Shocker – Not foreclosing on delinquent homes means high delinquencies

From the Star Ledger:

N.J. has highest rate of distressed mortgages in nation, study shows

A greater share of residential mortgages in New Jersey were distressed at the end of the second quarter of this year than any other state in the nation, new data shows.

The data from the Mortgage Bankers Association’s National Delinquency Survey shows 10.2 percent of mortgages in the state are either in foreclosure or at least three months behind on payments, according to Patrick O’Keefe, director of economic research with CohnReznick. The national rate stood at 3.95 percent.

O’Keefe wrote in a memo that New Jersey’s distressed mortgage rate was the “highest among all states for the seventh consecutive quarter.”

The association’s survey also shows the percentage of mortgages in New Jersey in the foreclosure process remained top in the nation despite a drop in the state’s foreclosure inventory.

“As has been the case since the fourth quarter of 2012, New Jersey, New York, and Florida had the highest percentage of loans in foreclosure in the nation,” Marina Walsh, the Mortgage Bankers Association’s vice president of industry analysis, said in a statement.

New Jersey’s foreclosure inventory rate was 7.31 percent, according to the report, while New York had the second highest rate at 5.31 percent. The report also noted that both states have a judicial foreclosure process.

“New Jersey’s relatively slow pace in reducing it distressed mortgage inventory is partially attributable to its status as a ‘judicial foreclosure’ state,” O’Keefe wrote. “Court supervised foreclosures entail procedures that are more rigorous – and time consuming – than administrative actions.”

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63 Responses to Shocker – Not foreclosing on delinquent homes means high delinquencies

  1. chi says:

    10.2? Are you fcuking kidding?

  2. grim says:

    Short of evicting half of NJ’s urban areas, that number has little chance of improving.

    This concept of “deep underwater”, I think helps illustrate the problem.

    Atlantic City Metro Area – You have 9.5% of mortgages that are currently greater than 200% of LTV.

    Trenton Metro Area – 10.9% of mortgages in excess of 200%

    NYC Metro Area – 10.3%

    This is a huge cross section of these areas – owing more than twice the value of the property. Unsustainable. What do you do? Foreclosure is likely the only solution. Even if everyone were to stay current, it would take more than a decade to bring this number down. And what then? The owner would have little to show for the effort. Walking away makes more financial sense.

    So you need to decimate the urban areas to allow them to repair? How does anyone pull this off politically. There are certain zip codes in Newark, Paterson, Camden – where you would need to evict nearly 50% of mortgaged properties. These are not at all evenly distributed, where the local impact would be muted.

    It’s also why I wear a tinfoil hat and say that I believe there is an active, concerted effort to create a foreclosure log-jam in these areas, because the powers-that-be know that if wholesale foreclosures and evictions start, they’ll be left to deal with the fallout.

  3. Juice Box says:

    Wait till some creep shows up in Times sq with his junk painted….

  4. Marilyn says:

    I often take rides thru Highland Lakes, NJ and NW NJ its a blood bath out here. Its bad. The worst I have seen it. Just in Lake Foreclosure there are a lot of empty houses. You cant tell the dividing line of NYS and NJ anymore. Its becoming the Catskills. Its a mess. One week till I leave , closing tomorrow with my friend. I will never buy rural again! I don’t care how much I love the woods. Vacation in the woods don’t live there is the lesson! I cant help my excitement to move into my new house!

  5. grim says:

    5 – the difference there is that while the percentages are high, the net totals are low in comparison. 10% of Newark is a much bigger number than 10% of Wantage.

  6. grim says:

    BTW – If I had to pick the top foreclosure area out there, Vernon for sure, not Lake Hopatcong.

  7. anon (the good one) says:

    are you Gary?

    Marilyn says:
    August 18, 2015 at 7:27 am
    I often take rides thru Highland Lakes, NJ and NW NJ its a blood bath out here. Its bad. The worst I have seen it. Just in Lake Foreclosure there are a lot of empty houses. You cant tell the dividing line of NYS and NJ anymore. Its becoming the Catskills. Its a mess. One week till I leave , closing tomorrow with my friend. I will never buy rural again! I don’t care how much I love the woods. Vacation in the woods don’t live there is the lesson! I cant help my excitement to move into my new house!

  8. D-FENS says:

    7 – even in comparison to South Jersey?

  9. grim says:

    No, added the qualifier, just for Sussex.

