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New Jersey Might Be Heading for a Flood of New Foreclosures

Posted on Jun 27, 2011
As reported today in the Star Ledger, New Jersey may be headed for a flood of foreclosure suits brought by banks, once the key players have gotten their acts together. On December 20, 2010, New Jersey Chief Justice Stuart Rabner announced an initiative to clean up the "robo-signing" problem of many mortgage companies, including Bank of America, JP Morgan Chase, GMAC Mortgage, CitiBank, OneWest Bank and Wells Fargo.

In fact, as of June 9 of this month, foreclosure paperwork for pending and future cases must include an affidavit certifying that either an employee of the lender or an employee of the lender's servicer has personally reviewed the case and confirmed its accuracy. A court-appointed special master is reviewing the material and will report on whether the banks have satisfied a number of changes. As a result, foreclosure filings are down 86% so far this year as compared to last year.

All of these changes have slowed foreclosures already commenced, and the time to complete a foreclosure from start to finish is now estimated at three (3) years! People are certainly using that time to get some relief by seeking modifications. But this is also creating quite a backlog. According to the article,

"[l]enders are waiting to file an estimated 28,500 foreclosures, and another 55,000 mortgage loans are currently more than 90 days delinquent, according to LPS Applied Analytics, a real estate data firm that tracks mortgage performance. At the current rate, it would take 49 years for banks to clear the logjam of mortgage loans that are currently in the foreclosure process or are more than 90 days delinquent, LPS found."

Not only is this influx going to bog down the courts, it is also going to have a significant negative impact on housing values. Certainly many mortgage companies have not been following proper procedures, and some have been out-and-out predatory on some of their loans. However, when the foreclosure ship finally rights itself, it is going to be anything but smooth sailing.

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