New Jersey Real Estate Report

From the Star Ledger:

Next N.J. governor is in hands of voters

Now it’s voters’ turn: Polls will be open across the state from 6 a.m. to 8 p.m. today for the General Election.

Three major candidates, Democratic Gov. Jon Corzine, Republican Chris Christie and independent Chris Daggett, along with seven others, are seeking to become the state’s next governor.
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In addition to the governor’s race, all 80 seats of the General Assembly are open, and there is a special Senate race in the 23rd Legislative District to fill the two-year unexpired term of Rep. Leonard Lance (R-7th Dist.).
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Voters also will be asked to decide whether the state should borrow $400 million to replenish the Garden State Preservation Trust. The bond issue would set aside $218 million for open-space purchases, $146 million for farmland preservation, $24 million for wetlands protection and $12 million to save historic sites.

From HousingWire:

IRS Wrongly Gave Homebuyer Tax Credit to Resident Aliens, Minors: Watchdog

The Treasury Inspector General for Tax Administration (TIGTA) believes the Internal Revenue Service (IRS) may have paid out millions of dollars in first-time homebuyer tax credits to individuals not eligible to receive the $8,000 credit.

Nearly $4m of incorrectly paid credits were due to both alleged fraud and filing errors on claims by 580 taxpayers less than 18 years old. The youngest of these was 4 years old, TIGTA head J. Russell George said in prepared testimony to the House Ways and Means Oversight subcommittee.

TIGTA also found 3,200 taxpayers with Individual Taxpayer Identification Numbers (ITIN) claiming the credits. ITINs are generally used to track income tax for resident aliens, in lieu of a social security number.

While the legislation creating the tax credit does not specifically address resident alien eligibility, other laws prohibit aliens residing without authorization in the US from receiving most federal public benefits, George said. It is possible that as much as $20.8m in tax credits were paid to resident aliens ineligible for the credit.
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But shortly after the IRS began administering the tax credit, the TIGTA office suggested additional fraud and error reporting measures, like requiring taxpayers submit a copy of their Department of Housing and Urban Development (HUD) Settlement Statement, known as the HUD-1 form. TIGTA also recommended verifying the information on Form 5405 and manually transcribing paper versions of Form 5405.

The IRS rejected both proposals, saying requiring the HUD-1 form would be burdensome to taxpayers and may deter them from taking the credit. IRS also indicated the tax credit was approved too late to manually transcribe the paper Forms 5405.

As a result of the IRS’ decision to not implement the additional checks, George said, more than 19,300 electronically filed 2008 tax returns improperly claimed the tax credit for homes that had yet to be purchased at the time of the tax filing. He said more than $139m in erroneous claims were paid to these individuals.
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George said his office also identified nearly 74,000 fraudulent claims for the tax credit by individuals who did not qualify because they were not considered first-time homebuyers. These individuals claimed deductions of home mortgage interest, real estate taxes, deductible points and qualified mortgage insurance premiums on previous years’ tax returns, indicating they had owned a home within the past three years.

From the Star Ledger:

Solomon Dwek, central witness in N.J. corruption probe, is expected to plead guilty to bank fraud charges

Solomon Dwek, the key witness in the massive federal corruption and money laundering sting that rocked the state’s political landscape, is expected to plead guilty today to charges in connection with a $50 million bank fraud in 2006 that first brought him to the attention of authorities.

Dwek, 36, is to appear first in federal court. Later in the day, he is expected to be in Superior Court in Monmouth County to plead to similar state charges, according to a person familiar with the investigation who did not want to be identified because he was not authorized to speak about the matter.

Officials at the U.S. Attorney’s office issued an advisory saying only that “a central figure” in the July 23 arrests of 43 people on public corruption and money laundering charges would appear in federal court Tuesday before U.S. District Judge Jose L. Linares in Newark. A spokesman for the office declined to answer questions and Dwek’s attorney did not return calls to his office.

Dwek was initially arrested on the fraud charges in May 2006 after he deposited a bogus $25.2 million check into a closed PNC Bank account he controlled. According to the original criminal complaint, Dwek went to a drive-in window at the bank’s Eatontown branch. The check was drawn on an account he controlled, but the account had been closed and had no money in it.

From Bloomberg:

Mortgage Bankers Push for New Federal Loan Guarantee Program

Mortgage bankers are pushing Congress to expand the U.S. government’s support of the market by guaranteeing private-industry home-loan securities and replacing finance companies Fannie Mae and Freddie Mac.

