It is a telling juxtaposition. New Jersey Gov. Chris Christie takes his entertaining 2016 show on the road to places like New Hampshire and Iowa, and gets to pontificate on global affairs; since last November he has helped the Republican Governor’s Association raise $60 million dollars. Meanwhile, on planet Earth, his own state continues to sink deeper and deeper into a prolonged foreclosure crisis which is taking a toll statewide, rapidly undermining the viability of its urban core.
Today, New Jersey leads the nation in the number of home foreclosures and the impacts of the crisis are worst in inner city neighborhoods where African-American and Latino households were originally targeted for the worst of the predatory sub-prime lending. Here is a stat you won’t hear in Christie’s New Jersey’s “comeback” stump speech: Three of the five cities in the nation with the highest percentage of homeowners most at risk of falling into foreclosure are in New Jersey.
In Newark, 54 percent of the home-owning households with mortgages fall into this at-risk category, according to an analysis by the Haas Institute, out of the University of California at Berkley. These so-called “underwater” households owe at least 25 percent more than their home is actually worth. In Elizabeth, it is 53 percent. In Paterson, 49 percent of homeowners with a mortgage find themselves owing considerably more than their home is worth. For perspective, consider that in the bankrupt city of Detroit, 47 percent of households are in that same untenable situation.
Families who find themselves in this upside-down condition, without meaningful mortgage modification, are twice as likely to fall into foreclosure. Foreclosed homes lose, on average, 22 percent of their value. So once a home on a block slips into foreclosure, experts say you can count on the market value of every other home in the neighborhood to decline, further increasing the chances that even more households will lose the remaining equity in their home to the mortgage meltdown.
In the city of Newark, the collapse of property values has led to close to a $2 billion dollar erosion in the city’s ratable base. As a consequence, the city’s property taxes have spiked 42 percent over the last four years, as municipal officials tried to make up for the decline in property tax revenue by laying off workers and hiking the rates on a shrinking tax base.
Recently elected mayor of Newark, Ras Baraka has committed to using the city’s eminent domain powers to help as many as 1,000 underwater homeowners avoid losing their homes to foreclosure because they can’t get a mortgage that reflects the real value of their home. Around the state, there are tens of thousands of households that won’t be that lucky.
The downward spiral has resulted in thousands of people just abandoning their homes, and banks leaving the homes vacant. The blight is not restricted to the cities and is evident in suburban cul-de-sacs and rural communities. Local governments have to resort to passing ordinances to compel the banks and mortgage servicing companies to do minimum upkeep on the empty homes they own.
According to Black Knight Financial Services, there was a 57 percent increase this year in so-called “zombie” foreclosures, with 8,500 empty homes. The jump in abandoned houses came as the state’s homeless rate went up by 16 percent, with close to 14,000 adults and children identified as in need of shelter, according to Monarch Housing Associates, a non-profit that conducts the annual survey.
In communities where the foreclosure trend has gotten traction, it’s not uncommon for squatters to take up residence in the abandoned housing stock. The vacant homes become hubs for illegal drug activity and further accelerate the decline of the neighborhood. In Newark, a 2012 fire in an abandoned home spread to an adjacent apartment building, killing five people — three of them children.
That same year, New Jersey Attorney General Jeff Chiesa announced that New Jersey would receive $837 million generated by the $25 billion dollar settlement between 49 states and the nation’s largest banks to resolve outstanding allegations related to the national mortgage meltdown they engineered. From that award, $762 million of the funds that went to New Jersey was supposed to provide direct relief to homeowners victimized by the banks. When recently queried about the status of those payouts, a spokesman for the New Jersey attorney general’s office sent an e-mail confirming that just $8 million dollars had been dispensed.
Earlier, in 2011, New Jersey got $300 million from the federal government to fund a foreclosure prevention program called Homekeepers. A year later, a local WABC TV reporter confronted Christie with evidence that only $4 million of the state’s $300 million dollars had been spent — on helping 498 families, while 2,000 were denied. In a widely circulated online video clip, Christie responded by blasting the reporter for his irregular attendance at Christie’s briefings.
Critics contend that Christie has diverted millions from foreclosure prevention into the general state fund to balance the budget, even as the crisis deepened. The Christie administration says it has not shortchanged the foreclosure prevention program. In a fact sheet issued by Governor Christie’s press office, the administration says it has now helped more than 5,600 families through its HomeKeeper Program which targets the unemployed and under-employed.
Arnold Cohen, a senior policy coordinator for the Housing Community Development Network, says Christie’s efforts are nowhere near the scale of what the state needs to turn the tide. “They denied close to 6,300 families,” Cohen says. Cohen contends Christie did not grasp just how central reversing the foreclosure crisis was to turning around the state’s economy. “It is the housing bubble that brought us down and it’s housing that could bring us back up,” Cohen says.
While the foreclosure process can be demoralizing for any family, there are an increasing number using it as a kind of motivation. Curt Hamilton and his wife Teresa Stevens-Hamilton live in Port Reading with their two children, and face foreclosure. They are working with New Jersey Communities United, a grassroots advocacy group, to hold on to their home. Curt is a union sheet metal worker but says things still have not bounced back in New Jersey. “I do construction and I am constantly in and out of work. When times are good, the money is good. When times are hard, the money is not there,” he says.
Back in 2001, Curt paid $149,000 and put 20 percent down on a modest Cape-Cod-style home on Larch Street. They got a 30-year mortgage for 11 percent from Countrywide Home Loans. Seven years later, in 2008, Countrywide paid $8.4 billion dollars to settle charges that it had engaged in predatory lending practices on a massive scale.
Curt says he and his wife are determined to hold on to their home and believe they qualify for a significant mortgage modification because they were victims of predatory lending.
“We had a son pass here. I had a father that put money in this house so I could get it, and I have my kids — this is the only place my kids ever knew. So it means a lot. I put a lot of work in it — even though it doesn’t look like it now because I can’t afford to — I put a lot of work in this house, fixing up stuff and putting stuff in, by being a construction worker, and it means a lot,” Curt says.
Teresa says the fear of being forced out of their home is taking a heavy emotional toll on her 14-year-old daughter Destiny, who worries her family could become homeless.
“We don’t know when or what is going to happen. We don’t know when or if they are going to take us from our house. She was just crying. She says ‘I think about this every day.’ Every day,” Teresa says.
The Hamiltons say that too many households in similar circumstances don’t speak up and are struggling in isolation. Getting active, they say, makes a difference.
“It is like, you don’t want to be that person that mismanaged their money. Everybody thinks that you mismanaged your money, you got sick, or your husband lost his job and you mismanaged your money. What kind of sense does that make?” Teresa asks. “But because we feel that we are supposed to succeed, we feel that if I tell people, they are going to think all of this. And we were ashamed. We were ashamed for so long, and … I don’t want people to be ashamed. I want people to speak out and to share, because there is help out there for them.”
Now, as members of New Jersey Community United, the Hamiltons have become politically active and are working to insure that families like them actually get to benefit from the billions of dollars the banking industry has had to pay the government to avoid criminal prosecution for their role in the mortgage crisis.
Mary Szacik is an organizer with NJ Community United. She says that without pressure, the settlement money won’t get to the households that should get the help.
“And for example, Chase Bank just settled that historic $13 billion ‘avoid jail/prosecution’ charge. But nobody seems to know a homeowner who has gotten their portion of the money. So these settlements are great, but where is the money going? We don’t know.”