NJ got $270M to help homeowners prevent foreclosure, but it's paid out less than 1%. Why?

New Jersey has paid out less than 1% of a multimillion-dollar pot of federal money to help struggling homeowners catch up on their mortgages, property taxes, homeowner’s insurance and other housing costs, according to the state’s latest federal status report.

This February, New Jersey launched its application portal for a $325 million program called Emergency Rescue Mortgage Assistance, in which low- and middle-income families who fell behind on housing expenses due to COVID-19 could secure up to $35,000 each to prevent foreclosure using American Rescue Plan money.

Of the nearly $270 million budgeted for direct payment assistance, New Jersey doled out $2.2 million, or 0.81% of the funds, through June 30, 2022, according to a quarterly report filed with the U.S. Treasury obtained by NorthJersey.com through a public records request.

The Housing and Mortgage Finance Agency, the state entity administering the program, approved $3.1 million worth of assistance for 167 applications during this time, according to the report. The state is sifting through another 4,700 applications filed, and denied 612 ERMA forms for a variety of reasons: Families made too much money, they didn’t prove hardship linked to the COVID-19 pandemic, or they owed more than the program cap.

That’s a stark difference from states such as Florida, which announced that it had awarded more than $328 million to 11,700 homeowners and stopped accepting applications at the end of July. Pennsylvania paid $30.4 million — or about 8% of what it received federally — to almost 4,000 families. Louisiana passed out close to one-fifth of its $146.7 million pot, or $25.4 million, to nearly 2,800 households.

"We are diligently working to ensure that eligible homeowners receive the assistance necessary," said Amy Palmer, chief of communications for the HMFA. "NJHMFA has administered multiple federally funded programs and recognizes the importance of our responsibility to oversee these funds. The NJHMFA is keenly aware of the risk of foreclosure facing certain New Jersey homeowners due to financial hardships caused by the COVID-19 pandemic."

The HMFA did not provide the USA TODAY Network New Jersey with updated statistics about award information or respond to questions about specific issues and challenges the agency is seeing in applications.

'It made no sense'

Joseph Henry, 58, doesn't know why the HMFA denied his application to help cover the roughly $11,000 he owes his mortgage servicer. The housing counselor he worked with said he was an ideal applicant and his "paperwork was perfect and ready to roll," Henry recalled.

His family fell behind on the mortgage on its Hopatcong house after his wife got sick with COVID and was let go from her job in December 2021. It took her months to find steady employment. A friend who is a real estate agent recommended that Henry apply for state assistance, so he turned in an ERMA application in mid-February.

Henry submitted bank statements and tax returns, and called the HMFA and sent messages through the application online portal with questions he had about the process. He was alarmed when he received an answer from the HMFA that said his file was submitted for underwriting and that the agency was waiting for his records to come back from his lender.

Henry had checked in with his lender, which had no record of any contact from the HMFA, he said. Henry sent the HMFA the phone number of his representative with his mortgage servicer so the agency could follow up, according to portal messages reviewed by NorthJersey.com.

In July, he received two rejections. An email said, "We are unable to complete our review of your NJERMA application due to the reason(s) listed below," but included no reasons. A few days later, a letter in the mail listed three reasons that were separated with the words "and" and "or," essentially saying he didn't demonstrate that his family lost income or had increased expenses due to COVID-19. He didn't know what the agency specifically needed to win an appeal.

"It made no sense," Henry said. "I didn't know how to reply to a letter that made no sense. I wrote them, 'What are you looking for? If you give me if's, and's, and or's, what do you want? How am I supposed to reply and defend myself if you're not telling me?'"

A few years ago, Henry suffered a heart attack and got a pacemaker.

"The arrhythmias are just kicking my ass right now, and things like this, this ERMA stress, kicked it off," Henry said. "They put me in a position where I may lose my house now. They took so much opportunity away from me. I could have tried to get a refinance, or a personal loan."

It's a house he has known inside and out for more than two decades.

Henry is a mechanic and electrician, and retired from Ingersoll Rand. He said he "touched every wall, every aspect" of his house he can think of: He dug the basement out; he redid the plumbing and electrical, adding in "fancy switches and gadgets" throughout the house. "I've been here for 25 freaking years," he said.

Why are applications rejected?

New Jersey consistently leads the nation in foreclosures, having nearly the highest rate of filings in the first half of 2022, behind only Illinois. Nationwide, about one in every 854 homes had a foreclosure filing in the first half of the year. New Jersey had double that: one in every 410 homes had a foreclosure filing, according to ATTOM Data Solutions.

The Garden State has a backlog of close to 11,700 foreclosure cases as of June 2022, according to the Administrative Office of the Courts.

To help keep families housed as many lost their jobs or hours when the pandemic struck, Gov. Phil Murphy announced in March 2020 a partnership with 150 financial institutions to offer forbearance to borrowers. The state also placed a moratorium on foreclosures through Nov. 15, 2021, meaning families in the foreclosure court process could not be removed from their homes until then, and sheriff sales were rare.

Then Congress passed the massive stimulus bill, the American Rescue Plan, which included a $9.9 billion Homeowner Assistance Fund to be divvied among states and territories to prevent mortgage delinquencies and defaults.

From that fund, New Jersey's HMFA created ERMA, an interest-free, non-amortizing, forgivable loan, recorded as a subordinate lien lasting three years. Families must repay the assistance they received if they sell their home or receive cash back from refinancing within three years. Households must earn no more than 150% of their county’s median income.

The HMFA is the agency that also administered a $25 million Small Landlord Emergency Grant Program. After fewer landlords applied for the aid than expected, New Jersey slashed the fund by 60%. Homeowners who tried to apply for grants told NorthJersey.com the application was confusing and they had trouble reaching agents to help them.

