Home foreclosures are still leaving New Jersey residents in limbo, not knowing what they should do or where they should go. These days, foreclosure is taking so long that homeowners in distress now have more than 2 1/2 years, on average, from the time the lender first initiates the process to the time they actually are forced out of the home. However, this delay will only get worse.
In December of 2010, the Chief Justice of the New Jersey Supreme Court announced an initiative to clean up the "robo-signing" problem of many mortgage companies. These banks, and others, cannot proceed until all of their paperwork is in order. As a result, foreclosures dropped 80% in 2011. This is not to say that fewer homeowners are defaulting, only that the banks are being held back from proceeding.
After topping 50,000 in 2008, 2009 and 2010, foreclosures filed in the state dropped to about 11,000 last year, according to the New Jersey Judiciary. That suggests there are tens of thousands of foreclosures waiting to be filed. Thus, there is the inevitability of a flood of foreclosures, once everything gets straightened out.
In the meantime this creates an ambiguous situation for homeowners and lenders. Homeowners can live in their homes for free, allowing many to pay other bills, but they live with the stress of knowing they ultimately will lose their homes and ruin their credit. Plus short sales can be difficult, and aren’t much better than a foreclosure on your credit score. At the same time, lenders are stuck with assets that are losing value and are not producing any income.
This may seem like a good thing for homeowners, getting to live in their homes for free for years, but ultimately there is a bigger price to pay. Having properties sit in foreclosure for years can harm neighboring property values, because financially distressed homeowners often fail to maintain their homes. In addition, until the courts get rid of the backlog in foreclosures, the residential real estate market will continue to be in the tank.
The whole situation reads like a good news-bad news joke. The good news is, you can live in your house for years for free; the bad news is, the economy is far from a real recovery until they start throwing you out.