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Why New Jersey Has Passed Florida For The Most Delinquent Mortgages In America
REUTERS/Shannon Stapleton
According to a report from the Mortgage Bankers Association, 11.8% of New Jersey's loans in foreclosure are seriously delinquent.
That figure sees New Jersey oust Florida from the top spot, which has 11.7% of seriously delinquent loans. New York takes the third spot at 9.11%.
Following this, Bloomberg News reported that "the epicenter of the U.S. foreclosure crisis is shifting to New Jersey and New York."
So how bad has it gotten?
Florida still holds the top spot in terms of overall percentage of loans in foreclosure. New Jersey and New York are a close second and third, though the percent of loans in foreclosure was down from the previous quarter.
And there's more worrisome data on both those housing markets.
Foreclosures were up 44% on the month in January, and up 66% on the year in New Jersey.
Foreclosures were up 13.6% on the month in January, and up 31% on the year in New York.
Foreclosure starts were at a 43-month high in New Jersey in January, up 79% from a year ago.
Completed foreclosures (REO) hit a 39-month high in New York in January
For comparison, the U.S. foreclosures were up 7.8% on the month in January, and down 17.5% on the year.
Mortgage Bankers Association
We have to remember that New Jersey and New York are judicial states — ones that require court action on a foreclosed home — and this creates a backlog of foreclosures. In New Jersey, the judicial process takes about nine months, while in New York it takes about 15 months.
Florida is a judicial state too, but the process takes about 4.5 months here.
"Of those three states, only Florida was clobbered by the housing crisis." Jed Kolko, chief economist at Trulia told Business Insider.
"Prices in New York and New Jersey fell by much less than prices in Florida did. But Florida, New Jersey, and New York are all judicial foreclosure states, where the foreclosure process can take years longer than in many other states."
Back in November, we explored just why it would be some time before New York and New Jersey's housing markets recovered.
"New York’s foreclosure backlog has been made worse by a requirement that lenders positively affirm that all elements of a foreclosure filing are correct, while mitigation programmes in New Jersey may be dragging out inevitable foreclosures," Paul Diggle, economist at Capital Economics wrote at the time.
Diggle told Business Insider that the foreclosure overhang could have been exacerbated by Hurricane Sandy. Some borrowers who weren’t fully insured at the time may have chosen to walk away instead of rebuilding their homes.
And there are other things weighing on New York and New Jersey's housing markets.
December single-family home prices, including distressed homes, were up 5.1% in New Jersey, 9.6% in New York, and 9.9% in Florida, according to CoreLogic.
Slower home price growth tends to keep more people underwater — when homeowners owe more on their homes than their mortgage is worth — and tends to raise delinquency rates, and the opposite is true when home prices appreciate.
"Over the past year, home price appreciation and job growth have both been stronger in Florida than in New York and New Jersey, which could add to more defaults in those northeastern states," Kolko said.
"But the main factor for the high foreclosure inventory in New York and New Jersey is the slower judicial foreclosure process."
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