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Proactive and relatively short-term
mortgage forbearance paired with pragmatic
loss mitigation solutions has proven to be the
most effective combination for preventing
unnecessary foreclosures following a market
crisis—without perpetuating the pain of that
crisis.
And while foreclosure moratoriums can
bring short-term relief to a market in crisis,
they are ineffective and even potentially
harmful when used as a long-term foreclosure
prevention treatment.
ese are lessons that jump out when
reviewing foreclosure and home price data in
the aftermath of the Great Recession of 2008
as well as more recent, regional market trauma
caused by natural disasters.
ONE-YEAR MORATORIUM, SIX-YEAR
BACKLOG
New Jersey serves as a cautionary tale for
overreliance on the moratorium as a foreclosure
prevention tool.
In response to the robo-signing accusations
that came to light in late 2010—involving
questionable foreclosure documentation
practices—the New Jersey State Supreme
Court imposed a statewide foreclosure
moratorium that extended for nearly a year.
Although individual servicers instituted
voluntary moratoriums in the wake of the
robo-signing accusations, New Jersey's blanket
statewide moratorium was one of the most
extensive and lengthy to be implemented at the
state level.
In the short term, the New Jersey
moratorium had its intended impact in
the form of a dramatic drop in completed
foreclosure auctions, which decreased 67%
in 2011 compared to 2010, according to an
EFFECTIVE
FORECLOSURE
PREVENTION
IN A CRISIS
What lessons from the Great Recession's foreclosure and home price
data can be applied to more recent market trauma?
Feature By: Daren Blomquist