The first step builds off the model for Ginnie Mae, the agency that guarantees payments on bonds backed by government- insured mortgages, according to a report today by the Washington-based Mortgage Bankers Association. The second part involves winding down government-seized mortgage buyers Fannie Mae and Freddie Mac and creating “two or three” new privately funded, government-chartered companies to back individual loans.

“We wanted to put forth a structure we think that has elements in it that respond to a lot of the discussion and debate on Capitol Hill,” Mortgage Bankers Association President John Courson said in an interview.

Putting the “full faith and credit” of the U.S. Treasury behind a portion of the $1.8 trillion non-agency mortgage market would help boost a once-dominant form of home-loan financing that almost collapsed in 2007 as delinquencies rose. The association, which represents about 2,400 lenders, mortgage brokers, commercial banks, thrifts and other companies, said the importance of housing to the U.S. “economic and social fabric” warrants a federal government role in mortgage liquidity.

“There’s a lot of white canvas that has yet to be painted on,” said Courson, who is also president and chief executive officer of Central Pacific Mortgage Co. in Citrus Heights, California. “. We don’t have all the answers. We just wanted to put a structure out there to guide the debate.”
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The new structure would remove the credit risk from the mortgages and leave investors with the interest-rate risk, the association said in the report. In a separate statement, the group said the government guarantee is intended only to support “products needed to keep the secondary market for core mortgage products liquid and functioning.”

From Bloomberg:

Geithner Rents Westchester Home After Failing to Sell

U.S. Treasury Secretary Timothy Geithner is renting his home in Westchester County, New York, for $7,500 a month after failing to find a buyer, according to data on the Westchester-Putnam Multiple Listing Service Inc.

Geithner, 47, was trying to sell the brick and stucco Tudor-style home, the listing shows. The house on Maple Hill Drive has five bedrooms, about 3,600 square feet, and an eat-in kitchen with Siematic cabinetry and black granite countertops.

“Careful attention has been paid to the design of every feature of this sophisticated home,” according to the listing.

The home was marketed in February for $1.635 million, according to Scott Stiefvater, president of Stiefvater Real Estate in Pelham, New York. The price was reduced to $1.575 million in May, he said.

The inventory of similar homes for sale in the area may have affected the property’s prospects, said Debbie Meiliken, a broker at Keller Williams Realty New York.

“There was a lot of competition,” Meiliken said. “Sometimes people will put the house for rent if they’re not prepared to sell it and take a loss.”

Home sales in Westchester County fell 41 percent in the first quarter from a year earlier, according to an April 27 statement from the Westchester-Putnam Multiple Listing Service. The county’s median home price fell 14.5 percent to $532,000, the organization said.

From the NY Daily News:

Geithner taking loss on home

Treasury Secretary Timothy Geithner may know something about the stock market, but like most Americans he can’t control the housing market.

Unable to sell his luxurious five-bedroom Tudor in Mamaroneck even when he dropped the price, Geithner is renting out the place - at a probable loss, according to Westchester real estate agents.

When he moved to Washington to become President Obama’s top economic official, Geithner and his wife, Carole Sonnenfeld Geithner, put the house on the market for $1.635 million. Records show the couple paid $1.602 million for the home in 2004.

There were no takers even when he dropped the price to $1.575 million. So he rented the pad to an unidentified family for $7,500 a month in May. Real estate experts told the Associated Press that he’s probably losing on the deal, since he has two mortgages worth $1.25 million plus $27,000 in annual property taxes.

From the Home News Tribune:

In Middlesex Borough, $500 daily fine possible if foreclosed properties aren’t maintained

A proposed ordinance could ensure foreclosed properties are kept up in the absence of a live-in owner at the threat of a $500 daily fine for noncompliance.

Councilman Michael Class said he began working on the ordinance after residents came to him complaining that foreclosed properties in their neighborhood were not being maintained.

“We’ve had a couple instances in town where the bank forecloses and . . . they don’t take care of the property. The grasses start growing long, the papers start piling up outside the house. Sometimes when people move out they leave behind a lot of garbage, and it never gets cleaned up,” he said. “There’s nothing currently on the books that protects neighbors when this kind of thing happens.”

