Despite signs that the economy continues to grow (albeit slowly), foreclosures continue to rise in New Jersey. In fact, right here in Union County, foreclosure notice have nearly doubled over the past 3 months.  I think we can all agree that this is a very troubling statistic. The current US housing market and financial crisis has caused enormous stress and heartache throughout our area. And the end result is that some very good people…maybe people you know… are facing the very real possibility of losing their home.

Maybe it’s my social work background, but I just couldn’t feel good about being a real estate broker without doing what I could to help. That’s why I took the time to earn the Certified Distressed Property Expert (CDPE) designation, and why I’m focusing an increasing part of my efforts reaching out to distressed homeowners.

Foreclosure Avoidance IS Often Possible.

What many people fail to recognize is that in many instances, foreclosure avoidance IS possible. But it requires 3 things:

1. Put Your Ego Away.
   • The biggest reason why people lose their house through foreclosure us that they bury their heads in the sand. Embarrassment is a major reason for this… I get that. Many decent, smart and hard working people can get foreclosed due to hardships beyond their control. But time is not your friend when facing foreclosure. The sooner you can get put your ego in check, the better.
2. Reach Out For Professional Help.
   • The fact remains that nearly 70% of all foreclosures nationally occur without any visible intervention from a real estate professional. It doesn’t have to be that way. As one of the very few agents in our market with specialized training to handle distressed properties, I know the proper resources to get you help! Sometimes, the most important first call is to your lender. If you qualify for a mortgage modification, they would MUCH prefer it over a foreclosure. Lenders report that on average, the foreclosure of a $200,000 home can cost them between $70,000 -$100,000.
   • Sometimes, a foreclosure avoidance counselor is the right person to call. They have the training and knowledge to help you explore your best options.
   • Whichever is best for you, feel free to give me a call and I’ll point you in the right direction.
3. Be PERSISTENT.
   • This may be the hardest part. Emotions run high, and these systems move slowly. Be persistent. Keep a record of your interactions with the date, time and name of the contact person you talk to at EVERY STEP along the way. I promise…you’ll need to reference it at some point in the future.

The goal of every Certified Distressed Property Expert is to help keep people in their homes. But sometimes, selling the home and avoiding foreclosure is the best option. Too frequently, people are afraid that because they owe more than their home is currently worth, there is nothing they can do. NOTHING could be farther from the truth!

A properly executed Short Sale (selling for less than is owed and having the bank absorb the loss) can be one of the best ways to avoid foreclosure. But they are difficult and time consuming. They are a part of this business that most agents avoid like the plague. Unless you really know what you’re doing, it’s virtually impossible to have success.

As an experienced real estate broker, I have SIGNIFICANT experience in this area. And now as a Certified Distressed Property Expert, I have even more knowledge and expertise to help you achieve the best possible outcome.

So if you or someone you know is worried about losing your home, give me a call. Together we can start to explore solutions!

New Jersey foreclosures are on the rise. Back in March I wrote a piece looking at the impact of foreclosures on your property value. What I was seeing then were New Jersey foreclosures well below national level (we were 39th out of 50 states in foreclosure notice filings at the time). But I shared my concern about their growing numbers, and speculated on what it could mean.

Last week Realty Trac (the nation’s leading source on foreclosures information) released their May 2010 foreclosure report. The report cited a month-over-month decline in national foreclosure filings, and was generally optimistic. But the devil is in the details…

New Jersey Foreclosures Break Into National Top 10.

The report shows that 10 states account for 70% of all the nation’s foreclosure notice filings. But as the tide seems to be stemming across the nation, New Jersey foreclosure notices are not keeping pace. This report shows NJ landing in the Realty Trac Top 10 for the first time that I can recall. (There are lots of reasons for this, which go beyond what I want to cover here today.)

Right here in Union County, some towns are seeing a DRAMATIC increase in default notices. Take a look at this chart showing the increase in foreclosure notice filings reported by Realty Trac between February 2010 (the data used in my previously cited post) and today:

Surprised? I have to say that despite seeing this trend coming, I was taken aback at just how quickly the change occurred. And look at the towns that are seeing the largest increase. Probably not what you expected, right?

Help For Those Facing Foreclosure

Keep in mind that receiving a default notice does NOT necessarily mean that you’ll lose your house. Good people find themselves in this situation for lots of reasons. A severe reduction in income through job loss or an unexpected health crisis are among the most common reasons why people fall behind. The most important thing to do is put your ego aside, and TAKE ACTION while there is time!

The US Department of Housing and Urban Development is one of the best starting places for those looking for foreclosure help. Here you’ll find strategies for avoiding foreclosure, options for refinancing, and ideas about what to do if foreclosure seems inevitable. Believe me…I’d much prefer to see people keep their homes and sell them on their own terms! But as a full service real estate broker, I can help you explore your options if selling seems to be the best course of action. I have the knowledge and experience to help you sell your house…even if you’re underwater and need to sell short.

Remember…taking action is the most important step. I’ve seen reports that show nearly 70% of all foreclosed homeowners never reached out for help! Don’t make that mistake. I can be reached most easily by calling the cell at 908-216-4836.

Understanding your credit score is never more important then when buying a home. We all know that the mortgage market is tighter than ever before. When applying for a loan, you will be asked to produce your credit report. And what your loan costs you is directly related to your overall score. So what exactly do lenders look at when calculating your credit score? Here’s what you need to understand.