  10. grim says:

    Sparta I think is up there too, once you factor in property values in addition to the volumes. But, I think for the case of Sparta, we all expected that. They were a major beneficiary of the ex-urban flight, and late-stage bubble buyers.

  11. Marilyn says:

    Im in Morris County, Jefferson Township, Lake Stockholm, which I call Lake Foreclosure. However by tomorrow I am no longer a home owner in NJ. I am next week a home owner in Raleigh, NC. NO I am not Gary. Gary probably made out much better than me. Im sure of it. I basically donated my house to charity to help a disabled friend. However I do feel good about helping someone!! Right Pumpkin!! That’s the charitable thing to do.

  12. Marilyn says:

    Good thing is you cant even call me a comp killer anymore! HAHA!!

  13. grim says:

    Hell, maybe 30yr can weigh in, I’d wager a guess that Sussex County is actively closing on a higher percentage of foreclosures on a weekly basis than Essex is.

    Essex currently running about 25-30 dispositions a week. So figure, 1300 to 1600 in a year. Will take 5 years at this pace to sell all the existing foreclosures.

    Sussex currently running about 12-15 dispositions a week. 600-800 a year thereabouts. Will take 3 years at this pace to sell all the existing foreclosures.

    Given Essex has approximately 5x the number of housing units that Sussex has, I’d imagine the rate should be better than 2x.

  14. grim says:

    Who is New Assets LLC and why the heck are they so active in Morris Co. foreclosures?

  15. brian says:

    Long time lurker here with a real estate question for the group. My wife and I were not in the market for a new home, but found something we absolutely love in Morris County last week while driving around my in-laws neighborhood. Since we were not actively looking for a new home (and focused on this one home only), we think it might be in our best interest to use a buyers agent that offers a commission rebate (1-1.5%) Has anyone used one of these before? If so, would you please share your experience — either positive or negative.

  16. 30 year realtor says:

    Passaic and Essex Counties are auctioning about 100 mostly urban properties a month each. This may only be a drop in the overall bucket, but the numbers have been growing steadily.

    There is a very limited market for these properties. Very few qualified owner occupants looking to purchase in the areas where the current crop of REOs are located.

    Long way to recovery for the NJ urban real estate market.

  17. 30 year realtor says:

    New Assets is my competition is Bergen, Essex, Morris and Passaic Counties. I am getting ready to expand into Union County which is where they are from.

  18. grim says:

    It does look like the pace is beginning to pick up, there should be a sizable improvement in the year-over-year numbers by this time, if they can keep it up.

  19. 30 year realtor says:

    Sussex County does not have a group of regular bidders at their sale. There is rarely anything equitable to bid on. Low property values, underground fuel storage tanks, septic systems and generally high cost of renovation work makes most properties inequitable at any price.

  20. D-FENS says:

    10 – got it.

  21. grim says:

    20 – concur, just long strings of $100 in the listings. But, at least, they are moving properties through.

  22. 30 year realtor says:

    The interesting thing right now with sheriff sales is how plaintiffs are adjusting their approach to bidding. A plaintiff (lender) is bidding at the sale to protect their interest. In the current climate the plaintiff’s judgement almost always exceeds the value of the property, often substantially. A plaintiff has the right to bid as high as their full judgement amount but can stop bidding at any amount they choose. Currently a few plaintiffs are choosing to make dramatic cuts to their upset prices to entice bidders so they do not have to take properties back. Over the last month the trend has been spreading.

  23. D-FENS says:

    16 – Don’t fall in love with the house. That’s your first mistake.

  24. 30 year realtor says:

    D-FENS – the whole idea of over paying for a home as a retail purchaser is dependent on how long you intend to live in the house. If you are taking a mortgage and the transaction is dependent upon an appraisal you are unlikely to over pay dramatically. My point is that if you are purchasing a home to live in for the next 30 years and it has everything you are looking for, you should reach to get it. The value of single family homes is in enjoyment.

  25. 30 year realtor says:

    Morris County is one of the few Counties that reports the names of purchasers at sheriff sale. New Assets, as best I can tell is a couple of young Latino real estate brokers from Elizabeth with some deep pocket investors. I am impressed by them. They appear well prepared and well funded.

  26. NJT says:

    #23 Yeah, I’ve been seeing a bit of that in my town here in Warren County. At first I was like “Why are they judging the property value so high when there is not that much owed?”. Then I realized the strategy when I saw the plaintiff(s) bidding at auction.

  27. leftwing says:

    New Assets buying to flip or rent?