In order to keep the properties maintained until a new buyer is found, the ordinance would require the new owner after foreclosure — most likely the bank or mortgage company — to register the property with the borough at a proposed registration fee of $50, Class said.
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If the complaint did reach the court level, Johnson said the judge could either fine the offending party or give them another opportunity to clean it up.

If, at that time, the property wasn’t clean, fines would be imposed.

“It’s up to the judge to say what kind of fine he’s going to impose, but he has the discretion of going up to 500 bucks,” he said. “The fine can be a continuing fine for each day, so . . . they’re not going to let that kind of a thing happen because it’s much too expensive. It’s much cheaper for them to hire someone to clean up the place than to (pay the fines).”

From Bloomberg:

Tax-Weary New Jersey Residents May Reject More School Budgets

New Jersey residents may reject a greater percentage of school budgets than last year when they go to the polls today amid dissatisfaction with rising property taxes that are already the nation’s highest.

Schools represent the largest portion of the real-estate tax bill in New Jersey, where the average levy exceeded $7,000 last year from about $4,100 a decade ago. Citizens in more than 90 percent of the state’s 603 districts have the chance to vote on schools’ annual spending plans.

A year ago, 74 percent of school budgets were approved in an election that drew 14 percent of voters. The last time fewer than half of spending plans passed was 1976. The threat of higher taxes may draw more people to the ballot box to vote “no” in a year when residents are already coping with rising unemployment and foreclosures, plunging stock values and a state budget that proposes other tax increases.

“The school districts are aware of the financial conditions out there,” said Frank Belluscio, a spokesman for the New Jersey School Boards Association. “We’re going to have a drop off of approvals from last year, but a majority should pass.”

Most of New Jersey’s school districts must have budgets approved by voters every April. Planned spending this year is largely flat or anticipates a less than 4 percent increase, because educators understand that voters’ personal finances have deteriorated, Belluscio said.

“If there’s going to be a year when we’re going to see a major number of them rejected, I would expect it to be this year,” said Jerry Cantrell, president of the New Jersey Taxpayers Association, an anti-tax group. “New Jersey is a state that has been majorly impacted by the fiscal downturn.”

From the Philly Inquirer:

New Jersey faces “historic” tax-revenue drop

New Jersey is facing a “historic tax-revenue collapse” that could leave the state with a $100 million deficit by the end of the next fiscal year.

That was the assessment of Budget and Finance Officer David Rosen of the nonpartisan Office of Legislative Services, who presented his findings to the Senate budget committee yesterday.

“New Jersey finds itself in the most significant revenue downturn in its modern history,” Rosen said.

Rosen projected that New Jersey would bring in $606 million less in revenue than previously anticipated by the Corzine administration from the current fiscal year through the end of the next on June 30, 2010.

If that estimate holds true, the state would be forced to make more spending cuts or increase revenue to balance the budget, as required by the state constitution.

Rosen said that only twice in the last four decades did the state’s revenue decline from one year to the next. Revenue declined 2.1 percent in fiscal 1975 and 1.9 percent in 2002, he said.

The Office of Legislative Services estimates that revenue for the current fiscal year, which ends June 30, will drop 11 percent from the previous year. For fiscal 2010, OLS projects a decrease of 3.7 percent.

Declining income, sales, and corporate tax revenues helped fuel the projections.
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State Treasurer David Rousseau, who addressed the Senate budget committee yesterday afternoon, noted that a difference of $600 million over two years of state revenues amounted to less than 1 percent. But he acknowledged that the difference, if accurate, would affect the budget.

Rousseau said the administration would adjust revenue estimates downward if warranted.

“This administration continues to work to find every dollar of savings we can, and we will not shirk our responsibility to provide additional recommendations to balance the [fiscal 2009 and 2010] budgets if further revenue reductions are warranted,” Rousseau said.

Rousseau is slated to present new revenue figures in late May, which will include critical April tax collections.

From the Jersey Journal:

MAYOR CAN’T HANDLE TRUTH IN ADVERTISING

Mayor Dave Roberts pulled out the political big guns yesterday to take down a billboard that offended him.

Jersey City real estate firm Metropolitan & Waterfront Residential Brokerage paid for the billboard outside the Hoboken PATH station that read: “Cut your Hoboken property taxes 47%. We’ll help you leave.”

The sign, which was up for only a day, referenced Hoboken’s state takeover and subsequent massive tax hike. The overall property tax rate for Hoboken property owners increased 47 percent for the fiscal year that ends June 30. The municipal tax rate rose 84 percent.

