Hurricane Ida forbearance proposal considered in New Jersey

The New Jersey Legislature will consider a proposed bill to provide foreclosure protections and forbearance to distressed homeowners still dealing with the hardships of Hurricane Ida in 2021. 

New Jersey homeowners with a mortgage on a home that served as their primary residence at the time of the storm would be eligible if they had previously received federal disaster assistance. 

Under the provisions of the bill, mortgage servicers would be mandated to provide a full year of forbearance and prohibit foreclosure proceedings in that period upon written affirmation of hardship from borrowers. An extension of 180 days would also be granted on request. The new law would also be applied retroactively to any missed payments since Sept. 1, 2021. 

Eva Marie Uzcategui/Bloomberg

The bill, which was first introduced in February, passed the community and urban affairs committee of the New Jersey Senate on Monday by a unanimous 5-0 vote. Democrats Troy Singleton and Andrew Zwicker served as co-sponsors.

"Due to the devastation of Hurricane Ida, some homeowners continue to face financial difficulties making their mortgage payments or have been forced to enter foreclosure proceedings as a direct consequence of the storm," Zwicker said. 

"This bill would provide a lifeline for families who continue to face challenges in their storm recovery, while also helping to prevent possible homelessness for those who may be in danger of foreclosure."

Distressed borrowers' statements must attest to negative financial impact resulting from storm damage that led them to receive federal emergency assistance as well as gross household income under 150% of their area's median income. They would also need to provide, if requested, evidence of less than a half year of reserves based on gross income in their bank accounts. The forbearance request window would open for a period of approximately six months following enactment of the law. 

Any forbearance granted would not impact homeowners' property tax and insurance obligations.

If passed in the Senate, the bill still requires approval from the New Jersey General Assembly before the governor could sign it into law. 

The state's leading bankers trade group generally welcomed the proposal, indicating it supported the overall intent but also expressed reservations about the length of time borrowers would be protected, no questions asked. 

"We would like to see changes made regarding the length of forbearance provided for in this bill. We feel that 365 days of forbearance is appropriate and reasonable, and that any subsequent forbearance should be made conditional and granted upon receipt of good cause," said Brittany Wheeler, vice president and director of government affairs for the New Jersey Bankers Association in a statement. 

Hurricane Ida initially hit the Gulf Coast as a category 4 storm in late August of 2021, before barrelling inland toward the Northeast. Despite decreased wind speed and a downgrade to a tropical depression, Ida's remnants caused more serious damage than expected in New Jersey as well as other Northeastern states upon arrival in early September. Severe flooding occurred in most Garden State counties with at least 29 deaths reported.

The storm caused an estimated $80.9 billion of damage nationwide, with 96 fatalities, according to the National Oceanic and Atmospheric Administration. 

Deliberations over potential new borrower protections come as many housing groups and federal agencies attempt to devise servicing and loss-mitigation plans that apply the lessons learned from COVID-19 federal forbearance and foreclosure moratoria measures. Earlier this year, the Consumer Financial Protection Bureau stated it expected servicers to extend many of the same pandemic-relief options to all struggling mortgage borrowers, whether or not distress was due to the economic impact of COVID-19.