Close to two dozen states post dashboards online with daily or weekly updates about their homeowner assistance programs, according to the National Council of State Housing Agencies. New Jersey is not one of them. The governor’s disaster recovery office has an online federal fund spending page, but the dashboard does not include 2022 spending.

A couple of states are almost as slow as, or slower than, New Jersey, including Delaware, which paid $600,000 to 120 families, Oklahoma, with $3.1 million to 290 families, and Wyoming, paying $4.7 million to 530 families. States have time: All funds must be spent by Sept. 30, 2025.

More:How to apply for up to $35,000 in NJ housing aid

More:NJ warns landlords who deny housing to those with criminal records

According to New Jersey's Treasury report, about $270 million out of the $325 million is budgeted to pay mortgages, property taxes and other housing expenses. The remaining $56 million is divided between administrative expenses, such as $25.6 million for salaries, equipment, legal compliance, audit and monitoring; $20 million for contracted jobs like vendor loan review and notary and title services; $8 million to counsel homeowners; and $3 million for transaction expenses like wire transfers or mailers.

The HMFA spent $1.5 million on these expenses so far out of the $56 million budgeted.

Maryann Flanigan at Legal Services of New Jersey says many people don’t understand the nuances of the program and the proof that is required, such as demonstrating that they lost 10% in income or had expenses rise by 10% as a result of the pandemic.

“People get denied and don’t know why and just give up … the denial letters I’ve seen are extremely vague,” Flanigan said.

And setting a strict percentage like New Jersey's can be “problematic,” said Stacey Tutt, senior staff attorney at the San Francisco-based National Housing Law Project.

“The more you have those types of onerous documentation requirements like New Jersey’s, which U.S. Treasury has encouraged states not to have, it's much more difficult to get those applications approved,” Tutt said. “Other states don’t ask for a strict percentage, or use other requirements. Vermont, for instance, accepts proof that a homeowner is eligible for public assistance like food stamps.”

States are seeing processing delays because mortgage servicers were taking more time on their end to accept the funds, Flanigan said. New Jersey reported that a servicer would not participate in 31 of its rejected applications.

NorthJersey.com sent a list of specific questions to the HMFA asking if the agency is considering any changes to program requirements.

"Staff have been monitoring program metrics to ensure program integrity, as well as reviewing existing application requirements for possible eligibility expansion pursuant to U.S. Treasury-approved guidelines," said Palmer, the HMFA communications chief.

If members of a family are facing an imminent sheriff's sale, they can file a motion to stay, or delay, the sale, and the court should direct them to the HMFA. An ERMA application should be flagged for priority review, Palmer said. The agency has received one application like this, which was approved and funded, Palmer said.

Bonita Holmes encourages families to work with a HUD-certified housing counselor like those where she works, New Jersey Citizen Action.

“Counselors are very familiar with processing these types of applications, so they would know exactly what needs to be sent, know how to go in and check that all the files are appropriate,” Holmes said. “Clearly they stand a better chance of the file being cleared if they go through us.”

Holmes said she thinks the state is doing “a great job” when considering the volume of paperwork its employees are handling.

“I don’t think folks really understand the amount of applicants for these programs … I don’t think anyone in the state agency can handle the amount of clients that come through within a time frame that most people would like,” Holmes said. “They’re doing a great job. Folks on the outside don’t understand the amount of work required and staffing.”

Successful applicants

For those who received acceptance emails, the process took months of wrangling, but the relief, they say, was worth it.

David Alston, 63, turned in his ERMA application on Feb. 11, three days after the portal opened. He would have liked to submit it on day one, but he needed help from the state to fix an important kink: He couldn’t get past a certain page without providing mortgage information.

Alston didn’t have a mortgage. He needed help with overdue property tax payments on the home his family bought 50 years ago in Iselin, in Woodbridge Township. Alston fell behind while waiting for his unemployment checks, which took six months to make their way into his bank account.

Throughout March, he uploaded additional forms that the HMFA requested. Six months later, the state approved his application, but for $10,700, about $5,000 less than the total he owes.

“I don’t understand why they wouldn’t cover everything, since $15,000 is below the $35,000 maximum they said they would pass out,” Alston said. “A couple of times I called and couldn’t reach a person, or the phone would just hang up. I thought, ‘Who’s running this program, Scooby-Doo?’ The process wasn’t too bad in the end, though.”

It took a little more than three months for the HMFA to approve Marcell Holiday’s application to pay back roughly $34,000 in outstanding mortgage payments — a process that he said went much more smoothly than what he experienced with his mortgage company, Cenlar.

Holiday, 43, worked a commission-based job for Medical Guardian, selling life alert devices. When the pandemic struck, fewer calls came in, which meant he had less income to support his family.

He said multiple Cenlar employees told him the company’s forbearance program would allow him to temporarily stop making mortgage payments on his home in Clementon, in Camden County, and tack those skipped payments on to the end of the mortgage.

But after a year, Cenlar told him he owed all those skipped payments in one lump sum, about $11,000, as well as additional fees. As he fought to get a loan modification, the amount swelled to around $34,000, and Holiday knew he had to find an alternative to pay back the funds.

Holiday said he wishes the application had been “a little faster” and that “communication with the state could have been better.” It took several phone calls with the agency to upload additional documents, and he had to email an employee after adding anything or the agency wouldn’t be aware he had made a change, Holiday said. But he bit his tongue even though he was frustrated, because of what the money meant to his family.

“It means the opportunity of keeping our first home, which we already put so much money into, and planned to add a studio for my photography business,” Holiday said. “It’s a great location for our children school-wise, with a bit of land. We didn’t want to be kicked out of our home due to miscommunication with our mortgage company.”

This article originally appeared on NorthJersey.com: NJ has passed out little of its $270 million in homeowner relief