The judicial delay of the foreclosure process in New Jersey looks likely to delay the housing recovery in the state. Now it also looks like it might add to the monthly mortgage bill of homeowners who have been diligent about paying.
Putting a property through foreclosure takes so long in New Jersey and four other states where it's also a judicial process that the federal government wants to charge mortgage holders in those states an extra fee to cover the higher costs of delinquent properties there.
The Federal Housing Finance Agency said that, as of the middle of last year, foreclosing on a house in New Jersey took an average 960 days from the time the borrower quit making payments on the mortgage.
That's a problem for the FHFA because its mortgage guarantee subsidiaries, Fannie Mae and Freddie Mac, own the bulk of the mortgages in America.
When someone stays in a house for 2½ years without paying on their Fannie or Freddie mortgage, it costs them money.
More than 4 percent of the loans in New Jersey backed by Fannie and Freddie - about 40,000 loans - have been delinquent for a year or more, the agency said.
By contrast, in California, where foreclosures don't have to go through or be delayed by the courts, fewer than 1 percent of mortgages are delinquent a year or more and the average processing time is 646 days.
The FHFA proposes to offset the added costs of carrying deadbeat properties by increasing fees on Fannie- and Freddie-backed mortgages in New Jersey and the other states with lengthy foreclosure processing: New York, Florida, Connecticut and Illinois.
The fees would amount to a third of a percentage point or less, which sounds small, but on a $200,000 mortgage with a 30-year fixed rate would add up to $7 to the monthly mortgage payment.
Not a lot, to be sure, but enough to raise the question: Should the people paying their mortgages on time have to cover the extra costs of letting others not pay their mortgages for years?
The Center for American Progress, a liberal think tank, blames the banks for not doing what the courts want quickly enough, and calls the FHFA fee proposal an attempt to punish someone other than the wrongdoer.
John McWeeney Jr., president of the New Jersey Bankers Association, told The Wall Street Journal that the courts have erred on the side of protecting borrowers.
He called it "crazy" to have a foreclosure processing system that takes nearly three years.
The FHFA is expected to announce before April whether it will proceed with the added fees.
On small step …
New Jersey has a well-established reputation for having a less than friendly, sometimes hostile, business climate. But at least we're now making a little progress.
In the 2012 Best/Worst States for Business list from Chief Executive Magazine, New Jersey has moved up two places from the year before.
Now we're merely 45th in the nation. In your face, California, New York, Illinois, Massachusetts and Michigan!
The magazine pegged New Jersey's state and local tax burden at better than 12 percent, compared with a national average of less than 3 percent.
But it said the state was showing a positive trend, and said: "Gov. Christie's boldness rallies business, but possible minimum-wage boost looms."
Anonymous comments from CEOs about the state included in the report were less than positive.
In last year's Tax Foundation rankings of state business climates, New Jersey also moved up - one spot, from worst to next to worst.
Contact Kevin Post: