The high rate of foreclosure in New Jersey could put local governments’ credit ratings at risk, Moodys Investor Service said in a report issued today.
According to the report, New Jersey’s rate of foreclosure, second highest in the nation behind only Florida, is credit negative for local governments “because abundant foreclosures suppress taxable values, which hinders property tax revenues.”
“Property taxes are the primary revenue source for NJ cities, towns, villages, townships, and boroughs,” the report said.
According to a report last month from the Mortgage Bankers Association, the state’s foreclosure rate rose 2.4 percent even as it dropped nationally.
Moodys went on to say that the number of properties in foreclosure is likely to remain high because of the slow nature of the process.
“Since foreclosed properties typically sell at steep discounts, large volumes of them threaten to keep real estate prices down for years,” a release from the rating agency said. “The ailing housing market and rising foreclosures are currently weighing on the economic recovery in the state.”
Earlier this week, the Assembly Housing and Local Government committee moved legislation that would make it easier to foreclose on a vacant home. According to supporters of the bill, the measure would help ease the backlog on foreclosures.