Housing markets have improved and foreclosure numbers dropped across the country since the Great Recession, but a decade on, New Jersey remains mired in a deep foreclosure swamp.
Statewide figures are significantly better than in 2009, the depth of the economic downturn. Yet some analyses cite Atlantic City as the worst housing market in the country, with Trenton not far behind. Overall, New Jersey continues to have the highest foreclosure rate in the country, according to real-estate data firms.
While many factors contribute to the problem, housing advocates point to a lack of leadership from state government as significant. Gov. Chris Christie, who used $75 million from national foreclosure-prevention aid to plug a budget gap in 2012, seldom mentions the issue.
"In the other states where we work, we have governors who have welcomed us and networked us to their housing agencies and counselors," said a relative newcomer to the state scene, Jessica Brooks, a vice president at Boston Community Capital.
Nonprofit housing organizations like BCC work with lenders and borrowers to prevent foreclosures. Some for-profit groups also have sprung up, like Community Champions of Melbourne, Florida to fight the effects of foreclosure blight. But as the major federal foreclosure relief ends, a lack of state leadership in New Jersey means municipalities must find such partners themselves. Meanwhile, borrowers must remain alert to police their own mortgages, according to a top foreclosure defense lawyer.
The 30-year-old BCC oversees housing and community development programs. In late 2015, it brought its Stabilizing Urban Neighborhood initiative to New Jersey. The program, narrowly tailored to help qualifying borrowers, has helped about 750 families in Massachusetts, Maryland, Rhode Island, and Illinois.
'In New Jersey, no one from the state stepped up'
Some other nonprofit groups, notably New Jersey Community Capital of New Brunswick and Newark, have bought troubled mortgages directly from federal agencies. BCC works differently, negotiating with banks to get better terms for borrowers whose job situation has improved but whose mortgages are still onerous.
"In New Jersey, no one from the state stepped up... and many of the community-based housing counselors here are struggling just to keep the lights on," Brooks said.
Nationwide, foreclosures dropped under 1 million in 2016, the lowest figure in 10 years, according to ATTOM Data Solutions, formerly RealtyTrac, of Irvine, California. Yet that firm found New Jersey has the highest rate in the nation. And in December, when foreclosure starts were dropping 17 percent nationwide, they rose 13 percent here as the state's economy continued to flounder, the firm found.
New Jersey has the highest inventory of homes in foreclosure at 2.8 percent, according to CoreLogic, another Irvine, California, real-estate analytics firm. That is greatly improved since the recession, but New York is the only other state above 2 percent, the firm reported.
New Jersey's underlying economics are weak. While the U.S. Census Bureau found median household incomes rose 5.2 percent in 2015, the last year for which complete data are available, New Jersey was treading water with a 0.3 percent gain.
Home prices rose 7.1 percent nationally from November 2016 to November 2017 - or 4.7 percent when weighted for owner-occupied units as opposed to those being acquired by real-estate investors - but just 1.7 percent in New Jersey, according to CoreLogic.
'New Jersey is the hardest place for us to work'
Just like the other numbers, New Jersey's trend in new foreclosure cases offers a mix of good news and bad. Fewer than 35,000 new cases were posted in the state courts' public access system last year, half the amount of 2009 in the depths of the Great Recession. But that remains well above the 20,253 filed in 2005, itself on the high end historically.
That continued stream of new foreclosures, plus the lingering effects of Hurricane Sandy, provided reason for BCC to expand its efforts to New Jersey, according to Brooks. While the organization's SUN program is "a drop in the bucket" compared to the problem, it provides a template of what can be done if lenders and borrowers work together on mortgages that are "underwater," meaning they cost consumers more than the house's current value, she said.
Throughout the foreclosure crisis, New Jersey consistently has had a high rate of troubled home loans, even as many borrowers got back on their feet financially after layoffs or business losses, Brooks noted. But the lack of state attention to the issue has contributed to low interest here in SUN, which currently is working with only about 60 New Jersey families, she said.
"New Jersey is the hardest place for us to work, and I feel it's because there isn't one state (leader) but many locally driven efforts," Brooks said.
The state Housing and Mortgage Financing Agency, which provides affordable financing and promotes affordable housing, recently co-sponsored a meeting to introduce BCC to troubled borrowers in the Mercer-Burlington area. But Brooks credited a number of county freeholder boards and municipal officials for connecting the nonprofit with its target audience.
"I have to thank Mayor (Christian) Bollwage," said Martin Gonzalez of Elizabeth. "Without him, I never would have known about this program." Gonzalez, a contractor, moved from Jersey City because he could afford to buy a home in Elizabeth. He did well at first, but his wife got ill and he began to lose work as the recession took hold. Meanwhile, Gonzalez said, his property value plunged to less than half what he paid.
'You know what this is? It's a miracle'
"I used all my savings account to fulfill my mortgage," and negotiated with the lender, Bank of America, for two mortgage modifications, Gonzalez said. But he fell into a common trap, the temporary modification. "It didn't work... because both times, they raised my mortgage again," he said.
As the recession eased, Gonzalez's work picked up and he was able to pay his bills, except for the looming mortgage arrears, he said. The house was going to a sheriff's sale when he received a notice from Bollwage about the SUN Program. He promptly applied to BCC, and the nonprofit opened negotiations with his bank. A "very helpful" judge agreed to stay the sheriff's sale.