    Looked at some of their buys. Not bad purchase prices for locations. Obviously depends on what’s inside the four walls.

  28. leftwing says:

    23. Quick glance says Wells Fargo just wants them off the books. More than a couple at big discounts to judgment.

  29. anon (the good one) says:

    yep

    30 year realtor says:
    August 18, 2015 at 8:59 am

    The value of single family homes is in enjoyment.

  30. 30 year realtor says:

    Leftwing, New Assets appears to be buying for flips. Wells Fargo is the leader in cutting upset prices at sheriff sales in NJ.

  31. leftwing says:

    Which BTW makes sense. As I recall from about three lifetimes ago by the time a loan reaches this stage it is substantially reserved against. Meaning that the lender may actually book a *gain* on a sale at 50% or less of its judgment (mortgage loan).

  32. leftwing says:

    32 re: the logic for the banks of letting the bid go away from them at a discount

  33. 30 year realtor says:

    33 – much more to the decision than accounting. Real estate value, the cost of taking in an REO and getting it out the door and the volume of property lender is foreclosing on also play heavily into bidding strategy.

  34. 30 year realtor says:

    The house I bought for myself in Passaic County last week had a judgement amount of just over $600,000. Property value is about $450,000 in current condition. Upset price set by plaintiff was $201,200. Competitive bidding resulted in sale price of $275,000.

    I wish I could explain what plaintiff was thinking when they decided on bid amount. All I can do is theorize. In this case it may have been confusion over the legal address and a bad BPO. Another theory is that they are reading tea leaves.

  35. Grim says:

    That is interesting information, but the volume of those transactions still appears to be small in comparison.

  36. Anon E. Moose says:

    Lib [23, prev thread];

    You want to know just how bad commercial air travel is? Airbus has filed a patent application on airline seats with a pair or concave depressions in the back of them to fit the knees of the passenger behind you; so they can wring another 9 mm out of the seat pitch in steerage.

  37. leftwing says:

    30yr, agree. Point is if corporate made the decision to take a large reserve the local analysis above becomes that much easier. If the corporate hit is in the rear view mirror and the assets are on the bank’s books at say, 20%, of original loan amount it is a no brainer to pump the stuff out the door.

    Contrast that to a bank that still has the mortgages valued at say, 75% of original loan value. Their math is different. It may make sense for them to take the stuff back even with REO costs rather than allow a third party bid at 50% which means an effective hit of 33% across their portfolio. ((75%-50%)/75%)

    Again, I’m reaching back 25 years but reserves and writeoffs are a highly negotiated and political event in a bank. The operating units want them lower as they hit profitability (bonus pool) and affect careers (lotsa bad loans not good). Some reserves/writeoffs are mandated, once a loan goes 90 days there needs to be some reserve. The higher the reserve the easier it is to dump. I strongly suspect some regional/local banks will not let any third parties prevail at foreclosure sales because they haven’t properly reserved the entire portfolio. They can’t let their loans go at a discount or else the Feds will make them write down the whole portfolio and from a corporate/regulatory perspective they can’t afford that. So they credit bid the judgment and keep up the facade that there is value in the asset that doesn’t exist because they don’t have the capital to recognize the reality on the corporate/regulatory level.

    I don’t follow WFC but my guess is they took a big residential loan loss reserve in a recent quarter which means they will continue to blow this junk out until that reserve is used up.

  38. Juice Box says:

    re: Cattle calls at Airports, just four airlines control 80% of the US market.

    My 7 hour flight on United last week was not comfortable at all, the lighter-weight, slimmer seats have almost no cushion, and had a hard spot in the middle. I used my pillow under my butt for most of the flight. I also could not recline all they way because the old lady sitting behind me complained and the steward looked like he was on roids.

    The entertainment system kept freezing and rebooting. Red Hat Linux kernel circa 2004. TYhat would make it RHEL version3. There hasn’t been any patches since 2007 for that version.

    Could there be a little truth into Chris Roberts (One World Labs ) claim that he hacked United more than 20 times using the entertainment system? Scary…

  39. jcer says:

    39 that is my experience with united, I think getting rid of those damn entertainment systems would be a good thing. We were on a flight to Europe trying to sleep and the damn thing was broken and flashing from black to white for 8 hours.

  40. Grim says:

    My pet peeve is the entertainment controls on the top of the arm rest.

    I usually keep it off because the screen is distracting, but pushing any button turns it back on. Argh.

    Who thought that was a good idea?

