New Jersey Bill Aims to Create Foreclosure Buyback Program

Legislation Update
December 10, 2018

Source: New Jersey Legislature  (S1584 information/full text)

Statement: 

The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 1584 (1R), with committee amendments.

As amended, this bill, the “New Jersey Residential Foreclosure Transformation Act,” establishes the “New Jersey Foreclosure Relief Corporation” as a temporary entity within the New Jersey Housing and Mortgage Finance Agency (HMFA) for the purpose of purchasing foreclosed residential properties and dedicating the properties for occupancy as affordable housing.  The corporation will cease its operations on December 31, 2022.  On that date, any assets, properties, or funds held by the corporation will transfer to the HMFA.

The bill provides for the corporation to be governed by a seven-member board, consisting of the Commissioner of Community Affairs, the Executive Director of the HMFA, the Commissioner of Banking and Insurance, and the State Treasurer and three New Jersey residents, appointed by the Governor, who have relevant backgrounds as described in the bill.  The Senate President and the Speaker of the General Assembly will each nominate one member for appointment by the Governor.

The bill requires the corporation to make an annual report of its activities to the Governor and to the Legislature, setting forth a complete operating and financial statement.  The corporation’s books and accounts must be audited at least once each year by certified public accountants.

The bill empowers the corporation to purchase eligible foreclosed residential property and mortgage assets to produce affordable housing and dedicate it for those purposes for 30 years.  The bill defines “eligible property’ as any residential property that is either owned by a institutional lender as the result of a mortgage foreclosure judgment, or owned by a municipality as the result of a tax foreclosure judgment.  The bill directs the corporation to enter into contracts or loans, or both, with no more than two experienced, financially sophisticated, community development financial institutions to enhance the ability of the corporation to fulfill its purpose of producing affordable housing.

The corporation or, if applicable, one of its contractors, will give the municipality in which the property is located, unless the municipality already owns the property as a result of a tax foreclosure judgment, a right of first refusal to purchase the property and dedicate it as affordable housing.  The bill allows a municipality to exercise its right to purchase and dedicate eligible property for affordable housing, decline the option to purchase, or decline to exercise the option but, instead, authorize the corporation or its contractors to use monies from the municipality’s affordable housing trust fund to purchase the property.

If a municipality does not exercise its right of first refusal to purchase a property, the corporation may purchase the property and convey it for occupancy as affordable housing subject to a 30-year deed restriction to another public agency, a community development corporation, a developer, or a qualifying household.

If the corporation, its contractors or a municipality purchases an eligible property from monies deposited in a municipality’s affordable housing trust fund, the municipality will receive bonus credits toward any constitutionally-imposed obligation to provide affordable housing as follows: two units of credit for each eligible property sold or conveyed as a for-sale unit or leased as rental housing; two units of credit for each unit of affordable housing dedicated for permanent supportive housing, other than supportive shared living housing; and two units of credit for each new bedroom dedicated in supportive shared living housing.  The bill provides that the number of additional units of credit that a municipality can receive under the bill, when combined with any other type of additional units of credit that may be available towards a municipality’s affordable housing obligation, cannot exceed 25 percent of the municipality’s total cumulative new construction affordable housing obligation.  The bill specifies that a municipality cannot receive both additional units of credit for producing a unit of affordable housing under this bill, and additional units of credit for that unit under another provision of law.

The bill establishes a mechanism through which a “foreclosure-impacted municipality,” one that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days, can insulate its affordable housing trust funds from the laws that require the transfer of its trust fund monies to the “New Jersey Affordable Housing Trust Fund.”  A foreclosure-impacted municipality can accomplish this by adopting a resolution committing the expenditure of its municipal affordable housing trust fund monies for the production of affordable housing and authorizing the transfer of at least $150,000 of its municipal affordable housing trust fund monies to the corporation for the corporation to use to produce affordable housing.

The bill requires the corporation to use funds transferred from a foreclosure-impacted municipality to produce affordable housing within that municipality.  If the corporation is unable to use all of the transferred funds within two years of the date of transfer, the corporation will return the remaining funds to the municipality and the municipality will have at least six months from the date the funds are returned to commit the funds in accordance with other provisions of law. During this period, all municipal trust fund monies designated for the purchase of foreclosed properties will be protected from transfer to the State. A municipality will receive bonus credits, as otherwise provided by the bill, for affordable housing produced by the corporation or by one of its contractors pursuant to this mechanism.

The bill allows the corporation to establish criteria to identify the circumstances when the purchase, sale, lease, or conveyance of market-rate units furthers the purposes of the corporation. The corporation, or its contractors, will be able to purchase, sell, lease, or convey market-rate units in accordance with those criteria without imposing affordability controls upon the property provided the transaction does not violate any other law or requirement.

The bill establishes the “Foreclosure to Affordable Housing Transformation Fund,” to serve as the repository for funds appropriated or made available for the corporation.  The HMFA will administer the fund, and is authorized to transfer into the fund any amounts it has that may be used for the production of affordable housing. The bill authorizes HMFA to issue bonds to fund the activities of the corporation.  The bill calls for prioritization of the allocation of tax-exempt private activity bonds to allow the corporation to fulfill the bill’s purposes.