Understanding The 5 Components In Your Credit Score

Basically, credit reports produce a score that tries to determine how likely you are to pay your bills. Most lenders run credit reports that uses a scoring model created by Fair Isaacs & Co. It’s known as your FICO score. This credit score is calculated by looking at the following things:

1. Your Payment History (35%). Do you always pay your bills on time? If you’re late on your payments, it will cost you. Your recent history weighs the most heavily
2. The Amount Owed/Available Credit (30%). What do you still owe on your charge cards? You car loan? And how much do you still have available on cards or your home equity line? Statistically speaking, people that have available credit are likely to use it. This is why having a lot of it is seen as a risk…just like having actual debt.
3. Length of Credit History (15%). How long have you managed your debt? The longer your history, the better you score.
4. Type of Credit Used (10%). Having a mix of revolving credit (like a charge card) and installment credit (like a car loan) makes you a better risk. It shows that you know how to handle money.
5. New Credit Applications (10%). How many new loan applications are you filling out? Often, people apply for new credit as a “last-ditch lifeline” right before declaring bankruptcy. So if you have some late payments and then apply for lots of new loans, it could raise some red flags. You should know however that the scoring models compensate for people “rate shopping” on big ticket items like cars or houses. In these instances, multiple inquiries in any 14-day period are counted as just one inquiry.  In addition, the score ignores all inquiries made in the 30 days prior to scoring.  (So if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.)

What Is A Good Credit Score?

The FICO scale runs from 300 to 850. The majority of people will have scores that fall between 600 and 800. While lending requirements are a moving target, a score of 720 or better will usually get you the best interest rate.  According to Fair Isaacs, most American FICO scores break down according to the graph on the left. Do these scores matter? You bet!! According to BankRate.com, the interest offered to a buyer with a 520 FICO score and one with a 720 score can be over 4%!!

Go ahead and use this mortgage calculator to see what the impact is on your monthly payment. (It’s pretty BIG!!)

Want to know your credit score? Click here to get a free copy of your credit report.

Earlier today, I was showing homes for sale in Union and Essex Counties. I have an investor looking to buy, and there are some really good opportunities out there at the moment. The sad part is that these were ALL distressed properties…bank owned or pre-foreclosure.

Now you might remember that only yesterday I posted a story saying that distressed property sales were not as big a problem in NJ as in other states. I even went so far as to say that in some Union County towns, there weren’t enough out there to have a significant impact on home values.

I still stand by that claim. But in several Essex and Union County communities there ARE distressed properties…LOTS of them. I learned a long time ago that there is a story behind each of these homes. In most cases, distressed property sales are the result of decent, hard working people, who met with an unfortunate twist of fate (can anyone say unemployment?!)

As I drove home, I listened to the evening news on the radio. This story really caught my attention. Bank of America announced a bold new plan today to not only modify troubled mortgages, but in some cases, FORGIVE some of the mortgage principle.

Mortgage Debt Forgiveness Could Be A Game Changer.

At the moment, the program is limited in scope. It’s only being offered to borrowers who received loans from Countrywide Financial, the biggest and one of the most aggressive lenders during the housing boom. (Incidentally, Bank of America bought Countrywide in 2008.) But this is one of the first programs I’ve heard  of that would actually forgive some of the debt, and not simply restructure the payments.

And that could really make a HUGE difference to folks who are underwater.

Bank of America executives said the program would work this way: A borrower owes $250,000 on a house now worth $200,000. Fifty thousand dollars of that balance would be moved into a special interest-free account. As long as the owner continued to make payments on the $200,000, every year $10,000 in the special account would be forgiven until either the balance was zero or the housing market recovered and the borrower once again had positive equity.

Now this could be a game changer…

We’ve all read about the growing number of foreclosed properties out there. According to the Mortgage Bankers Association (MBA), one in 10 borrowers is seriously delinquent on their mortgage, up from one in 16 borrowers a year ago, and one in 33 two years ago. Increasingly, I’m being asked whether or not all these distressed properties are having a negative impact upon existing home values here in Westfield and our surrounding Union County towns. The short answer is…maybe. It all depends on where you live.

Union County Foreclosure Levels Among The Highest In The State.

It’s important to understand that while foreclosures are a big problem nationally, they are not as common here in New Jersey. Nationally, over 50 percent of all foreclosures are concentrated in only 4 states… California, Florida, Michigan and Illinois.  NJ ranks only 39th out of all 50 states in total reported foreclosures. That’s the good news. But their numbers are growing here in NJ, and a large number of distressed property sales CAN pull down the value of neighboring homes. That’s the bad news.

According to Realty Trac, the nation’s largest provider of foreclosure information, Union County ranks 3rd highest in terms of NJ’s reported foreclosures…behind only Essex and Ocean Counties. That number concerns me. But the number of new filings varies dramatically across all Union County towns.

Realty Trac Heat Map

Realty Trac also maintains this “heat map”. The map shows the concentration of new foreclosure filings for the month of February, 2010. What you see here is that new filings are ABOVE THE COUNTY AVERAGE in some towns, but SIGNIFICANTLY LOWER in others. In the towns with the highest concentrations, I’m seeing property values suffer. In towns wil the lowest levels, I’m not seeing any significant impact.

The Take-Away

Depending on where in Union County you live, foreclosures may or may not have a negative impact your property value. If you have a question about a specific property, feel free to contact me. I’d be happy to provide a price opinion for you.