"The process was, Boston Community Capital met with Bank of America and... they found a way to work together" to lower his mortgage principal closer to the home's value, Gonzalez said.
"We're safe; we're happy with the new mortgage," he said. "You know what this is? It's a miracle."
Although the SUN program is limited to borrowers whose finances have turned around, it is making a difference in Elizabeth, said Eduardo Rodriguez, the city's director of planning and community development. The argument that mortgages should reflect actual property values makes a lot of sense in a city and state where prices have not recovered to pre-recession levels, he said.
But endorsing Brooks' point that local governments have had to take their own initiatives, Rodriguez pointed to the city's work with Community Champions. The Florida firm oversees vacant properties to ensure the responsible parties - whether former occupants, banks or investors - are maintaining them, he said.
'It all boils down to the banks and what they want to do'
"It all boils down to the banks and what they want to do," but a 2014 state law that requires foreclosing creditors to maintain properties and provide contact information has helped, Rodriguez said.
Community Champions handles the inspections and administration, and is paid from the resulting fees so there is "zero cost" to the city, he said. Keeping properties maintained and attractive helps neighborhoods, and increases the chance of getting the homes "into the hands of hard-working people," Rodriguez added.
In raw numbers, Florida and Nevada have had the most foreclosures and were the hardest hit areas in the early years of the recession. At the same time, local governments were increasingly hard pressed to conduct code enforcement, said Scott Blaise, who at the time was doing that job for the city of Melbourne in Florida. Ready to retire from his city job, Blaise was recruited by Community Champions, with his former employer as one of the first customers. Since then, the firm has expanded its business across the nation, including to 44 communities in New Jersey.
Unlike other states where Community Champions works, New Jersey has some counties that piqued the company's interest by setting up buy-in processes for municipalities, similar to those for organizing regional authorities or divvying up federal block grants, Blaise said. South Jersey counties led the way, so most of the firm's clients are clustered there, he said.
"The first thing we ask is that they (municipalities) have a good ordinance," clearly spelling out property registration and maintenance requirements as well as penalties for non-compliance, he said. "If you wait until a property gets vacant to get it registered, you probably already have code violations."
While the firm's customers represent only a smattering of New Jersey communities, they do provide some insights into foreclosures in the state. With roughly 125,000 residents, Elizabeth is the most populous participant and has the most recorded foreclosures, 1,764, according to Blaise.
But the company sees much higher foreclosure rates in Winslow Township, 1,589, and Egg Harbor Township, 1,511, each of which has scarcely a quarter of Elizabeth's population.
The main federal anti-foreclosure effort is wrapping up
While towns and cities may wrestle with foreclosures and declines in housing values, overall solutions may be hard to come by in the absence of larger efforts. The main federal anti-foreclosure effort is wrapping up after limited success.
The Federal Housing Finance Agency has offered some continuing assistance to borrowers whose mortgages are insured through Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation). The new "Flex Mod," flexible modification, program aims to provide reductions of up to 20 percent on mortgages that are 60 days' delinquent, instead of waiting the traditional 90 days.
On the other end, Flex Mod would provide incentives to mortgage servicers to process modifications more quickly than they have in the past. If they modify a loan that is less than 120 days' delinquent, they would earn a $1,200 fee. But the amount of that reward would decline as the modification processing period lengthens.
"We believe the program is flexible to adjust for regional and even local differences in housing," Bill Cleary, the vice president of single-family servicing policy at Fannie Mae, said in a statement. Like previous foreclosure relief programs, though, Flex Mod may look good on paper without delivering in reality, said attorney Josh Denbeaux of Denbeaux and Denbeaux in Westwood. "The question about Flex Mod is not the regulations themselves, it's whether they will be enforced," he said. "And the answer to that is no."
He pointed to the previous Home Affordable Mortgage Program, which stopped accepting applicants on December 31. It was supposed to share federal bailout funds with home borrowers. But a U.S. Treasury Department report on January 3 showed that only $27.8 billion of the $700 billion-plus provided in the Troubled Asset Relief Program had been earmarked for them, and they have received just over $16.1 billion.
As a result, the program fell far short of its target of helping 4 million borrowers. Banks rejected 70 percent of its applicants for mortgage modifications. Of the 1.6 million people accepted, about one-third lost their homes anyway. "HAMP failed because the banks didn't follow the regulations," Denbeaux said. "They spent years arguing that people weren't entitled to modifications, and Treasury never enforced the rules."
To add insult to injury, banks continue to be eligible for bailout money. Wells Fargo, which has filed the most foreclosure cases in New Jersey, has received $1.8 billion from TARP, and is entitled to another $1.5 billion. JP Morgan Chase has received $1.9 billion and could claim another $1 billion.
Just like New Jersey's cities and towns, individual mortgagors remain largely on their own, but not without tools, Denbeaux said. When the Consumer Fraud Protection Bureau took charge of the existing Real Estate Settlement Procedures Act, it clarified the information that lenders must provide to borrowers. Denbeaux pointed to the law's "error resolution" provisions, allowing borrowers to demand an explanation and the documentation lenders use in mortgage-related actions.
"You're the oversight," he said. "You don't need a lawyer to question the bank's judgment by sending them an error resolution letter. You might need a lawyer to sue the crap out of them when they don't follow the regulations."