After hearing from Roberts and others, Jaime LeFrak - a principal of the LeFrak Organization and a Jersey City waterfront developer who has a one-third interest in Metropolitan & Waterfront - ordered the billboard removed, a process he said would take about a week.

But Roberts was not about to wait that long.

The mayor called NJ Transit “several” times yesterday and the agency removed the billboard from its property last night.

“It’s outrageous they’re trying to use this as a marketing tool, which is totally inappropriate. Now we have a developer from Jersey City mocking our situation?” said Roberts.
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“I received friendly requests from other people who kindly asked us to think of a different advertising campaign and we obliged,” said LeFrak.

“We don’t legally have to take it down, but we’re nice guys and if someone asks you in nice way to do something as a friend we’ll do it.”

Roberts said he and LeFrak had a heated exchange.

“I would not tolerate it if a Hoboken developer started printing the murder rate in Jersey City - that kind of advertising would be despicable,” said the mayor.

From Inman News:

New Jersey bill seeks to lift rebate ban

New Jersey’s General Assembly on Monday voted 46-25 to pass a measure that allows real estate brokers in the state to give rebates to homebuyers — counterpart legislation has not yet been passed by the state Senate.

The New Jersey Association of Realtors, a statewide real estate trade group, had earlier expressed opposition to the rebates, which were proposed in legislation introduced last year.
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The legislation, A-373, seeks to allow brokers to give rebates to both buyers or sellers, though the Assembly Regulated Professions Committee removed the provisions in the bill that would allow sellers to receive a rebate and clarified that “a rebate may only be paid to a purchaser of residential real property,” according to a committee report.

In order to receive a rebate on home purchases, “the broker and the purchaser (must) contract for such a rebate at the onset of the broker relationship in a written document, electronic document or a buyer agency agreement,” according to the bill text, and the broker must comply “with any state or federal requirements with respect to the disclosure of the payment of the rebate.”

Also, the broker must recommend that the buyer “contact a tax professional concerning the tax implications of receiving that rebate,” and that the rebate be paid as “a credit, reducing the amount of the commission payable to the broker, or a check paid by the closing agent” made at the time of closing, the bill text states.

From the Record:

Towns to lose more than $32M in state aid, Corzine says

The Corzine administration was the bearer of bad news again today when it told towns they will lose more than $32 million in state aid next year.

Towns whose residents make less money and have a heavier tax burden are slightly cushioned by the blow. Mu­nicipalities with higher incomes and lower taxes will be hurt the most.

Governor Corzine said he made awards “in a manner that’s consis­tent with need” and using a “formula that is reflective of the property tax burdens and the wealth” of towns. The Corzine administration cre­ated a sliding scale for aid per town based on the average income residents earn and taxes they pay. That means towns with high taxes and residents with less money — such as Passaic and Paterson — will not lose any aid.

And municipalities with higher incomes that pay lower taxes will get 5 percent less than last year. For example, in 2008 Franklin Lakes Borough received more than $2 million in aid and this year they will get $101,000 less.

“This is new ground, I don’t recall there being municipal funding that was based on that kind of formula,” said Bill Dressel, executive director of the League of Municipalities

Some big losers are:

Hoboken -$604,890
Morris Township -$178,529
Westfield -$167,283
Livingston -$160,878
Summit -$156,020
Holmdel -$135,345
Montclair -$127,669
Millburn -$126,871
Bernards -$120,511
Colts Neck -$112,740
Montville -$112,548
Franklin Lakes -$101,845
Ridgewood -$101,639

From the Record:

Property taxes by the numbers

Residential property taxes in New Jersey rose by just 3.7 percent last year but topped $7,000 for the first time, a new state report says.

The increase in property taxes is the lowest in at least a decade, and is below Gov. Jon Corzine’s 4 percent cap instituted through a special session on property tax reforms in 2006.

The data released by the state Department of Community Affairs, covering every municipality in the state, shows the average property tax bill rose $249, to $7,045.

In budget documents released today, the Corzine administration showcased the 3.7 percent increase, saying it shows “the stabilizing effect of the governor’s policies” after increases as high as 6.8 percent in 2006.

If the rate had remained the same as the past five years, the documents say, “last year’s statewide average tax bill would have been $193 higher.” There were 266 towns last year in which average bills rose 4 percent or less, according to the budget summaries released today by the Treasury Department.

