As Foreclosed Home Prices Recover, Who Reaps the Benefit?

Just about everywhere you turn the housing market is reported to be on the mend. The conditions that just a few years ago led to a wave of homes in Pennsylvania being swept into foreclosure appear to have eased. Still, according to a number of real estate tracking firms, there are indicators that the foreclosure crisis is not over for Pennsylvania and New Jersey.

According to numbers compiled by CoreLogic, the number of properties in serious mortgage delinquency in Pennsylvania stood at 5.6 percent as recently as February. Homes in this category mean that payments on the mortgages are at least 90 days past due. Meanwhile, the number of seriously delinquent mortgages nationally stood at 4.9 percent

More recently, the Mortgage Bankers Association reported that New Jersey had 8 percent of its mortgages in foreclosure in the first quarter of 2014 -- the highest rate in the nation. And data collected by the state shows that foreclosure filings in Bergen and Passaic Counties are running 22 percent and 33 percent respectively ahead of what they were last year.

Judicial process effects on foreclosures

One reason cited by analysts for the homes-in-foreclosure bubbles in the two states is that the process in both is handled through the courts. The analysts say that has delayed action in many cases.

RealtyTrac, another foreclosure-tracking company, recently reported that New Jersey foreclosures take an average of more than three years from start to finish. No other state's process takes longer.

Meanwhile, in a separate report in early May, RealtyTrac noted that bank repossessions, the last step in foreclosure, went up 58 percent in New Jersey in April, compared to the same month in 2013.

Economic upturn creates a foreclosure paradox

And now, there may be yet another wrinkle in the mortgage foreclosure landscape that is being tracked back to the judicial resolution system. Again, the data comes from RealtyTrac.

It says that of the all the homes in the nation that were in foreclosure in the first quarter of this year, 35 percent were no longer underwater. That is, they actually now enjoyed a level of positive equity. That was up from 31 percent in the last quarter of 2013 and up 24 percent from the quarter before that.

The reason given for this apparent paradox is that while many communities have seen housing prices improve in sync with the economic recovery, the foreclosure process has lagged behind.

The result, according to analysts, is that many homes that had no equity when they entered foreclosure have regained lost ground. They remain in the foreclosure inventory because the process hasn't been completed. And what may be equally intriguing is that many affected homeowners may not know about the turnaround. RealtyTrac says many homes are now vacant, but it doesn't know how many of the vacated places enjoy positive equity.

That being the case, it might seem logical to think that the banks are likely to be the ultimate beneficiaries of the turnaround.

The loss of one's home through foreclosure can be one of the most trying things anyone can endure. Consulting an attorney experienced in dealing with mortgage lenders can help to counter wrongful actions.