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New Jersey Housing Suffers as Defaults Exceed Nevada: Mortgages

New Jersey Housing Suffers as Defaults Exceed Nevada: Mortgages

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New Jersey Housing Suffers as Defaults Exceed Nevada: Mortgages

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Piggybankblog posted on 09/18/12

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Cross linked with businessweek.com

Wendell and Margret Brady haven’t paid their mortgage in more than three years, withholding the money amid a foreclosure dispute on the couple’s 11-bedroom house in Morristown, New Jersey.

The Victorian home, built in 1887 and owned by the retired couple for 38 years, is part of the growing backlog of properties facing repossession in the state, which now has the second-highest serious delinquency rate in the U.S. While shrinking nationwide, the pipeline of distressed real estate, or shadow inventory, is also growing in New York, Connecticut, Maine and Pennsylvania because of state laws that slow the foreclosure process. The Bradys heard nothing from their lender from May 2011, until a letter arrived in the mail last week.

“This was like going back to day one,” said Margret Brady, 77, after she and her husband received on Sept. 15 the certified letter saying they must pay $223,730 by the end of the month or face losing the house. “It was like we hadn’t gone through any of the stuff of the last three years.”

New Jersey’s judicial review of all foreclosures, which delays seizures to help borrowers, threatens to hold down prices for years as properties remain subject to repossession and then may be sold at a discount. That’s buffeting a housing market already hurt by unemployment that’s risen to a 35-year high.

Passing Nevada

The state passed Nevada in the second quarter in the rate of homeowners with seriously delinquent loans — those 90 days late or in foreclosure — according to the Mortgage Bankers Association. Only Florida had a higher rate of serious delinquencies, and that fell 1.2 percentage points from a year earlier to 17.5 percent of mortgages. In comparison, New Jersey’s rose 1.3 percentage points to 12.7 percent.

While home values increased in July from a year earlier in 42 states, New Jersey prices fell 0.8 percent, according toCoreLogic (CLGX), a real estate services company based in Santa Ana, California.

“Housing is an albatross around New Jersey’s economy, which is one of the weakest in the country,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in an e-mail.

Standard & Poor’s revised its outlook on New Jersey today to negative from stable, citing the state’s optimistic revenue assumptions and longer-term spending pressures, including pension obligations and Medicaid funding.

Serious delinquencies as of June 30 were up 6 percent from a year earlier in New York, Connecticut and Maryland, and up 5 percent in Pennsylvania and the District of Columbia, the Washington-based Mortgage Bankers said on Aug. 9. The rate fell by 27 percent in Arizona, 24 percent in California and 14 percent in Nevada, among states worst hit by the housing crisis.

Shadow Inventory

“Shadow inventory is falling in much of the country –except for the Northeast,” said Zandi. “The implication is that house prices will be much weaker in the Northeast in coming years as these distressed properties eventually get sold.”

U.S. foreclosure filings plunged in late 2010 after attorneys general in all 50 states started investigating allegations of faulty and fraudulent paperwork used to repossess homes. The country’s biggest banks, including JPMorgan Chase & Co. (JPM) and Bank of America (BAC) Corp., agreed to a $25 billion settlement in February.

In New Jersey, where about 60,000 foreclosures started since January 2008 still await resolution, borrowers in the foreclosure process haven’t made a payment for an average of 934 days, according to Lender Processing Services Inc. (LPS) New York, at 953 days, and Florida, at 938 days, are the only states with longer time frames. The U.S. average is 742 days.

Robo-Signing Scandal

New Jersey’s foreclosure process ground almost to a halt in December 2010 after state courts threatened to suspend seizures by six of the largest banks unless they showed they had processes in place to ensure that information in uncontested foreclosures is based on a personal review of records. State Supreme Court Chief Justice Stuart Rabner said the lenders were implicated in “robo-signing,” using assembly lines of workers to sign foreclosure documents without verifying them.

The Bradys were among those caught up in the scandal. In September 2006, they took out a $485,000 loan from a division of General Motors Acceptance Corp. on their home, which has an assessed value of $650,000, according to public records. The debt paid for home improvements and medical bills for their daughter, Karen Quinlan, Margret Brady said. They missed a payment in November 2008, the month after their daughter died of cancer, Brady said.

“We used her life insurance to catch up, which was $10,000,” she said. “We thought we were even, but they kept putting on these bogus charges.”

 

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