the attorney general and a landlord will have a chance to fix the situation. If he doesn’t, he could be fined $500 for a first violation, $1,000 for a second violation and $2,500 for each violation after. The landlord will have to pay a fee for a tenant’s lawyer and take action to fix the credit record of a tenant within 30 days.
Is there any additional help in the bill?
The bill includes an income tax write-off for small landlords with fewer than 10 units. The tax credit would be equal to half the amount of rent that tenants don’t pay during an emergency period that landlords permanently forgive.
For example, let’s say a tenant does not pay his $1,000 rent for a month. If a landlord says the renter no longer owes that money, the landlord will receive a $500 income tax credit. That credit can be carried forward for up to three years. It cannot be used to make his tax liability less than 0, with the government owing the taxpayer funds.