    The same guy who thought it was a good idea to put the jack next to your thigh, which pretty much means the jack is destroyed by the torque on the plug after a couple of dozen real flights.

  41. homeboken says:

    Report: Airlines Installing Uncomfortable Bumps In Seatbacks Because It Pleases Them

    NEW YORK—According to sources throughout the commercial aviation sector, the nation’s airlines will begin installing awkwardly placed bumps in every airplane seatback this week because it reportedly brings great pleasure to them. “Over the next four to six months, across our entire fleet, we’ll be rolling out seats with an irritating array of lumps and ridges to painfully jab our customers in the back, and we couldn’t be more delighted about it,” said United Airlines CEO Jeff Smisek, speaking on behalf of all international, regional, and low-cost carriers, every one of whom admitted to deriving immense joy from watching their passengers squirm and search in vain for a tolerable position. “Let me make clear that these seats will be incredibly uncomfortable, and there is nothing more gratifying than making the experience of simply sitting during one’s flight an excruciating ordeal.” Smisek noted that for an additional fee, customers would be allowed to purchase seats with only a single, pointed protrusion in the lower back.

    Credit – The Onion

  42. D-FENS says:

    So, Anon, are you a Bernie Sanders guy now? Do you think Hillary can come back from the server in the bathroom thing?

  43. Libturd in Union says:

    Anon would support Ho Chi Minh if he was trending in the polls.

  44. Anon E. Moose says:

    bokoen [42];

    Its only funny because its true. Fast food restaurant seats are intentionally made to be uncomfortable (i.e., 15-minute chairs) so people eat and leave quicker.

  45. anon (the good one) says:

    free market

    Juice Box says:
    August 18, 2015 at 10:12 am
    re: Cattle calls at Airports, just four airlines control 80% of the US market.

    My 7 hour flight on United last week was not comfortable at all, the lighter-weight, slimmer seats have almost no cushion, and had a hard spot in the middle. I used my pillow under my butt for most of the flight. I also could not recline all they way because the old lady sitting behind me complained and the steward looked like he was on roids.

    The entertainment system kept freezing and rebooting. Red Hat Linux kernel circa 2004. TYhat would make it RHEL version3. There hasn’t been any patches since 2007 for that version.

    Could there be a little truth into Chris Roberts (One World Labs ) claim that he hacked United more than 20 times using the entertainment system? Scary…

  46. Condo 1987 says:

    Teresa Giudice’s Jersey Shore home sold back to bank for $100 at auction

    TOMS RIVER — Teresa and Joe Giudice are officially one house lighter after the reality show couple’s mortgage holder bought back their Jersey Shore vacation house at a foreclosure auction in Toms River for the minimum bid of $100. There were no others bidders.

    It was not unexpected, as Teresa, currently serving a 15-month prison sentence for fraud, and Joe, who faces a 41-month sentence, owe significantly more on the Manahawkin home — $348,025 — than the home is worth, approximately $290,181, according to Zillow.

    America’s Servicing Company holds the mortgage and initiated the foreclosure proceeding. The couple does have 10 days to pony up the money they owe and reclaim the house, and if not, they have about 30 days to vacate the house.

    The couple listed the home (along with their other two properties) in September, shortly before they were set to be sentenced in federal court for bankruptcy fraud and conspiracy to commit wire and mail fraud. The Manahawkin home was listed by the couple for $315,000, though the couple paid $347,000 for it in 2005, and renovated it after it was damaged in Hurricane Sandy. …….

    http://www.nj.com/entertainment/celebrities/index.ssf/2015/08/teresa_giudice_foreclosure_auction_jersey_shore_ho.html#incart_river

  47. Essex says:

    Greetings from Montauk. This place puts the Jersey shore to shame.

  48. Essex says:

    43. From a comedic / trainwreck standpoint this election is pure gold. I can’t wait to see Hillary in handcuffs, Trump debating Sanders on income inequality. And in the end whoever gets the job – good f’ing luck. They are gonna need it!!!

  49. Essex says:

    On a separate note what is it with women and tattoos ?!

  50. Condo 1987 says:

    We can’t solve income inequality, but Tatoo inequality reduction is making great strides

  51. grim says:

    Funny, Trump takes a hard-line on immigration, historically a conservative position, only he takes it just one step too far. So what do the other candidates do? Move to center, start talking about “humane” alternatives, guesses on which candidate starts talking about granting amnesty to try to differentiate?

    Ha ha, charade you are.

    At this point I have to wonder if Trump is just doing this to fuck with everybody.

