Senator Menendez Examines Foreclosure Crisis’ Effect on Neighborhoods
On February 10, Senator Robert Menendez (D-NJ), Chair of the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation and Community Development held a field hearing, “Saving our Neighborhoods From Foreclosures,” in Plainfield, NJ.
The hearing coincided with the announcement a day earlier of a $26 billion settlement between 49 states and major banks. The agreement will bring roughly $800 million to New Jersey. Senator Menendez, along with several of the witnesses at the hearing, addressed the settlement funds.
Senator Menendez opened the meeting by reflecting on how it has always been “everyone’s dream to own a home” and that “buying a home is an accomplishment.” Senator Menendez admitted that times have changed, but emphasized that the “American dream still exists.”
Senator Menendez suggested that it was time to think outside the box, including finding solutions to deal with vacant homes and providing incentives for rental alternatives. Senator Menendez expressed support for additional resources for the Neighborhood Stabilization Program as well as efforts to transition foreclosed homes into rental properties. Senator Menendez endorsed the strategy of Shared Appreciation Mortgages, in which a lender agrees to an interest rate lower than the prevailing market rate, in exchange for a share of the appreciated value of the home upon its sale.
The following witnesses explained the impact of foreclosures on neighborhoods:
The Mayor of Plainfield, NJ, Sharon Robinson-Briggs, made the connection between foreclosures and employment, reminding Senator Menendez of the 1,100 jobs lost in the city due to the closing of its major employer, Muhlenberg Hospital;
Krishna Garlic, representing Brand New Day, a community development corporation that does real estate development, community education and organizing, property management, and youth services, also testified;
Wayne Meyer, representing New Jersey Community Capital (NJCC), stressed that beyond the impact on individuals and families, foreclosure compromises “neighborhoods of choice.” Mr. Meyer shared that NJCC is offering “mini-perm” loans to developers to convert what were to be homes sold to owners into rental housing. Mr. Meyer also talked about the work of an auxiliary to NJCC that purchases REO properties in bulk to enable early intervention, but stressed that banks are needed to help in the acquisition process. Finally, he talked about the development of the NJ Mortgage Resolution Fund (based on the Illinois model), which is poised to use a portion of the state’s Hardest Hit allotment to purchase mortgage paper and work to keep homeowners in their homes by initial refinancing and then reduction of principal. He expects close to 2000 NJ homeowners will benefit from the program.
Phyllis Salowe-Kaye, representing NJ Citizen Action, testified that the number one priority is to keep people in their homes, then to preserve existing properties as a way of preserving neighborhoods.