Still, New Jersey property taxes have now increased by 55 percent since 2000, according to the latest data. Republicans were unimpressed by the new figures, which come amid a fiery debate over the property tax plans in Corzine’s proposed budget for next year.

From the Record:

Budget could deal middle-class homeowners a painful double whammy

The budget Governor Corzine unveiled Tuesday calls for eliminating property tax deductions on state income taxes next year, raising about $420 million to help balance a painful spending plan. But for middle-class New Jerseyans who would also lose their property tax rebates, the missing deduction could pack an extra punch.

Although many budget details had leaked in advance, the lost tax write-off caught many off guard. Corzine would remove the property tax deduction on income taxes for all but senior citizens, and eliminate property tax rebates for non-senior households making more than $75,000 a year. Non-senior households earning $50,000 to $75,000 would see their rebate check from last year slashed by a third. Last year’s program offered staggered rebates for households making up to $150,000.

That could translate into a double whammy for non-senior homeowners earning $75,000 to $150,000. They lose their rebate and hundreds of dollars from the deduction.

A homeowner earning $95,000, for example, would not only lose a $1,000-plus rebate. Scrapping the property tax deduction would take away another $350 or so, according to state figures.

“The loss of the deduction would make homeownership even harder for New Jersey residents who are struggling to make ends meet during this recession,” said Senate Minority Leader Tom Kean Jr., R-Union.

From the Record:

Where will governor find $4B in cuts?

Governor Corzine is preparing a new state budget that will reduce spending to below $30 billion for the first time since 2006.

The budget, which Corzine will present Tuesday to a joint session of the state Legislature in Trenton, will be about $4 billion smaller than the current spending plan.

Why the big reduction: Corzine, a former Wall Street executive, is working within the confines of a steep and widespread decline in state revenues caused in large part by the poor economy. Nearly every state revenue source, including sales and income taxes, is down compared with this time last year. Some sources, such as the realty transfer tax, have been hit extraordinarily hard by the recession. Economists don’t expect things to improve much, if at all, in fiscal 2010. The New Jersey Constitution requires a balanced budget, so Corzine is slashing spending in response.

How it got this bad: Corzine and legislators increased spending from around $28 billion when he took office in 2006 to $33 billion approved in June. They’ve spent more money on education, employee pension liabilities and property tax rebates than prior years and also faced rising debt payments tied to the state’s record $32 billion debt. But few programs were cut to compensate for the increases. Now, with revenue dropping by more than 10 percent, the balanced budget requirement is bringing dramatic cuts and few places to make them.

An opinion piece from the Hammonton News:

2006 property tax relief was only a mirage

The state is between a rock and a hard place.

On one hand, tax revenues are way down, and the state faces a $6 billion deficit next year because of the recession. On the other, there’s a gigantic state government and hundreds of local governments, school districts and other public entities in this state that take tens of billions of dollars to operate.

Facing dire economic times, it should surprise no one Gov. Jon S. Corzine is looking at doing away with property tax rebates most New Jersey homeowners receive. The rebates cost about $1.7 billion, and the state faces a $6 billion budget deficit for 2010.

But just because the recession is so profound, lawmakers shouldn’t be let off the hook for their failure.

If they had done tax reform the right way — by reforming government spending — the deficit might not be as large. Lawmakers might not have to increase property taxes, which is what taking away the rebates effectively would mean.

When they approved rebates in 2006, state lawmakers said they had a permanent solution to our highest-in-the-nation property taxes, which now average $6,800 annually for every homeowner.

The lawmakers instituted rebates — 20 percent back for households that earn less than $100,000; 15 percent back for households earning between $100,000 and $150,000, and 10 percent back for those earning between $150,000 and $250,000.

From the moment lawmakers approved rebates, we had doubts. How could rebates that could be taken away at any time, such as during an economic downturn, constitute permanent property tax relief? Only lowering property tax rates, so people actually pay less, would constitute permanent relief.

The rebates already are pared down for those in the $100,000 to $150,000 range, and they’re gone completely for households that earn more than $150,000. That happened after they were just a year old. Now, the rebates could be gone for everyone by next year.

If that happens, it will be as if our lawmakers did nothing after all their big talk in 2005 and 2006 about lasting tax relief. They didn’t fundamentally change our government and make it smaller and less costly, and they didn’t give us permanent property tax relief. They will have failed us.