The scary language used on mortgage foreclosure letters makes it seem that homeowners will be out on the street in no time. In New Jersey, the process of losing a home can last years.
A court hearing Friday might get some foreclosures moving in the Garden State. This is the story of one family that has lived under threat of losing its home since 2007.
Kayode Adeleye and his wife, Sherifat, live in a new development in Sicklerville, about halfway between Philadelphia and Atlantic City.
"The house was originally built for us, but unfortunately after eight months [living] here, I lost my job," Kayode Adeleye explained.
In their development, large homes are set back from winding roads to nowhere with names like Serene Lane and Beaver Dam Drive. The Adeleyes were the third family to move in at the height of the housing bubble in 2006. Today there are still empty lots of dead grass where homes never got built.
The Adeleyes' mortgage from that period has all the hallmarks of a subprime loan. The rate isn't fixed, and it started high. They put down a relatively low sum.
They missed payments the next year. And despite falling so far behind, they have been living in the home for years with sporadic responses from the bank that owns their mortgage.
One of many
New Jersey's subprime loans and foreclosures were concentrated in the counties closest to New York and Philadelphia, and many are taking just as long as the Adeleyes' to resolve.
According to Peg Jurow of Legal Services of New Jersey, "Those cases are sitting out of a of lack of prosecution, out of a lack of moving forward on the part of the bank." She says a big block of mortgages got stuck. People were behind of payments, but banks and mortgage servicers were not pushing them out.
As explained by Ira Goldstein of the community redevelopment group The Reinvestment Fund, the rate of completion slowed and in 2010 the foreclosures just stopped going through.
"You're seeing these delinquencies pile up and pile up and pile up," Goldstein remarked.
New Jersey may have been spared the worst of the housing collapse, but the backlog means that only Florida has a higher percentage of homes in foreclosure. An average New Jersey foreclosure process takes 900 days — second only to New York.
There's one factor New Jersey shared with the nation. As the housing crisis grew, the people who service foreclosures were overwhelmed and took short cuts on paperwork — that's the robo-signing that got so much attention. When the courts got involved, Daren Blomquist, vice president of RealtyTrac, says there was a virtual moratorium on foreclosures nationally.
"The lenders pulled back and didn't want to make a mistake," Blomquist said, "and may have erred on the other side of just 'Well we're just not going to say anything, because we don't want to get into trouble.'"
Then in New Jersey, a judge declared the banks were still handing homeowners incomplete foreclosure documents. He told the banks to fix them before trying again.
Alan Mallach of the Brookings Institution says the long wait has been a mixed blessing for homeowners.
"More and more people are getting to realize that ... they can pick up a couple of years basically rent free," said Mallach.
Mallach argues the most "rational" thing for individuals with underwater homes to do is default, sit it out until they're evicted, saving their mortgage payments to walk away with money for a rental. Few take that route.
"For a lot of people, their home has more than purely financial or transactional value," he said.
The number of delinquent mortgages may be keeping more of their neighbors' homes underwater. They're a drag on the market. Even now, as these foreclosures begin moving again, there are new risks to neighborhoods, says Blomquist.
The big lenders did finally arrive at a settlement over robosigning with the states' attorneys general in February and promised to make changes to their process, such as assigning one person to handle a family's foreclosure from start to finish.
Now, in response to the separate New Jersey decision, servicer Wells Fargo is the first to present to a New Jersey court a packet for thousands of homes to show why the bank should be allowed to move forward. That is scheduled to happen Friday.
Experts estimate that, behind the dam, there could be anywhere from 20,000 to a 100,000 homes in New Jersey.
"We have a lot of concern that as these delayed foreclosures hit, as the courts catch up and the lenders catch up with foreclosures — which we're starting to see happen already in the last few months, that that's going to once again destabilize home prices and the market overall," said Blomquist.
However, there won't be a wave or surge, he thinks, but more of a steady pressure that he hopes banks can successfully manage. These days, he says financial institutions also pursue alternatives to foreclosure much more aggressively, for example: short sales and loan modifications.
In the case of the Adeleyes, they have just won another reprieve. In October they got a letter from Wells Fargo, promising a permanent loan modification if they make three payments of just under $2,400 each.
Kayode Adeleye is not celebrating yet. His house is worth nearly half what it was when he bought it.
"I meet a lot of couples when I'm jogging in the morning. They just move here like the other guy he bought his house [for] 180 [thousand] and that house worth like 430!"
He and his wife they just can't abandon their home to the bank.
"Our credit is already messed up," she explained. "We can't walk away and buy another one. That's the problem. If we can walk away to buy another one, we would do it. We can't do it."
They'll hold on as long as they can and, they hope, for good.