From NJ Spotlight:
Baraka’s response – a plan for eminent-domain acquisition of inflated mortgages in two ‘model neighborhoods’ – may be needed citywide.
A new report finds foreclosures and housing vacancies continue to destabilize Newark, and the problems extend well beyond the two small “model neighborhoods” targeted for help by Mayor Ras Baraka.
“This is a problem that kind of spreads out throughout the city,” said Christopher Niedt, an associate professor of sociology at Hofstra University and a co-author of the study, “Our Homes, Our Newark: Foreclosures, Toxic Mortgages and Blight in the City of Newark.”
Without a more comprehensive approach, “We’re still going to see people pushed out of their homes,” Niedt said. That is particularly true for those whose mortgages were packaged into securities sold to investors, a common practice before the Great Recession, he said.
Baraka promised action later this year on a redevelopment plan intended to eliminate blight such as vacant homes. The mayor said it would include a controversial tool, eminent domain, as necessary to bring mortgage payments into line with the housing market.
“We are going to go after some of these distorted mortgages” that have left borrowers paying more than their properties are worth, Baraka told a forum organized by New Jersey Communities United.
The power of eminent domain allows governments to acquire property for public purposes such as roads or schools, even from unwilling sellers. But it frequently has been used to promote private interests, such as shopping centers and casinos.
Baraka acknowledged the tactic raises alarms in many minority communities, which often have been victimized by eminent-domain projects benefitting outside interests. But he said Newark would use it to acquire inflated mortgages, an action which has been discussed in communities across the country but never tried.
“We should be able to use eminent domain to keep people in their homes,” Baraka said.
The city “has the right and the responsibility to use eminent domain to seize” unrealistic mortgages that have been chopped up and repackaged as private securities, said Trino Scordo, executive director of NJCU.
Baraka’s remarks are “a pretty big deal,” said Udi Ofer, executive director of the New Jersey chapter of the American Civil Liberties Union. Previous studies also have documented the prevalence of “predatory” mortgage loans, at inflated interest rates or unrealistic payment terms, in Newark and other New Jersey communities, Ofer said.
“These are really, really, really bad loans,” contributing to continued high foreclosure rates in New Jersey after problems have diminished in most of the country, he added.
The gap can be significant, Meyer said. For 125 Newark mortgages purchased by NJCC, “the average amount of the loan was $325,000, but the average value of the property was $175,000,” he said.
Moreover, while banks often refuse mortgage modifications to individual borrowers, “they have no problem selling a mortgage at a discount to large private equity firms,” he said.
“We are going to be involved in that struggle” on behalf of residents, Baraka said. But he cautioned that progress “is going to take some time.”