The bill provides that in any year in which the proceeds from the additional fee segment of the realty transfer fee exceed $75 million, the first $10 million above the $75 million collected will be transferred into the “Foreclosure to Affordable Housing Transformation Fund” for purposes of producing affordable housing.  The bill authorizes the Commissioner of Community Affairs to transfer into the fund certain amounts held for the production of affordable housing, including but not limited to monies deposited in the “New Jersey Affordable Housing Trust Fund.”

The bill requires amounts deposited in the “Foreclosure to Affordable Housing Transformation Fund” that are derived from federal funding sources or are otherwise dedicated to the production of affordable housing be used for the production of affordable housing.  The bill allows the corporation to use other funds for the production of affordable housing or market-rate housing, and allows the corporation to use annually up to three percent of fund monies for administrative costs.

COMMITTEE AMENDMENTS:

The committee amended the bill to expand the definition of “eligible property.”  As amended, the bill defines “eligible property” as any residential property that is either owned by an institutional lender as the result of a mortgage foreclosure judgment, or owned by a municipality as the result of a tax foreclosure judgment.  Previously, the bill defined “eligible property” solely as residential property owned by an institutional lender as the result of a mortgage foreclosure.  The amendments also clarify various provisions of the bill to account for this expanded definition of “eligible property.”

The amendments provide that, if the corporation, its contractors or a municipality purchases an eligible property from monies deposited in a municipality’s affordable housing trust fund pursuant to the bill, the municipality will receive two units of credit, instead of one and one-quarter, toward its affordable housing obligation for each new bedroom dedicated in supportive shared living housing.  Finally, the amendments clarify that the total number of additional units of credit that a municipality can receive under the bill, when combined with any other type of additional units of credit that may be available towards its affordable housing obligation, cannot exceed 25 percent of the municipality’s total cumulative new construction affordable housing obligation.

FISCAL IMPACT:

The Office of Legislative Services (OLS) estimates that the enactment of the bill would have an indeterminate impact on State and municipal finances associated with the operations of the “New Jersey Foreclosure Relief Corporation” (“corporation”), the transfer of monies thereto, and the purchase and dedication of properties for affordable housing purposes.

Most notably, the New Jersey Housing and Mortgage Finance Agency (“HMFA”) may experience a temporary increase in expenditures associated with the operation of the corporation.  These expenditures, which would be supported by the proceeds of bonds issued by the HMFA, also may be offset by monies appropriated by the State, transferred from municipal affordable housing trust funds, or made available from other sources.

Specifically, the bill requires the corporation and the HMFA to enter into a mutually binding funding agreement that would determine the amount of bond proceeds to be raised by the HMFA to support the activities of the corporation.  Due to the discretionary nature of this provision, the OLS is unable to predict the amount of debt that would be issued as a result of the bill.  The OLS notes that depending on the maturity schedule of the bond issuance, the bill may result in a temporary increase in State expenditures that extends beyond the lifetime of the corporation, as the corporation would expire on December 31, 2022.

The enactment of the bill also may result in the redirection of certain State revenues, which would have been otherwise deposited in the New Jersey Affordable Housing Trust Fund, into the “Foreclosure to Affordable Housing Transformation Fund” and used to support the operations of the corporation.

Most notably, the bill provides that if the annual proceeds from the additional fee segment of the realty transfer fee exceed $75 million, the first $10 million collected above that amount would be used to support the corporation.  Unless used to fund other housing-related purposes in the annual appropriations act, the proceeds of the additional fee segment of the realty transfer fee are currently deposited into the New Jersey Affordable Housing Trust Fund.  However, given the volatility of realty transfer fee collections, the OLS is unable to determine the amount of realty transfer fee revenues that would be deposited into the “Foreclosure to Affordable Housing Transformation Fund.”

Additionally, the bill permits certain “foreclosure-impacted municipalities” to transfer not less than $150,000 from their municipal affordable housing trust funds to the “Foreclosure to Affordable Housing Transformation Fund,” and thereby protect uncommitted trust fund monies from being forfeited to the New Jersey Affordable Housing Trust Fund.  A “foreclosure-impacted municipality” is defined as any municipality that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days.  Under current law, if monies held in a municipal affordable housing trust fund remain uncommitted for longer than four years after the date of collection, the uncommitted balances would be forfeited to the State and deposited in the New Jersey Affordable Housing Trust Fund.

The enactment of the bill could also result in a limited increase in revenue for certain municipalities.  Specifically, the bill authorizes the corporation or its contractor to purchase residential properties that are owned by a municipality as a result of a tax foreclosure judgment.  The purchase of these municipally-owned properties by the corporation or its contractor would result in a one-time increase in municipal revenues.

The OLS also notes that the enactment of the bill could result in an increase in expenditures for certain municipalities that elect to (1) exercise the right to first refusal and thereby purchase and dedicate foreclosed properties for affordable housing purposes, or (2) finance the purchase of property by the corporation using municipal affordable housing trust fund monies, insofar as those transactions would not have otherwise occurred absent the enactment of the bill.

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CHIEF EXECUTIVE OFFICER

Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.

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Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.

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CHIEF INFORMATION OFFICER

Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.

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General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.

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AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.

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AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.

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AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.

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AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.

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Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.