Report: We've 'Turned The Corner' On Foreclosures

The Record ( — Thursday February 17, 2011

The Record

The Mortgage Bankers Association's chief economist said Thursday that the nation has "clearly turned the corner" on the foreclosure crisis, citing new statistics that show declining delinquency rates.

The percentage of homeowners falling behind on their mortgages dropped in the fourth quarter of 2010 in New Jersey and nationwide, the association said.

Nationally, the percentage of homeowners 30 days behind on their mortgage payments is back to pre-recession levels of late 2007, the MBA said.

"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner," said Jay Brinkmann, MBA's chief economist. As long as the economy and job market continue to recover, he said, the mortgage picture "should continue to improve during 2011."

In New Jersey, a smaller percentage of homeowners were late on their mortgages in the fourth quarter than a year earlier. But the percentage of mortgage holders in the foreclosure process hit a record — the result of lenders halting foreclosure activity in the face of concerns about their legal procedures. That has slowed the sale of distressed properties.

In December, N.J. Chief Justice Stuart Rabner ordered six large lenders to show why their foreclosure activity should not be suspended in light of allegations of "robo-signing," or employees signing foreclosure affidavits without reviewing them. The six are due in court in Trenton next month in that case.

Despite the MBA numbers, Phyllis Salowe-Kaye, head of N.J. Citizen Action, sees little evidence that the foreclosure crisis is ebbing. She said there has been no let-up in the number of homeowners seeking her group's help in getting their mortgages modified to more affordable terms. The number of clients has quadrupled since home prices began sliding in 2007 and 2008, she said.

"We have more people coming in than ever before, and we have fewer permanent modifications than ever before," Salowe-Kaye said. She said few lenders are reducing the amount of principal owed on the mortgages, a step she said is necessary to help distressed homeowners keep their homes.

Mortgage delinquencies started rising a few years ago as less qualified homeowners began to default on the exotic subprime mortgages that were written during the housing boom. Over the past year, however, the biggest problem was among previously qualified buyers who fell behind on mortgage payments because of lost jobs, as the unemployment rate climbed above 9 percent.

"You need a paycheck to make a mortgage payment," Brinkmann said. "The mortgage market is going to reflect how the job market does."

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