Eminent Domain maybe the Answer to Newark’s Foreclosure Problem
Newark, New Jersey has seen a fair share of foreclosure problems, particularly after Hurricane Sandy hit. In Newark, the majority of mortgages are “Private Label Mortgages”. $56 million was allocated to maintain the upkeep of abandoned homes; $630 million is the total amount of debt held by underwater borrowers; and $1.9 million was lost in overall property value.
This foreclosure problem has become very expensive. This crisis has had a dire effect on families and individuals; more people are worrying about becoming homeless. New Jersey is the state with the second highest foreclosure rate in the whole country.
One of the major causes of the foreclosure crisis in New Jersey was the selling of bad loans to the public. These bad loans had families paying more than they could afford. Wall Street included them along with lower-risk mortgages and sold them to various investors.
Large scale principal mortgage deductions are one way to solve this foreclosure problem. Investors also need to stop selling private label mortgages to the public. One way to get this done is to do a mass reset of underwater mortgages.
This is hard to pull off so New Jersey may have to resort to eminent domain, which is basically “urban renewal”. This method has poorer communities torn apart and richer areas put in to increase property values and the wealth of the city.
This method should not be used because it could cause people to lose their homes to foreclosure.