New York City Council members and housing advocacy groups called on Mayor Bill de Blasio on Wednesday to join them and help homeowners at risk of foreclosure, proposing the use of eminent domain to buy back underwater mortgages.
At a news conference, council members Donovan Richards, Mark Levine and I. Daneek Miller said eminent domain could be used to buy back mortgages from homeowners who owe more than their houses are worth.
Under the proposal, the city would purchase the mortgages from banks and refinance them to match home values to prevent foreclosures, said Robert Hockett, a law professor at Cornell University Law School who helped draft the plan. Eminent domain would be used only for contracts that could not be modified without government intervention, he said.
About 60,000 New York City mortgages, mostly outside Manhattan, remain underwater since the housing bubble burst in 2007, according to a report released Wednesday by the Mutual Housing Association of New York and New York Communities for Change.
Association executive director Ismene Speliotis said African-American and Latino homeowners have been disproportionately affected by underwater mortgages because they were targeted for private-label securitized loans. She said these loans are the most likely to default.
The mayor’s press office did not answer a phone call for comment Wednesday or respond to an email.
The New York Bankers Association maintains that using eminent domain would negatively affect mortgage credit and housing market recovery.
Richards said in a telephone interview after the press conference that the city could save billions of dollars in the long run by avoiding foreclosure expenses and could help many minority homeowners.
“It’s time for the people to get a bailout,” Richards said. “It’s time for New York City to step up to the plate.”
He said the number of underwater mortgages rose particularly in places like the Rockaways, hard hit by Hurricane Sandy.
“When these homeowners went through Sandy, their homes were put underwater, but their mortgages as well,” he said. “We’ve seen skyrocketing foreclosures because of Sandy.”
New York is not the first city to propose eminent domain to modify underwater mortgages. Similar proposals have been announced in Richmond, California, and in the New Jersey cities of Irvington and Newark.
(AP)
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One Response
“Under the proposal, the city would purchase the mortgages from banks and refinance them to match home values to prevent foreclosures”
I think this means that taxpayers will have to pay additional funds to pay off mortgages of others.
Is that fair?