Cleaning Up Abandoned Homes in New Jersey

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Homeowners in New Jersey who’ve fallen behind on their mortgage payments and have received notice of foreclosure on their home from their lender actually have a number of options. Depending on their financial situation, desire to keep their home and other case-specific factors, it is quite possible to make a responsible and sound decision even after falling into foreclosure.

Unfortunately, a significant number of NJ residents simply don’t know enough about the foreclosure process. Fueled by fear of eviction by their lender, a lot of distressed homeowners flee the scene, putting as much distance between themselves and their foreclosed property as possible.

“Out of sight, out of mind?”

The problem with this strategy is that the foreclosure timeline in New Jersey is significant, often taking many, many months for a single foreclosure case to reach completion. The abandoned properties left by vanishing homeowners must sit, unoccupied, while their paperwork slowly makes its way through the court system.

During this time period, the home and lot it sits on become an eyesore: grass and weeds grow to exorbitant heights, and the structure itself is often vandalized. Word of zombie homes travels quickly, and unfortunately to the wrong people. Abandoned homes often turn into crack houses and are frequently stripped of things like copper pipes and copper wiring, which are then sold. These types of activities not only cause significant damage to the property, but also create fear among neighbors while simultaneously causing local property values to plummet.

Zombie foreclosures are problematic around the country, but because New Jersey has the highest foreclosure rate in the US, the number of abandoned homes in the garden state has spurred some towns into action.

This action comes in the form of creating a record of all foreclosure properties so that town or county officials have contact information for responsible parties. This will enable town leaders to ensure that empty properties don’t fall into disrepair and that illegal activities aren’t occurring inside the homes.

Participating municipalities are requiring that all foreclosure properties be registered with the town by the responsible party. If the homeowner has left town and is unreachable, the onus for registration (including paying the registration fee) falls on the lender or lien holder.

For now, individual towns set their own registration fees, which are currently ranging from $100 to several hundred dollars. Part of the process involves filing a ‘Registration and Maintenance of Properties Pending Foreclosure’ form with the town’s clerk. An example of information requested on this form includes:

  • Property location information: Block number, lot number and physical address
  • Identification of the party responsible for the property: Homeowner, lender, lien holder, trustee, management company, agent, or other.
  • Contact information of responsible party: Name, address and current phone number where an in-state person can be reached in the event of a problem with the property in question.

A property checklist will also be included on the registration form. The responsible party must certify that all of the following items are attended to:

  • Grass/weeds must be kept under 10 inches high.
  • Dead trees, fallen tree limbs and dead shrubbery must be removed.
  • Snow shall be removed from any public sidewalks as needed.
  • Waste, trash and other rubbish is to be cleared from the property.
  • No illegal or hazardous activity shall be performed on the property.
  • Standing water should not accumulate anywhere on the property.
  • All enclosures (fences and gates) are to be maintained and functional.
  • Any pools or hot tubs must be kept clean and either maintained or drained so as to not attract mosquitoes and other insects.
  • Pools must be kept covered whether full or drained to prevent accidents.
  • Basements must be kept watertight and clear of rodents.
  • Exterior walls shall be maintained and kept free of holes and rotting wood so as to protect the interior of the home from water and rodents.
  • Doors and windows are to be kept in stable and locking condition to prevent unauthorized entry.
  • The roof must be in good condition so that water does not enter the home.
  • The exterior siding, brick, stone, trim, soffits, moldings and any other decorative material is to be kept in good repair.
  • Chimney/flue must be functional and weather tight.
  • Exterior stairs, porches, balconies and walkways must be safe for use.
  • Street address (number) must be visible on the front of the house; the numerals must be at least three inches high and two inches wide.

Failure to comply with anything contained on the registration form may lead to the summons of the responsible party by the municipal court.

Hopefully more New Jersey towns will initiate the foreclosure registration process in the near future, keeping our neighborhoods cleaner, safer and more attractive while we slowly bounce back from the housing crisis.

Image credit: darkday

New Hope for ‘Zombie’ Foreclosures in New Jersey

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Foreclosures are still being filed at a staggering rate in New Jersey, and Atlantic City has the highest foreclosure rate in the country among cities of comparable size. Foreclosures occur when financially distressed homeowners become unable to pay their mortgage bill, and their bank or lender repossesses the home, effectively evicting the homeowner.

Since the number of NJ homes in foreclosure is currently so astronomically high, the court system has become bogged down and way behind schedule. In fact, New Jersey presently holds the title for the state with the longest foreclosure timeline, coming in at an average length of 1,103 days. That comes out to just over three years from filing date to eviction and sale of the home.

When faced with an impending foreclosure, some homeowners hit the panic button. Without knowing much about  foreclosure timelines, these homeowners quickly pack up and move out, likely feeling that they’d rather leave willingly than be evicted by their lender.

These abandoned properties are then left empty and in disrepair for the duration of the foreclosure process. Their owners are gone but they are not owned by the lender yet, either. These empty homes are referred to as “zombie foreclosures” because they’re seen as a threat to the safety of their neighborhood, much like the mindless undead creatures in horror movies. Zombie homes also threaten the vigor of the surrounding housing market. Squatters and/or drug dealers frequently occupy these empty homes, making the area seem seedy and undesirable to potential new residents.

The real horror involving zombie foreclosures affects the home’s original owner who packed up and left town. Under the impression that their lender would follow through with foreclosure, many homeowners wash their hands of the problem, find a more affordable place to live, and move on with their lives without giving their former home any more thought.

Unfortunately, there are circumstances under which a bank or lender simply decides not to follow through with a foreclosure. Oftentimes, this occurs in lower income areas in which lenders don’t see any real benefit in owning property. Rather than become responsible for the home’s taxes and repair costs (particularly if there are squatters involved), a lender may simply cancel the foreclosure altogether.

How Zombie Foreclosures are Haunting their Former Owners

When an abandoned property drops out of the foreclosure process, guess whose name is still on the title? That’s right – unbeknownst to them, those homeowners who fled as soon as foreclosure was mentioned will remain legally responsible for the home if foreclosure never occurs. This can be literally devastating to people who haven’t thought about their former home in possibly years.

When a foreclosure is halted, for whatever reason, the property’s unpaid debts (property taxes, home association dues, property maintenance) default back to the homeowner. As these debts have often been compounding interest for years, the ultimate cost to the homeowner (and his credit score) can be disastrous.

How the U.S. Senate is Trying to Fix the Problem

The U.S. Senate Subcommittee on Housing, Transportation and Community Development wants to help. Subcommittee member Senator Robert Menendez (D-NJ) recently introduced a bill called the Preserving American Homeownership Act. The Act’s main goal is to help underwater homeowners stay in their homes rather than face foreclosure and the financial destruction that comes along with it.

Menendez’s proposal aims to help both homeowners and lenders alike. The best way to help distressed homeowners is by reducing their mortgage principal. Historically, lenders have been hesitant to reduce principals out of fear of losing too much money. The Preserving American Homeownership Act proposes that banks offer a reduced principal to those homeowners that qualify. In return, the bank will receive a fixed amount (up to 50%) of the home’s increased value when it is refinanced or sold in the future.

In order to be eligible for the program, homeowners must continue to make their new, modified payments on time every month. Failure to make timely payments going forward will disqualify them from receiving a reduced principal. This legislation offers a great deal of hope to struggling borrowers, their lenders, and the New Jersey real estate market.

Image credit: T.A. Bain