The city of Newark, N.J., is moving forward with a foreclosure-prevention plan that could involve using the power of eminent domain to restructure underwater mortgages.
The Newark Council voted unanimously Wednesday to take steps toward establishing a program that would allow the city to purchase troubled mortgages from banks and reduce the principal on the loans, thereby allowing struggling borrowers to stay in their homes. The vote allows the city to begin conducting legal research and policy analysis. Cities including Richmond, Calif., Irvington, N.J., Seattle, and Yonkers, N.Y., are exploring similar plans.
"The fact that we, as a city council, now have to consider this approach speaks volumes about the uncaring tone-deafness of the banks," Councilman Darrin Sharif said in a Thursday press release. "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."
Newark has had nearly 7,000 foreclosures since the housing crisis struck the city in 2008, according to a report by NJ Communities United, a community organization.
San Bernardino County abandoned a plan to use eminent domain to restructure underwater mortgages in January, citing a lack of public support for the program.