The Times, Trenton

Foreclosures Continue To Plague Homeowners In Mercer County

The Times of Trenton — Friday, April 16, 2010

By Meir Rinde
STAFF WRITER

More than two years into the foreclosure crisis, the number of homes in Mercer County whose owners have fallen behind on their mortgages remains at historically high levels.

The county saw 672 homes enter foreclosure in the first three months of this year, according to RealtyTrac, a California firm that tracks foreclosure filings. The figure represents a 30 percent drop from the previous quarter, but a 28 percent increase from the first three months of 2009.

"This crisis is still going strong," said Markese Humphrey, director of housing and homeownership at Isles Inc., and a member of Trenton Mayor Douglas Palmer's foreclosure mitigation task force.

Trenton has the region's highest foreclosure rate, particularly in its South Ward, where large numbers of older homeowners are losing their homes after becoming jobless, seeing their incomes drop or facing other personal crises, Humphrey said.

"You would think the rate would have slowed a year later, but no, it has not. It's at a continuous rate, if not higher," he said. "There's no drop anywhere. It's very consistent in Hamilton, Ewing. We've got people as far up as Princeton, Hightstown, the whole of Mercer County."

The county figures correspond to statewide statistics. Lenders sent out foreclosure fillings for 15,593 New Jersey properties through the end of March, according to RealtyTrac. The figure represents a 35 percent decrease from the previous quarter but is one-third higher than in the first three months of last year.

Across the nation, about 932,234 properties received notices in the first quarter, a 7 percent increase from the previous quarter and a 16 percent increase from the first quarter of 2009.

Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, attributed the persistently high foreclosure rate in part to adjustable rate mortgages that have recently reset, increasing their interest rates and requiring higher payments from cash-starved homeowners.

In many cases, the owners are unable to refinance or take advantage of government-backed mortgage modification programs, she said.

"Some are finding they can't move into a lower rate mortgage because their property values have decreased," Salowe-Kaye said.

Yet even holders of "good" mortgages, in which the homes' values are still relatively strong, are falling into foreclosure because of job losses, she said. New Jersey's unemployment rate was 9.8 percent last month, slightly higher than the national rate.

A number of state and federal programs provided assistance to troubled homeowners or encouraged lenders to negotiate loan modifications, but Salowe-Kaye said banks that gave people temporary relief may now be acting to evict them.

"When the lenders are seeing the documentation, they're seeing those people can't afford the modified mortgages," she said.

"People get these temporary loan modifications, and at the end the bank makes a decision they're not going to make a permanent (modification), and they're still going to make a foreclosure."

Salowe-Kaye said the only way to substantially lower the foreclosure rate is to have banks lower loan principal amounts for current homeowners, rather than evict them, and then resell for the new, lower value.

Yet the region may also have worked its way, however painfully, through much of the foreclosure crisis, said Jeffrey Otteau, whose firm Otteau Valuation Group compiles and analyzes New Jersey housing market data.

Otteau said banks stopped issuing adjustable rate subprime mortgages in 2007, and the last of the two-year rate resets have passed.

"We're seeing that actual foreclosures, where the bank takes a home, are occurring at an increasing rate, but new delinquencies are actually occurring at a decelerating rate," he said.

"That's because we're not seeing significant job losses any more, and in New Jersey we had a February jobs report showing that losses are actually decreasing."

Separate figures from the state judiciary suggest that foreclosures may be stabilizing, though not dropping. After hitting a high of 287 last August, filings in Mercer County have fallen to about 240 a month. The number in February was 8 percent higher than a year earlier, and 57 percent higher than in February 2008.

Otteau noted that the RealtyTrac statistics reflect both new filings and actual evictions.

While banks are still processing borrowers who fell into foreclosure previously, the "pipeline" of new foreclosures should begin drying up, he said.

"This is actually, in a backhanded way, good news," Otteau said.

"The foreclosures that are happening now are actually people who got in trouble a year or two ago. We'll probably have another year of high foreclosures before the reduced rate will begin to show up."

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