From the Record:
The number of New Jersey homes repossessed by lenders may increase by 49 percent, and maybe by as much as 140 percent, by the end of 2013, depending on how fast foreclosures move through the courts, according to a new government study.
The report released Friday by the Federal Reserve Bank of New York, made predictions about future trends in banks’ repossessions of residential properties from defaulted borrowers, based in part on the average time it takes to foreclose, which varies from state to state, and is always in flux.
If the average number of days it takes to foreclose on a property declines, for example, lenders’ repossessions “would rise sharply in most states, tripling in New York and more than doubling in New Jersey,” the study performed for the New York Fed by CoreLogic said.
As of June, lenders in New Jersey had nearly 1,979 properties on their books, and New Jersey ranked 38th among 50 states, the New York Fed said. The top three states were California with 49,299 repossessed properties, or 11.1 percent of the nation’s total; Florida with 44,677, a 10.1 percent share; and Michigan with 38,275, an 8.6 percent share.
The report also found that 16.3 percent of New Jersey residential property sales in July were distressed sales compared with 33.8 percent for the nation. Distressed sales include foreclosure sales, short sales and deeds in lieu of foreclosure.
In New Jersey, residential foreclosures tend to crawl through the court system, taking more than 900 days on average, said John McWeeney, president of the New Jersey Bankers Association.
A bill sponsored by state Sen. Raymond Lesniak, D-Union, may, if passed, speed foreclosures of abandoned properties, McWeeney said.
If the average time it takes to foreclose in New Jersey increases in the coming months, the backlog of foreclosed homes in the pipeline is such that the number of repossessions would still rise substantially, by an estimated 49 percent, according to the New York Fed report. On the other hand, if the duration decreases, the number of repossessed properties may climb 140 percent.
“That sounds accurate,” said McWeeney.
Although a foreclosure is a tragedy for a family that loses its home, bankers and economists say the market will not fully recover until an oversupply of distressed properties is resold and cleared from the market.
Once the bank owns the home, it is likely to be sold quickly because lenders do not want to pay the real estate taxes, insurance and maintenance costs, said economist Joel Naroff of Naroff Economic Advisors.
Some banks may be dragging their feet on foreclosing for economic reasons, because home values have declined and they are reluctant to recognize those losses on their books, according to Naroff. Once they foreclose, the losses have to be recognized, he said.
“If banks start seeing prices rise, will they wait longer? They might,” Naroff said.
McWeeney said most banks have been writing down the value of their problem loans before they take possession, so that is not an issue for most banks.