Third quarter saw record foreclosures in N.J.

About 15.5 percent of Garden State mortgage holders — almost one in six — were in trouble, up from 14.5 percent in the year-ago quarter. New Jersey was 25th in delinquencies and ninth in foreclosures started nationwide.

Nationally, 13.8 percent of mortgage holders were either late or in foreclosure, down from 14.4 percent a year earlier.

Phyllis Salowe-Kaye, head of N.J. Citizen Action, which provides counseling for homeowners in distress, said the New Jersey numbers did not surprise her. Many loans that were temporarily modified by banks have been kicked back into the foreclosure pipeline, she said. In some cases, homeowners did not keep up with their modified payments, often because they lost jobs or their hours at work were cut back.

“But with most of them, we have no idea      why,” she said. “The lender just makes a decision not to make it a permanent modification.”

Nationally, the foreclosure numbers show a few signs of improvement, according to Michael Fratantoni, an economist with the Mortgage Bankers Association. The number of homeowners who were 90 days or more late on their payments declined slightly. But at the same time, foreclosure starts on prime, fixed-rate loans — typically the safest mortgages — reached record levels, he said. That’s a result of continued high unemployment, he said.

The third-quarter numbers do not reflect the recent pause in foreclosure activity among many large lenders worried that the legal paperwork was not done properly, Fratantoni said. That delay is likely to show up in the fourth-quarter data.

The housing market will continue to be dragged down by foreclosure activity into 2011, Fratantoni predicted.

“There’s a very substantial overhang of homes on the market,” he said. Foreclosure activity is expected to dump millions more homes on the market, he said. Since foreclosed homes usually sell at a discount, this is likely to keep home prices  from rebounding.

“People are still losing their jobs and having a difficult time finding a job,” he said. “And they have a lot of difficulty selling their homes” to get out from under mortgages they can no longer afford.

“We still have a long way to go,” he said.

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