Panel Pushes City Eminent Domain in Newark "Foreclosure Crisis"

Industry Update
August 7, 2015

A panel convened here in St. Lucy's Church July 30 urged Mayor Ras Baraka and the Municipal Council to use the city's power of eminent domain to halt foreclosure of distressed houses and apartment buildings.
The panel of nine, convened by Communities United NJ, would like to see Newark take a path locally blazed by neighboring Irvington. The city, as explained by ACLU-NJ Executive Director Udi Ofer, would apply eminent domain to obtain distressed properties that are still occupied by its home owners and/or tenants.

Governments, said Ofer, prefer to use eminent domain to seize private property on the grounds of compelling public interest.

The Newark-based ACLU state branch leader gave an example of the state obtaining land to build a railroad right-of-way. Obtaining land for a highway right-of-way or an exit or entrance would be another example.

Eminent domain is often used as a last resort, when government offers to buy the land at fair market value or otherwise failing to agree to a price with the landowner in question.

Government may build up to eminent domain by designating properties that have become blighted or '"in need of redevelopment."

South Orange Village, for example, has designated its entire self as an area in need of redevelopment as a means of rewriting its zoning master plan. Glen Ridge Borough applied a similar designation on a long-closed match factory so it could be redeveloped into apartment dwellings.

The key difference in application, however, would be the city taking over ownership of distressed properties - vacant or abandoned "zombie properties," foreclosed properties or those with "upside down or underwater" mortgages - from banks and/or Private Label Securitization companies.

"The government would be renegotiating mortgages or loans with the banks or private lenders while allowing the homeowners and other residents to stay," said Ofer. "This has never been tried in the courts - but, if you look at past court decisions, we believe this' a legal way to save blighted communities."

Hofstra Assistant Sociology Professor Christopher Niedt, in a 20-minute computer slide presentation before a St. Lucy's hall audience of 35, outlined how bad a "foreclosure crisis" Newark and New Jersey are in.

Neidt, who also provided a 20-page "Our Homes, Our Newark: Foreclosures, Toxic Mortgages and Blight" report he co-authored with SUNY-Queens College urban Studies assistant professor Stephen McFarland, said that New Jersey is still one of the hardest hit states by Great Recession era foreclosures.

New Jersey, for example, currently tops the nation in foreclosure rates. One in every 210 Garden State housing units face foreclosure. Florida, by comparison, has one in 324 units and New York one in 476. Part of that dubious distinction is because many of the loan or mortgage payments that homeowners were able to renegotiate with banks or PLS lenders in 2008-12 are now coming due.

Newark, in Neidt and McFarland's report, has 1,151 homes that are 'underwater" or have mortgages from PLS companies. Banks and other lenders who attracted homeowners with sub-prime loans in the early 2000s were able to re-bundle or resell those mortgages and deeds to PLS. About 77 percent of those mortgages and loans have balloon payments or other "exotic" repayment plans.

Such affected housing are found among all five of Newark's wards - but many can be found clustered in the North, West, Central and South wards.

The Neidt-McFarlane study also found links of abandoned or vacant buildings to declining neighborhood property values (and declining tax revenue), crime and declining neighborhood health.

It is not just Newark who has these distressed properties. The panel found similar patterns in the City of Camden - and in Monmouth and Ocean counties. Amanda Devecka-Rinear, of Point Pleasant, talked about the slow rate of home repair and pressing mortgages among those hit by Superstorm Sandy Oct. 28, 2012.

Baraka, who arrived with Councilman Eddie Osborne early in the 90-minute panel discussion, agreed with the assessment and proposed remedy.

"The same way we use eminent domain to develop properties, we should be able to use to keep people in their homes," said Baraka. "This didn't happen overnight."

The Irvington Township Council voted a resolution supporting such eminent domain use last year. The City of East Orange is meanwhile surveying some 728 dwellings to find their owners. Orange had supposedly sold some $1.7 million worth of its distressed properties in bulk to West Orange developer Washington Bay last month.



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