Newark City Council Unanimously Votes to Explore Novel Local Principal Reduction Strategy to Fight Local Foreclosures

December 5, 2013

Newark, NJ – The Newark Council voted to move forward with with establishing a plan for local principal reduction that could include the use of eminent domain to purchase a targeted set of toxic mortgages from banks that are unwilling to work with homeowners to avoid foreclosures. So far Richmond, CA has approved such a plan and dozens of other cities across the country, including Irvington, NJ, are either considering similar actions or moving forward with concrete plans.

Newark’s unanimous vote signals the city’s commitment to relief for homeowners who have, so far, seen little recompense from the banks or the federal government. Newark joins Irvington, NJ; Yonkers, NY; Seattle, WA; Richmond, CA and other cities around the nation in exploring local principal reduction and potentially eminent domain to help families in foreclosure.

“Today’s vote paves the way for the City of Newark to begin the work of establishing a program to fight foreclosures and hold banks accountable,” said Trina Scordo, executive director of NJ Communities United. “The fact that it was a unanimous vote sends a clear signal to banks and to homeowners that the City Council is taking this issue very seriously.”

The foreclosure crisis has hit Newark particularly hard. According to a report released last April by NJ Communities United, foreclosures have cost the city an estimated $56 million to cover the costs associated with homes that have been abandoned and sit vacant as a result of foreclosures. There have been nearly 7,000 foreclosures in Newark since the housing bubble burst in 2008.

"For years, communities of color across the nation and in New Jersey were targeted by banks peddling subprime toxic mortgages, greatly contributing to the current foreclosure crisis," said Udi Ofer, executive director of the ACLU of New Jersey. "Now communities are responding by considering novel approaches to help save their neighborhoods. Newark has the right to consider all of its option, including eminent domain, to help homeowners stay in their homes and to stabilize neighborhoods."

“The fact that we, as a City Council, now have to consider this approach speaks volumes about the uncaring tone-deafness of the banks,” said Councilman Darrin Sharif. “It’s our job to protect the residents of Newark, but it’s a sad day that we have to do so because Wall Street and the ‘too big to fail’ banks are acting out of concern for their bottom line rather than the interests of homeowners and the larger economy.”

“I hear from homeowners almost every day of the week about this issue,” said Councilman Ras Baraka. “They feel bullied by the banks. They feel threatened by the banks. They are worried sick that their lenders are going to take away their homes and everything they’ve worked so hard in their lives to achieve. I’m giving my word to the residents of Newark that I will do everything in my power to fight to keep families in their homes.”

An eminent domain program to fight foreclosures will need to be developed by the city, but the unanimous vote from the Newark City Council paves the way for the legal research and policy analysis required to formulate an ordinance.

Photo courtesy of Mario C. Russell.

Category: Economic Justice

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