    I don’t even know what reality is.

  52. Essex says:

    52. Nice “Animals” reference – kudos

  53. Libturd at home says:

    It is pure entertainment. After years of listening to Republicans call Dems ‘Soc1alists’ like it’s a bad word (while collecting social security and praising med1care), there’s a fairly good chance that the next president will be one.

  54. NJT says:

    Re: Squatters.

    A house here in town was foreclosed upon and purchased by the bank at auction in April. In May squatters moved in and are trashing the place. It’s six blocks away and won’t effect the value of my properties but it’s becoming an eyesore and the people are…’undesirables’. I think there are drugs being sold there, too!

    *Deal fell apart on the house I was going to buy here so we lived in this house for six months doing renovations (owner paid for materials) in exchange for rent while we waited for something else we liked to come on the market. Owner figured that the renovations would increase the value enough that she could sell it for a profit. Long story short she couldn’t get what she needed and had fallen far behind on the mortgage payments. I hate to see blight in my little town.

    My question: Why is the bank taking so long to put it on the market? I fixed all the major (and some minor cosmetic) stuff. If they wait much longer these vagrants might burn it down! Hmm…maybe that’s what the bank wants?

    *I could tell the Police that I think (I’m pretty sure) there are illegal drugs being sold there but I have no proof.

    What to do?

  55. joyce says:

    The vagrants are going to burn it down with you living in it?

  56. NJT says:

    No. I don’t live there anymore (and never will again though I might be interested in buying it to rent out as it’s zoned as a commercial property).

    Again, I lived there temporarily until we could find a house we liked (Victorian) because the one we were going to buy…seller backed out of at the last minute and we had already sold our house in another town.

    Again, the question is:

    If the bank now owns the house (since April) why are they waiting so long to put it on the market?

  57. Essex says:

    57. If banks ignore it perhaps it does not hit their balance sheet as a loss.

  58. Fabius Maximus says:

    #48 Essex

    I love Montauk. I managed to get a week off work at the start of the summer and spent a week camping. Mrs. Fab is doing a lot of camping with the kids at the moment, while I am working. I now spend my weekends moving them from campsite to campsite. They were in MA last week, they are at the Jersey shore at the moment, and I’ll set them up in Montauk on Saturday for the last Hurrah of Summer.

    If you have the right type of parking pass, Navy Beach is one of the best places. After that check out Ditch Plains.

  59. Essex says:

    We’ve enjoyed Ditch Plains. Nice place. I love the topography of the place and the lack of morbidly obese mouth breathers.

  60. leftwing says:

    “If the bank now owns the house (since April) why are they waiting so long to put it on the market?”

    “If banks ignore it perhaps it does not hit their balance sheet as a loss.”

    See my 38 above. Could be, one of many explanations.

    We tend to focus on one asset – the house on our block, a particular property at auction. Banks, depending on the institution, have portfolios of similar residential situations in the hundreds, thousands, or even tens of thousands. They look at individual properties from that portfolio perspective. If by disposing of a number of assets from a certain similar class (suburban loans in the Mid-Atlantic with LTV of 120%, REO, etc) they set a consistent value lower than current Fed standards the Feds will make them write down the entire portfolio, essentially marking to market. If the institution is not willing or capable of doing that now, they aren’t going to be selling those individual assets. They’ll take the slow bleed (REO expense), look to minimize that (no maintenance), and wait and hope the market bounces back enough to bail them out.

  61. leftwing says:

    Again, my info is dated, but I have to imagine the standards and oversight are even tighter now. Used to be that even just having – not evaluating – a current set of personal financial statements changed the risk profile of a non-performing loan.

    Two guys, both broke, not repaying their loan, everything else the same. One gives the bank a set of financials, the other doesn’t. The reserve against each was different.

    I am certain there are grids out there, maybe googleable, for the current residential situation. If an offer – for a loan at sheriff’s sale or REO – clears the grid or the bank’s loan net reserve they’d be insane to not take the offer.

  62. leftwing says:

    Also, another view from the seller’s (bank’s) perspective on your specific situation looking at the dates.

    Banks are massive regulated bureaucracies with multiple redundant layers.

    In April the asset changed from a non-performing loan to REO. File moves from a workout group to a new group. Different individuals in each group. Counsel likely changes. Summertime in a part of the bank where people go to retire. My guess, the new guy may not have even cracked the file until recently. And he has 200 more exactly the same on his desk he’s responsible for that are months and years older. Good luck.

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