THE FORECLOSURE CRISIS TRENTON IS IGNORING Popular Narrative: ‘Let It Ride and Have the Banks Handle It’

Listening to Wall Street based business reporting you would believe that the nation’s foreclosure crisis is in the nation’s rear view mirror. Yet, in New Jersey in places like Newark, East Orange, Paterson and Atlantic City foreclosures are hollowing out entire primarily African-American neighborhoods. Go to any on line real estate tracking site like Zillow and you can see the carnage depicted graphically. Atlantic City has the highest foreclosure rate in the country.

On the ground in these places it has meant vacant zombie homes, where families were pressured out, and banks have failed to re-market these distressed properties, and they continue to depress local property values. Sometimes the derelict properties catch fire and threaten the lives of those left behind. For those remaining families in these places, that are desperately trying to hold on to their homes, this downward spiral makes holding on even harder, as they find their mortgages sinking deeper and deeper underwater.

But that is not the only economic force drowning these folks,  as they tried to hold on to their piece of the American dream that often has been in their family for a couple of generations. The local governments have tried to make up for the slide of their ratable base  by raising property taxes. In some cases like Atlantic City by double digits as in 2014 when that City’s property levy spiked by 29 percent in one year. 

PROPERTY TAX HIKES LIKE GASOLINE ON A FIRE

According to number crunching by the Star Ledger last month as it turns out the municipalities where the property tax takes the deepest bite out of the average household income is in the very places hardest hit by the ongoing foreclosure crisis that can least afford it. In Passaic, with a median income of $31,832, the average property tax bill is $9,246, or 29 percent of the household median income.

Similar distressing household income versus property tax ratios are reported for the rest of the top four on the list: Paterson, Orange, East Orange, Atlantic City.  Not far behind is Irvington, ranked number eight and Newark at 13 on the list with property taxes claiming over 18 percent of the median $33,139 income.

For context, state wide New Jersey’s  median household income is over $68,000 and the average property tax bill is $8,549.   

As it turns, out when it comes to the implosion of African-American homeownership New Jersey is not an outlier but part of a troubling national trend that is part of the largest destruction of African-American household wealth going back decades. In an under reported tragic historical irony, the election of the first African-American President Barak Obama to the White House marked a dramatic down turn for millions of people of color who lost their homes and African-Americans  who saw half of their household wealth disappear.

AND IT IS NOT JUST JERSEY

In the Washington Post 2015 profile of  Prince’s George County in Maryland the paper described the suburb of our nation’s capital as an American rarity in that as it became more black, it became more “upscale” as reflected in the home prices. A few years before the 2008 Wall Street bank heist homes in this well situated county were hitting the million dollar mark. 

“But today, the nation’s highest-income majority-black county stands out for a different reason — its residents have lost far more wealth than families in neighboring, majority-white suburbs,”  the Washington Post reported.  “And while every one of these surrounding counties is enjoying a strong rebound in housing prices and their economies, Prince George’s is lagging far behind, and local economists say a full recovery appears unlikely anytime soon.”

The Washington Post continues. “The same reversal of fortune is playing out across the country as black families who worked painstakingly to climb into the middle class are seeing their financial foundation for future generations collapse.” As a consequence homeownership for African-Americans, which back in 2005 the Washington Post reports was approaching the 50 percent mark has now dropped to 41 percent of African-American households according to “State of the Union-Housing 2017” by Matthew Desmond,  a professor at Harvard University and  lead researcher with Stanford University’s Center on Poverty and Inequality.

Back in 2014  an analysis entitled “Underwater America” of the nation by zip codes, conducted by the Haas Institute at the University of California Berkeley, New Jersey’s Newark ranked number two in the nation with 54 percent of homeowners drowning in underwater mortgages where families owed more money than their home was worth. Number three on the national list was Elizabeth, 53 percent, followed by Paterson at number four, at 49 percent. For perspective Detroit was number five on the list with 47 percent of its mortgages underwater.

