Repossessions Spike 66% As Foreclosure Crisis Lingers

“In states such as New Jersey, Massachusetts and New York, a flood of deferred distress from the last housing crisis is finally spilling over the legislative and legal dams that have held back some foreclosure activity for years,” said Daren Blomquist, vice president at RealtyTrac. “That deferred distress often represents properties with deferred maintenance that will sell at more deeply discounted prices, creating a drag on overall home values.”
 

Banks have finally reached a point where they can push foreclosures forward, having streamlined all the extra paces required by laws and court rulings.

“Additionally, more nonbank lenders who purchased nonperforming loans over the past couple years are moving forward with foreclosure, having passed the foreclosure moratorium of six to 12 months required by many of these purchase agreements,” said Blomquist.

With the backlog finally moving, New Jersey now has the nation’s top foreclosure rate, just beating Florida, which was once the poster child for the housing crash and which also has a judicial foreclosure process.

Foreclosure activity in the Garden State is more than twice the national average. New foreclosures there are falling, but bank repossessions jumped 351 percent from a year ago. Atlantic City now boasts the highest metropolitan foreclosure rate. Trouble in the local casino economy now is causing more new foreclosures, but the bulk of the bank repossessions are on homes that were in default well before that.

While states like Michigan, Texas and Washington are also seeing increases in foreclosure activity, their numbers are far closer to normal levels. Foreclosure starts historically speed up between September and November before holiday moratoria set in.

“The third-quarter increases are a sign that the foreclosure market has settled into a normalized pattern close to or even below precrisis levels, and in those states the overall housing market should easily absorb the additional foreclosure activity with little impact on home values,” added Blomquist.

Foreclosure activity in formerly hard-hit states, like Arizona and California, is falling. Those states had much swifter systems for processing foreclosures, and investors helped to put a floor on home prices. In New Jersey in August home prices were still higher than a year ago, but just barely, up 2 percent from a year ago according to CoreLogic. Compare that to national gains of 6.9 percent.