Buying or selling? What you need to know about the $25 billion foreclosure settlement.

It is difficult to interpret how national real estate news will impact the local, central NJ market.   You have probably heard that the Department of Justice has concluded its investigation into foreclosure abuses by the banking industry.  You may even be familiar with the investigation – which followed the robo-signing debacle in late 2010.   Well, the result of the investigation includes a $25 million mortgage relief plan intended to help homeowners.

The settlement is the result of a deal between the Department of Justice, the Department of Housing and Urban Development, 49 state attorneys general, and includes five of the country’s largest mortgage loan providers: Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Wells Fargo & Company and Ally Financial Inc.

So…what does this mean for NJ real estate?  The settlement will realistically impact a small number of underwater homeowners in the form of a principal reduction on their mortgage – if the mortgage holder is one of the five providers listed above who are currently part of the settlement.

Experts feel that the biggest change the majority of buyers and sellers will see is an increase in the number of foreclosures hitting the market from the “shadow inventory” of homes that have been delayed in processing by the investigation.   When the shadow inventory is cleared, the hope is that future foreclosures will be fewer if the mortgage relief plan performs as intended.   Only then will the NJ real estate market begin to see a widespread recovery.