The reality is years into a so-called recovery much of America is still feeling the impact of President Obama’s decision, following on the course set by President George W. Bush  to bail out America’s Wall Street banks  leaving Main Street to its own devices. It required  the US Treasury and Federal Reserve to  lend, spend or guarantee, what Bloomberg News estimates, was $12.5 trillion dollars to prop up the world financial system but did nothing for hometown America’s decimated ratable base. The price would also be paid in trillions of dollars in lost US household wealth, much of it burned off in the collapse of real estate values that still a reality in many of the 200 counties that voted for Obama in 2008 and 2012 but voted for Trump because that had seen no recovery where they live.

According to the Harvard University’s Center for Housing Study’s annual report released in June between 2000 and 2016 while home prices rebounded in most of the country they declined in 280 metro regions throughout the rust belt, in parts of Pennsylvania, the Midwest and into the South. 

‘GET OVER IT ALREADY’

Here in New Jersey the dominant narrative is that the ‘lingering’ foreclosure crisis is a confluence of New Jersey Supreme Court Chief Justice Stuart Rabner’s decision back in back in 2010 to declare a moratorium on foreclosures and a widely held belief that the entire mortgage crisis was set into motion because people of color got mortgages they should never have had in the first place.  Under this worldview the faster these remaining laggards are dispossessed the better off the entire state will be, kind of similar to the theory behind burning off underbrush to prevent forest fires. 

What that analysis ignores entirely is the systemically fraudulent nature of Wall Street’s churning mortgages into mortgage backed securities and using the Mortgage Electronic Registration System, a private corporation they created to cover their tracks. If people are upset with the erosion of the rule of law under President Trump they missed the last decade where the nation’s highest level officials were making things up as they went along because ‘of the unprecedented nature of the financial crisis we faced.’

The very creation of the mortgage backed security machine permitted Wall Street to by pass the legally required recording of mortgages at America’s county seats,  In 2011 in RollingStone invesitgative reporter Mike Tiabbi described MERS as “the brainchild of the mortgage-lending industry and is essentially an effort at systematically evading taxes….. and hiding information from homeowners in ways that enabled the Countrywides of the world to defraud investors and avoid legal consequences for same.”

Tiabbi continued. “The idea behind MERS was to wipe away centuries of legal tradition that mandated the physical transfer of loan notes and ownership information. Whereas lenders once were required to physically register with county clerk offices every time a mortgage loan was extended or re-sold, MERS provided an “electronic registry” of mortgage notes where all such transfers were recorded in the wiry brain of a giant computer instead of on paper.”

FASTER, FASTER, TO WHAT END?

In essence a property title system, that had served the nation, even before it was a free standing republic, was destroyed by corporate caprice looking to accelerate the rate at which they could trade. “Instead of the individual banks or lenders registering with the counties each time a loan was sold or re-sold, MERS would handle the initial registration and then become the “nominal” note-holder,” Tiabbi wrote. “Then, each time the note was passed on, MERS would record the transaction in its computer — but no matter who the actual owner of the note was, MERS would remain the legally registered assignee of the note.”

The year before Tiabbi’s article appeared the NJ Legal Services Corporation was already on to the implications of MERS and in a report  in 2010 concluded that “a pervasive, industry wide pattern of false statements and certifications at various stages of foreclosure proceedings” was now carrying the day in court here in New Jersey since 95 percent of the homeowners in New Jersey were not bothering to counter what was on its face fraudulent paper rife with robo-signed, aka  forged signatures. The banks that had gotten bailed out by taxpayers and the Federal Reserve, were coming back for as much of the housing stock as they could grab..  

In addition to the massive mortgage backed fraud that banks have paid tens billions  to the government to make go away the very neighborhoods of color, where foreclosure is most common, where the same ones targeted for predatory lending. As the New York Times editorialized in 2011 “pricing discrimination — illegally charging minority customers more for loans and other services than similarly qualified whites are charged — is a longstanding problem. It grew to outrageous proportions during the bubble years,” the New York Times opined. “Studies by consumer advocates found that large numbers of minority borrowers who were eligible for affordable, traditional loans were routinely steered toward ruinously priced subprime loans that they would never be able to repay.”

