A mortgage is considered underwater if the homeowner owes more on the mortgage than the assessed value of the property, also referred to as negative home equity. In both Newark and Elizabeth, New Jersey, more than half of all homes are underwater, with Paterson just behind at 49 percent.
A national study tracking underwater mortgages delivered good news for homeowners across the country– but not for New Jersey. As many as 50,000 foreclosures are projected for this year in the Garden State, an increase from last year.
The report blamed predatory lending for long-lasting foreclosure and home equity problems in the state. There is a direct connection between negative home equity and the high rate of foreclosures, since defaults are more than twice as common on these properties.
Another factor contributing to the crisis is depressed home prices that, in some areas, have not fully come back from the housing slump of several years ago. New Jersey is ranked near the bottom for return to a healthy housing market, although it remains a relatively expensive place to buy real estate.
Local politicians cited the failure of mortgage lenders to work with homeowners on mortgage modifications to prevent foreclosure. Nearly 13 percent of New Jersey homeowners are behind on their mortgage payments, putting them at risk for repossession.
While New Jersey mortgage borrowers continue to struggle with the effects of the recession, including unemployment, financial challenges, and bankruptcy, the rate of foreclosures may remain high.
Homeowners do not have to take on their mortgage lenders alone; they can seek assistance from a lawyer who is experienced in financial regulations in order to attempt to protect their assets.
Source: NJ Spotlight, “NJ Still Drowning in 'Underwater' Mortgages, New Study Reveals,” by Joe Tyrrell, May 9, 2014