According to a news report released this week, residential foreclosures in the state of New Jersey skyrocketed in the past year to make the Garden State one of the worst in the nation. According to Realty/Trac, a real estatet statistics firm, New Jersey’s foreclosure rate was up an astronomical twenty-nine percent from 2008 to 2009, with counties in the southern part of the state taking some of the hardest losses. Commercial foreclosures did far worse, rising sixty-eight percent in the past twelve months. Across the nation, foreclosures were up twenty-one percent between last year and the one before. The fact that New Jersey performed so much worse – particularly in the counties of Atlantic, Bergen, and Sussex – is indicative of that state’s especial struggles during the national economic crisis.
Experts are not predicting that the foreclosure rate will improve at any time in the near future, either. We know how the housing market crashed: banks lent high-dollar, completely unjustifiable mortgages to consumers who could not possibly repay them and most of which did not even understand how far in over their heads they were getting. Disturbingly, however, the crisis seems to have made its way through the sub-prime market and is currently affecting the middle class – most of whom did not necessarily make poor borrowing decisions. The major unknown factor at this point is where and when this crisis will ultimately end.
Experts are very concerned about what is being called a “shadow inventory” of foreclosures. Due to a slew of mortgage modification initiatives launched by the Obama administration, many homes hovering on the brink of foreclosure have been kept off the market. Obama has also asked many banks to not publicly list foreclosures. As a result, there is no real way to know how many distressed properties there truly are, and how many might flood the market at a point when these initiatives are recognized as failures or Obama lifts the request to not list the properties.
One of the biggest problems right now is so-called underwater mortgages, in which residents owe more money than the properties in question are actually worth. The second problem is the state’s phenomenal unemployment rate. Many middle class consumers who have lost their jobs – and with the state carrying a ten percent-plus joblessness rate (a thirty-three year high, according to the Department of Labor and Workforce Development), that’s lots of them – are being stretched too thin by the costs of their mortgages, and are unable to sell and escape, both because the market is so slow and also because they owe so much more than the houses are actually worth right now.
The worst might actually be still to come, as depressing as that is. The executive director of New Jersey Citizen Action, Phyllis Salowe-Kaye, was quoted as having said that many failing mortgages in the state might not fall over the edge until late next year or early next year. That’s scary, because it means that the numbers will continue to rise throughout 2010. The state’s Administrative Office of the Courts has announced that there is a five- to six-month backlog in reviewing individual foreclosure cases, meaning that many homeowners are left dangling wondering when the axe will fall. State budget cuts have left the office low on clerks, and unprepared to cope with a case load that has increased by an estimated fifty percent in the last two years.
The massive amount of distressed properties has had other impacts as well. Since last January, the state of New Jersey has obliged its mortgage lenders to attempt the mediation process with delinquent lenders. They aren’t required to make deals as a result, but the new requirements have still significantly slowed down the foreclosure process. As a result, the process has become even more stagnant. According to Salowe-Kaye, mediations are currently scheduled out through the month of April, creating a four-month backlog between the time when a foreclosure is legally filed and when her organization can get a mediation meeting with a lender. Add in the issues with the court waiting times, and you could have distressed homeowners sitting around in a home without paying for it for close to a year. The state is absolutely bogged down by the amount of foreclosures trying to be jammed through the system.
Former New Jersey governor Jon Corzone, obviously recognizing a sinking ship when he saw one, took about twenty-nine million of a failed forty million dollar initiative to cut mortgage amounts for troubled consumers to patch the massive budget hole. The Legislature has reallocated the rest of the funds for other uses. In the meantime, nobody has a good idea about what to do with the massive mortgage problems in New Jersey.
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