Housing experts fear the deluge of work once foreclosure filings pick back up in the state’s court system.
In the past six months, an eerie feeling has settled in the offices of housing counselors and attorneys who confront the foreclosure crisis head-on and help distressed homeowners in New Jersey. The phone hasn’t been ringing any less than it did at the height of the storm, but what is about to hit may be greater than anything the group has seen so far.
Foreclosure filings are down 86 percent so far this year from last, owing in part to a December crackdown by the state’s chief justice that effectively halted proceedings by the country’s biggest mortgage lenders and service companies, according to court data. But lenders 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.
Those figures are a sign of what is to come when lenders are able to begin filing again, and the pipeline speeds up.
“It’s what keeps me awake at night,” said Peggy Jurow, who leads Legal Service of New Jersey’s Foreclosure Defense Initiative. “It’s what keeps my colleagues and me strategizing all the time.”
“What are we going to do,” she asked, when these cases get filed?
The work is taking its toll on those trying to help homeowners. Last week, housing counselors, attorneys, community leaders and county officials gathered at the Bloustein School of Planning and Public Policy at Rutgers University to share what they have learned battling the foreclosure crisis. The goal was to let the stakeholders discuss what has worked and what hasn’t, said Kathe Newman, an urban planning professor who studies the foreclosure issue and hosted the conference.
During one of the discussions, the question posed to the group was straight and to the point. What do you do to stay motivated in the face of this daunting and challenging problem? The consensus came quickly: We just have to remember that behind the numbers and paperwork are humans who are at risk of losing their homes.
A sudden halt
The foreclosure process came to a halt on Dec. 20, when Chief Justice Stuart Rabner announced an initiative to address fears homeowners were unnecessarily put into foreclosure and judges had inadvertently “rubber-stamped” files that had inaccurate or inadequate paperwork.
In March, six of the country’s biggest financial institutions — Bank of America, JP Morgan Chase, GMAC Mortgage, Citibank, OneWest Bank and Wells Fargo — agreed to submit extensive documentation of their foreclosure processes and outline any revisions they have made. A court-appointed special master, retired Superior Court Judge Richard Williams, is reviewing the material and will report on whether the banks have satisfied a number of changes.
Rabner’s order also addressed the concern that employees of the lender or servicer had signed thousands of foreclosure claims without any personal knowledge of their contents, a process known as “robo-signing.” As of June 9, foreclosure paperwork for pending and future cases is required to 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.
The court’s actions have slowed foreclosures in the state. And because there is no deadline for Williams to submit his findings, the storm can start at any point, advocates fear. There is one heartening fact, they said. Williams will issue his report regarding each bank as he finishes it rather than waiting, said court spokeswoman Winnie Comfort.
Bankers in New Jersey have told John McWeeney Jr., president and CEO of the New Jersey Bankers Association, that the time it now takes to complete a foreclosure has stretched to nearly three years.
“The reaction of the Supreme Court certainly delayed a large volume of foreclosures that otherwise would have been put in process, so I would expect that that will eventually hit and increase the number of foreclosure filings,” McWeeney said.
Bracing for onslaught
When the foreclosure filings start winding their way through courts again, the influx will affect everyone in the industry.
“There are going to be very substantial numbers of foreclosures that are going to hit the market, all of which is problematic and obviously has a negative impact on housing values,” said Robert Levy, executive director of the Mortgage Bankers Association of New Jersey.
Asked what the financial institutions are doing now, representatives of Wells Fargo and GMAC said their attorneys are working closely with the court and documenting their improved and enhanced foreclosure procedures. The other financial institutions declined to comment.
In the interim, there is no shortage of homeowners seeking mortgage assistance. There is a three-month waiting list at some of the offices of New Jersey Citizen Action, said Executive Director Phyllis Salowe-Kaye. Some clients are coming in later in the foreclosure process, claiming they had not received earlier notification from their lenders. Others are borrowers who can’t afford to pay their mortgages because someone lost a job or as a result of another financial change. Activity could also pick up in mid-2012, Salowe-Kaye said, when homeowners with predatory loans begin facing ballooning payments.
The delays have done nothing to relieve homeowners’ stress. The process of finding a workable resolution can take longer, and it is difficult to try to sell or refinance a home that is worth less than its mortgage, said Jurow, the Legal Services foreclosure point person.
What homeowners who are either in foreclosure or late on payments should be doing now is organizing their finances and preparing for when activity picks back up again, Salowe-Kaye advised. That goes for homeowners who may have just lost their job and could face problems with their mortgage down the road.
When the wave hits, advocates said, they will have a plan. For its part, attorneys at Legal Services are studying defenses they can use to promote their clients’ abilities to get a loan modification, and, Jurow said, plan to reach out within the legal community for help.
“We’re happy that the court took the action that it took,” she said. “But, coupled with what we know is coming, it’s like bus-bunching — there hasn’t been a bus for an hour, but now five are going to come at once.”