Commercial Foreclosures in New Jersey Unabated

• New Jersey banks are continuing to foreclose commercial properties
• The rate is the same as in 2009
• Now the regulators are stepping in there too

New Jersey is continuing to experience commercial property foreclosures at the same rate as in 2009. The news is contained in State foreclosure data for the second quarter, and reflects the ongoing economic distress the Garden State business community is experiencing.

Between January and June 2010, banks and loan servicers filed for foreclosure against 754 commercial properties in the State of New Jersey. This is approximately half the total repossessions for 2009. The total for 2006 was just 173 – indication enough of the troubles that began with the recession the following year. New Jersey commercial properties seized this year included a one-time Closter childcare centre, an office building in Maywood, and the premises of a former lumber company in Hackensack. These examples indicate the extent to which the economic woes have spread.

I spoke recently to an attorney who represents loan servicers and lenders across State. She confirmed that the wave of  commercial foreclosures  was likely to continue for two more years."We're probably in the middle of it," she commented. "The economy's going to have to get better. The banking system is going to have to heal, and it's going to take a while."

The situation is set to get even tougher for property owners of shopping centers, office blocks and apartment buildings, as more commercial and residential tenants develop their own financial worries and cease paying rent. Boom time commercial mortgages agreed seven years or more ago, are difficult to re-finance as property values decline. In some cases, even property owners with clean servicing records are unable to secure a loan.

As a result, regulators in the financial sector are turning their attention to the commercial segment of lenders’ balance sheets, and are pressing them to more accurately reflect the status of their commercial loans. They are also indicating that they need to re-assess their exposure to the commercial mortgage market – unfortunately, this much needed control will also lead to lenders reassessing existing mortgages and foreclosing on some.

A commercial foreclosure case in America can take up to two years to work its way through the system, and even then the lender may not become the owner of the piece of real estate. For example, TLD Bank foreclosed on the premises of the Fairmount Coal and Lumber Company in Hackensack in April 2010. The borrower did not give up the fight, and managed to cover his obligations at an auction. The foreclosure was dismissed, and all parties walked away happy with the result. Is this not the way that things should be?

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