Dear Editor:
On May 5th, Governor James McGreevey signed into law the “New Jersey Homeownership Act,” a bill intended to stamp out predatory lending in New Jersey. The good news: it has been successful in uprooting predatory leaders from our communities. The bad news: it also caused legitimate lenders to leave the state. If this bill isn’t amended quickly, we’ll be facing the biggest mortgage crisis in our state’s history.
For New Jersey homeowners, or those who intend to purchse a home in the future, this is troubling news. While the rest of the nation is taking advantage of all-time low mortgage rates, most New Jersey homeowners will be unable to refinance their mortgage after November 28th of this year. And worse yet, first-time New Jersey homebuyers will face interest rates markedly higher than the national rates. Although this was not the goal of the bill, it has been a consequence.
For most of us, our home represents our primary source of wealth (particularly in light of the stock market decline). It’s critical to our own financial situations, as well as the economic health of our state, to be able to take advantage of these unprecedented interest rates. If this bill is not amended, it will end up costing New Jersey approximately 24,000 jobs and reduce gross state product by $2.4 billion. Moreover, it will cut into our state’s tax revenues and increase the budget shortfall. With an economy stuck in neutral, the last thing we need is a bill that drives jobs from the state, raises interest rates, and increases the deficit in Trenton.
A couple of months ago, the state of Georgia passed a law identical to New Jersey’s. Within weeks, three dozen lenders and all three credit ratings agencies had pulled out of the state. As a result, the Georgia mortgage market dried up virtually overnight. Georgia’s Governor and State Legislature were forced to amend their bill to prevent an economic disaster. The same thing will happen in New Jersey if this bill isn’t modified.
In short order, getting a mortgage in New Jersey will be like buying car insurance: a nightmare! We pay the highest car insurance rates in the country, and now we’re going to be paying the highest mortgage rates as well. Governor McGreevey and the State Legislature need to act now before it’s too late.
To find out how this bill will effect your ability to refinance your mortgage, contact the following:
Governor James E. McGreevey, (609) 292-6000
General Assembly Speaker, Albio Sires, (201) 854-0900
Senate Majority Leader, Bernard F. Kenney, (201) 653-1466
John Urbanchuck
Economist for LECG, LLC