Ocean County halts all foreclosure auctions, fears NJ law encourages phony nonprofits

Ocean County has postponed the foreclosure auction scheduled for July 23 amid concerns that unproven nonprofit agencies are taking advantage of a new law that was designed to even the playing field at sheriff's sales with investors.

Ocean County Sheriff Michael G. Mastronardy said his office has sold a dozen properties that prompted an outcry from bidders that the process wasn't fair. It plans to pause the sales indefinitely until it received more guidance from lawmakers.

"When they (enacted the law), it caused some problems, like, what designates a nonprofit?" Mastronardy said. "Until they straighten it out, we just wanted to not compound the problem and sell more properties that people complain about."

New Jersey established the Community Wealth Preservation Program in January in a bid to give low- and moderate-income residents who are foreclosed on a chance stay in their home.

Why is it so hard to find an NJ home? Here's the answer buyers are seeking, and what needs to change

The law was seen by supporters as a tool to help New Jerseyans find affordable housing in a market that has seen a proliferation of investors purchasing homes to either rent or remodel and resell at a higher price. The Asbury Park Press in 2022 found the number of LLCs owning single- to four-family homes soared from 12,000 in 2012 to more than 72,000 in nine years.

Meantime, the median price of a single-family home statewide has climbed 71% in five years, while the inventory of homes for sale has declined by 65% during that time, according to the New Jersey Realtors Association, a trade group.

The Community Wealth Preservation Program gives homeowners experiencing foreclosure, their next of kin, or tenants living in a foreclosed property the first chance when the property goes up for auction at making the minimum price a seller would accept.

NJ real estate: Ocean County home prices dipped in June; see how the average price has fallen

The law then gives a nonprofit community development corporation the second chance if it agrees in writing to buy the property for the foreclosed-upon family, their next of kin, or the tenant. The organization must negotiate an affordable lease for the family and give them the option to buy the property back from the organization.

The law is administered by the county sheriffs. Morris County Lt. Michael Turkot, who leads the civil process committee for the Sheriff's Association of New Jersey, said nonprofit organizations that aren't well known are attending the sales, raising questions among sheriffs.

Turkot said he has reached out to the legislation's lead sponsor, state Sen. Britnee Timberlake, D-Essex, for more guidance.

NJ real estate: NJ's most expensive home for sale is in Colts Neck. Here's what $28M will buy you.

"We just want to make sure we can properly vet (the nonprofit groups) to ensure they are the types of companies that are doing the business of the intention of the law — to revitalize communities and keep people in their homes," Turkot said.

"Hopefully we'll be able to find a resolution sooner than later because nobody want sheriff's sales to stop," he said. "It doesn't really help anybody and it certainly doesn't put any of the people who are potentially losing their homes at ease."

Ocean County has 51 properties listed for sheriff's sales, although 18 have been adjourned to a later date or postponed.

It isn't clear if other counties have followed Ocean County's lead and postponed sales. In Morris County, the sheriff's sale is going on as scheduled, Turkot said. Monmouth County officials didn't return a call for comment, but its website has a sheriff's sale scheduled for July 29.

Commercial real estate: After eight-year lawsuit with Belmar, Boathouse owners fight off foreclosure and $4M debt

The law's advocates were surprised to hear about complaints, noting it shouldn't be difficult to ensure nonprofit groups are legitimate since they are required to file vigorous paperwork with the IRS to obtain tax-exempt status. And the law allows sheriff's to fine bad actors $100,000 and more for violations.

"I haven't heard this (happening) in any widespread way from any of our members … that would cause a county to forgo its foreclosure sale," said Staci Berger, president and chief executive officer of the Housing and Community Development Network of New Jersey, an affordable housing group.

Michael L. Diamond is a business reporter for the Asbury Park Press. He has been writing about the New Jersey economy, real estate industry and health care industry since 1999. He can be reached at mdiamond@gannettnj.com.

This article originally appeared on Asbury Park Press: Ocean County halts all foreclosure auctions, fears NJ law encourages phony nonprofits