Foreclosure activity slowed further by Hurricane Sandy
The state's housing market now looks like it will need until the end of next year to work through the backlog of foreclosures hanging over it.
Just as the second wave of foreclosures was reaching the market and replenishing inventory, Hurricane Sandy rolled in to stall their processing for another couple of months.
Darren Blomquist, vise president of foreclosure-information service RealtyTrac, said some of the October decline in New Jersey foreclosure activity from the prior month was due to storm delays of processing and data collection.
Foreclosures in New Jersey fell 15 percent in October from September, and declined in Cape May, Cumberland and Ocean counties. Atlantic County bucked the trend with a 7 percent increase over the prior month.
But the second wave of foreclosures - as a 17-month backlog hits the market after finally being released by New Jersey's courts - still gave the state the biggest bump nationwide with a 140 percent increase in foreclosures over a year ago.
Blomquist said he estimates that it will take New Jersey about 17 months to work through the backlog as well.
"So far through October, there have been eight straight months of increases in foreclosure activity in New Jersey, so basically there will be another year of the lenders playing catchup with the delayed foreclosures," he said.
As of the end of October, the state's total inventory in foreclosures was 64,251 homes, he said, a 17-month high, with about 56,000 in the initial stage of the process.
In Atlantic County, October foreclosures jumped from 59 last year to 164 this year. Cape May County's rose from 23 to 59; in Cumberland County, from 36 to 59; and Ocean County filings rose from 116 last year to 270.
Jennifer Gatto, of Balsley Losco Real Estate in Northfield, said that in the first days after the storm a company handling short sales for Bank of America put the local area and others affected on a do-not-call list.
Like other pending home sales, foreclosures and short sales were delayed until the properties could be reinspected for storm damage, she said.
Then on Nov. 9, the government-owned mortgage giants Fannie Mae and Freddie Mac announced a 90-day moratorium on foreclosure auctions and evictions. "Some lenders are also offering forbearances," she said.
Gatto, 37, of Egg Harbor Township, said there are several ways storm damage could affect the distressed property market.
"Homeowners who are short selling, if their home sustained significant damage and they have a high insurance deductible, may not be willing to pay that deductible," she said. "So it won't get sold and will become a bank-owned property."
She said she knows of a short sale in Atlantic City that was damaged and there's a $5,000 deductible on the insurance.
Gatto said she personally knows people who thought they had enough insurance but discovered they had a $30,000 claim limit, "and that doesn't come close to restoring the first floor."
Other homeowners who lost their jobs due to the storm now might go into default on their mortgages, she said.
And buyers no doubt will be more critical of houses near water.
"Anybody who was looking in those areas is going to wonder what kind of flood damage a property sustained and how it was repaired," she said. "That could be a big turnoff for the buyers."
Blomquist said that, with housing inventory low, industry professionals and largely cash buyers somewhat welcomed this year's increase in foreclosures despite their negative pressure on home prices.
"In my mind, it was actually a good thing that some of the backlog was being cleared out in New Jersey," he said. "It's a necessary step the markets need to go through to get to a healthy recovery, and this storm is just going to prolong that process."
In much of the United States, where foreclosures are required to go through the courts, the housing market already has worked through most of its foreclosures.
U.S. foreclosures in October were down 19 percent from a year ago.
Mortgage delinquency rates also increased in area counties, so new foreclosures are likely to swell the second wave in the year ahead.
Financial information provider CoreLogic said this week the mortgage delinquency rate - percentage of loans with payments past due 90 days or more - for Atlantic County increased to nearly 16 percent in September from 14 percent a year ago.
In Cape May County, the delinquency rate rose half a percentage point to 5 percent; and in Cumberland County, from less than 8 percent to more than 9 percent.
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