“Affordable Housing “ is supposed to be just that. Affordable. Though many homes designated as affordable start out that way, they can end up on the foreclosure block. Many foreclosure narratives share common threads. Many feature single, working Moms. Moms working full time hours, and many work at two, part time jobs to make ends meet. Most have no health plan, no safety net, no voice. Encouraged by newly created inventory of affordable housing made available to qualified low and moderate income buyers, many single Moms made application for, qualified as low or moderate income buyers, then purchased ‘affordable’ housing units located in large, condominium communities. Those experiencing financial hardship and being unable to cope with rising costs, have fallen behind in their payments. Previously “affordable homes” are no longer affordable, and are at risk of foreclosure. Before describing Annie’s ordeal, let me share what I know about affordable housing, and the State’s Housing Affordability Service (HAS).

The Council on Affordable Housing (COAH) was created by the Fair Housing Act of 1985 as the State Legislature's response to a series of New Jersey Supreme Court cases known as the Mount Laurel decisions. The Supreme Court established a constitutional obligation for each of the 566 municipalities in the state to establish a realistic opportunity for the provision of fair share low and moderate income housing obligations, generally through land use and zoning powers. The legislature provided an administrative alternative to this constitutional obligation via the Fair Housing Act. COAH is empowered to: (1) define housing regions, (2) estimate low and moderate income housing needs, (3) set criteria and guidelines for municipalities to determine and address their own fair share numbers and then (4) review and approve housing elements/fair share plans and regional contribution agreements (RCAs) for municipalities. As a quasi-judicial organization, COAH can also impose resource restraints and consider motions regarding housing plans.¹

 What is so-called affordable ‘program’ housing? Program housing can be selected, newly constructed units, or existing, substandard dwellings rehabilitated, and then dedicated by deed as ‘affordable’ can be an act of benevolence by public and/or charitable organizations, or involuntary compliance by developers to federal, state, and/or local housing law.   I say involuntary because developers want to maximize profitability, not to subsidize discounted units... After communities are assigned their ‘fair share’ of affordable housing responsibility, and in its effort to meet its responsibility, the community can impose minimal requirements for land use applications from the developers of large scale housing projects. These applications are usually to first rezone farms or other open tracts, then develop condominium or townhouse communities numbering from a dozen units, to several hundreds. Some of the units built are reserved for low or moderate income buyers, and priced at less than market value. In an effort to offset the sale of less profitable ‘affordable’ units, the developers seek to build more units (greater density) sold at market value. In my experience, units designated as ‘low income program units’ are smaller and less well appointed compared to neighboring, upgraded, non ‘program’ units.

Sellers have problems, too. When the dwelling is purchased, the new owners must agree to and sign numerous documents including deed restrictions which dictate maximum resale price schedules, and maximum refinance limits predicated upon a formula derived from the original purchase price, length of ownership, and sometime may include a recovery for certain repairs or upgrades. For example, a seller may pass along the cost of a replacement heating or air conditions system if the replacement was within a prescribed period before placing the home on the market. Each year, the maximum resale price ceiling amount raises, slightly. Though the sellers are able to recover equity, they must adhere to a prescribed, maximum selling price based on a percentage of its true market value. They are also limited to selling to those from a select buyers pool. Many Sellers have entered into one or more contracts of sale with prospective purchasers presumed qualified only to learn a few weeks or a month afterward of the buyer’s failure to secure mortgage financing. Incompleted transactions waste time, and are an unwelcome expense to all parties. The Seller may incur attorney’s fees as caution suggests each new contract be reviewed by an attorney. The buyer incurs mortgage loan application fees. 

Soon after divorcing her child’s father, “Annie” entered into a series of relationships each lasting a year or two trying, in vain, to create a stable home for herself and her young son. The last relationship, peppered by an escalation of domestic abuse, resulted in her being on the receiving end of a thrown punch which broke her jaw and cracked several teeth. It was then she reluctantly accepted an offer from her sister to move out of danger and into the safety of her small apartment. The move would not solve Annie’s long term housing need.

After almost two years of emotional and physical recovery, the two sisters managed their work and childcare schedules quite well. Annie was able to contribute to the household expenses, and provide for her young son’s needs. Even though things were going well, Annie came to realize the need to move on, and needed a home to call her own. 

Encouraged by her sister, Annie went through the state’s application and qualification process resulting in her selection of an affordable program home. The formal mortgage loan application and approval took about 6 weeks. It was recommended she hire a private home inspection service costing $250 which she didn’t think she had to spare. Even though she had an idea what her closing costs could be, she knew she would need additional monies for utility security deposits and was watching every penny. She passed on the home inspection which may have revealed some of the problems she would later encounter. The big day, the day that she officially became a homeowner, finally arrived. The closing took about 90 minutes, her hand numb from signing scores of documents. One of those documents contained provisions regarding the new owner’s responsibilities when selling, or refinancing the mortgage on the unit. Immediately afterward, with help from friends and family, she and her young son moved their possessions from a two bedroom apartment they had shared with a their relative, into their new, two bedroom condominium home. After several years of shared and cramped living, they finally had a place of their own and some much needed privacy. They each had a bedroom with its own closet. And, instead of four people sharing a single bathroom, it was now all theirs! They had a refrigerator they would, for awhile, call their own. Two months later the decade old refrigerator was deemed to be not cost effective to repair and needed to be replaced. The prospect of having to purchase a replacement refrigerator so shortly after moving in would cause a strain to their already strained budget. Annie didn’t have $600 to spend on a new refrigerator. But as a new homeowner, she was offered instant approval for a big box store credit card account. She selected a basic, no-frills box and agreed to pay monthly installments on a debt carrying a 21% interest rate. This was her first credit card, but not her last.

Then, one fateful day, the nurse at her son’s school called her at work. “Your son is ill, and probably should go home,” the nurse said. This would be the first of many calls from the school’s nurse. After numerous tests and office visits, doctors were able to diagnose and treat the boy’s disease. Despite the diagnosis and prescribed treatment, Annie  was missing work on a regular basis to tend to her son who missed quite a bit of school and was in danger of failing his grade. Worried and distracted, her job performance suffered. Her frequent absences from work resulted in a reprimand, and a warning that additional absences would result in the termination of employment.   Shortly thereafter, her position changed, her hours were scaled back from full to part time and she was in trouble. On one hand, the extra ‘free’ time allowed her to tend to her son, but the ‘free’ time came with a cost. Her income dipped and she was having trouble paying her bills. The first casualty was non payment of her quarterly condominium association fees. She began to pay late her mortgage. Soon, she was running a month behind and falling further into delinquency heading to default. The delinquency added an additional $50 in late fees to her already unaffordable payment each month. The thirty day delinquency stretched to sixty. Soon, sixty turned into ninety at which time the loan was considered to be in default. The homeowner will incur substantial, additional fees if the default isn’t cured and the the mortgage is foreclosed. Oftentimes it’s the amount of additional foreclosure related fees that create an extra level of debt the borrower is unable to overcome.

Instead of contacting her lender, Annie, with money borrowed from her sister, brought the loan current, avoiding formal foreclosure. Then, the cycle repeated itself ending with Annie taking more money from her sister. And again, the cycle appeared to repeat but this time the sister wasn’t in the position, or willing to help.

Again facing the prospect of foreclosure, Annie, referred from a local housing counseling organization which out-sources pre-foreclosure counseling clients to my office, called for help.

Typically, we listen to the Homeowner as he or she describe their hardship, and steps they’ve taken to resolve the matter. Usually, this preliminary information furnished by the homeowner has been edited to exclude details which may not support a best case workout scenario. We try to determine where they are in the collection process. All too often, they’ve waited too long or simply don’t have sufficient resources readily available to cure the delinquency necessary to reinstate the loan and avoid foreclosure.

As a short term solution, Annie had used her sister like an ATM to buy a few extra months before a long term solution became an absolute necessity.

As with most callers, she was reluctant to divulge certain information... information I would have preferred to have sooner than later including the fact she owned a designated affordable housing unit. Due to the implicit but ignored deed restrictions, some conventionally accepted workout options were no longer applicable. The problem, as mentioned earlier, was LTV, or loan to value. She owed more on her mortgage than permitted by established affordable housing program guidelines. Conventional options no longer viable would include a mortgage refinance, or preforeclosure sale.

At that point, I formally requested the mortgagee (including its appraiser and title insuror) accept partial responsibility for failing to identify the mortgaged premises as having LTV caps via deed restriction. As a remedy to avoid foreclosure, I requested the portion of the mortgage loan exceeding the maximum LTV be forgiven, and then the loan modified so it would conform to applicable guidelines. The mortgagee has not yet responded to my certified letter(s), or repeated telephone calls. (I later learned Annie had again borrowed ‘catch-up’ money from her sister... paying the mortgage, and stalling the process undertaken to fix the problem. The mortgagee no longer viewed this matter as critical since the loan had been reinstated and was not at risk of foreclosure.) 

Simultaneously, I sent notice to the applicable housing authority informing it that one of its designated affordable housing units was at risk of foreclosure, and the Authority was at risk of losing one of its affordable units, a unit it might have to replace in order to comply with the state’s affordable housing criteria. Since the creation of an affordable housing unit is expensive, I proposed that preserving an existing affordable unit would be a more cost effective solution. I proposed the Authority consider advancing the monies, in the form of a grant, to cure Annie’s default. I later learned Annie had again borrowed ‘catch-up’ money from her sister... paying the mortgage, and stalling the process undertaken to fix the problem. I can only assume the Authority no longer viewed this matter as critical since the loan had been reinstated and was not at risk of foreclosure, pushing this matter to a back burner. Despite another short term fix, the problem remained. Annie found a new job, but after a couple of months, she was soon unemployed.

Foreclosure began once again, and Annie has sought help from another agency...

There are two issues that must be resolved in order for Annie to be able to keep her home. The matter regarding her disregard of the deed restriction placing caps on refinance, is, in my opinion, resolvable. Though resolvable, it will require continued cooperation from the Client. As in the case of many folks seeking help... results are possible if they select a course of action and stick to the game plan. Switching horses in midstream is ill-advised. However, even if this administrative matter is resolved, it may be pointless if Annie can’t maintain employment. This paramount issue can only be resolved by Annie, and Annie alone.