LOCAL RESPONSE GETTING TRACTION

A recent meeting in East Orange brought out  local activists committed to helping their neighbors hold on to their homes. It was a hot weeknight in the East Orange City Council chamber and lead organizer Fredrica Bey brought the Hearing of Citizens Coalition to order asking for a benediction. On hand were dozens of residents in the facing foreclosure. Also in attendance members of the City Council including Councilman Ted Green, who just won the town’s June primary for Mayor. He introduced fellow Councilman Romal Bullock who, as a tax assessor in Newark is on the front lines of an under reported neighborhood economic implosion

 “When I was a little kid the Sheriff.You hear about the Sheriff, wild west, there was a cartoon ricochet rabbit out here enforcing the laws but I work full time for the City of Newark as a tax assessor and the Sheriff that i know much more as the name on top of foreclosure deeds. And there are lots and lots of them every day they come through,” Bullock told the crowd. 

Long time resident Janet Mitchell had a hard time holding back the tears.

“I have been living in East Orange for almost 40 years but my problem is with my Aunt Pauline that I am trying to fight for who is a senior who lost her home after her husband paid for her home through tax sale in East Orange,” she said. “Her home was on fire the day before Christmas, she was homeless. I found her someplace to stay but where she is is very uncomfortable and her home was lost for a tax lien sale of less than $500 which she did not know at the time. Because of her losing her home she lost her savings and everything like that so I am here fighting for my Aunt I am trying to fight for my home on 84 McKay Avenue.”

Charlotte Cardenas told  the crowd that a foreclosure program she signed up for, promoted by the Obama Administration, was great for a few years but now has got her behind a mounting mortgage interest eight ball.

“Although I am not facing foreclosure right now I can foresee it coming very soon.  Back in 2009 when we had the collapse, I signed a deal with Chase for 2 percent Obama deal for five years.  But what I didn’t now was the fact that the interest off those five years is now going behind the loan, when instead of owing $200,000, now I owe $300,00, so that’s where I am now and so shortly I will be facing foreclosure because there is no way I can manage that amount.”

Irvington resident Clifton Beckley, a Vietnam era veteran is a success story.  Working with NJ Communities United and local veterans, he fought foreclosure and ultimately the bank relented and negotiated a deal that kept him and his family in his home.  He coaches the crowd not to be ashamed, but to organize.

“Because the psychological part of this by people being ashamed that they have gotten themselves into a situation they are going to lose their home,” he said. “So we don’t do anything.  One day you have a neighbor the next day you get up and that house is empty and a lot of times that is because the person is ashamed about what has happened to him thinking it is his fault.  If you don’t fight, you will never win.”

Laura Walsh is a consumer advocate and anti-foreclosure activist.  She has counseled hundreds of families and works with a Passaic Count lawyer, Joseph Chang.   Walsh said it was key that homeowners know their rights and educate themselves about basic legal procedures, including things as basic as how they are legally supposed to get the foreclosure notice in the first place. 

“Proper service is ( knocking on the podium) ‘Hello-Is this Jane Doe?’ ‘Yes’ ‘Here’ that is service. The service is not throwing the complaint and the summons on th porch. Service is not throwing it at the curb. Service is not giving it to your neighbor somebody you may have never met six blocks away. This happens all the time,” she said. “You have a right to be properly served and the court can not make you do anything unless (knocking) this occurs. If that happens that is one of the few times the court will roll back foreclosure.”

Walsh told the crowd that there is a stark contrast between how families facing foreclosure in places like East Orange are treated those families in a similar situation in white suburbs.

“Normally what happens, and this is the difference between white and black communities, I am embarrassed to tell you—it is true-in white communities somebody from the real estate office will knock on a family’s door and find out if they are there and have plans to leave before an eviction date is set,” she said. “And usually they give them a letter that offers cash to cover moving expenses. That doesn’t happen much here but is should and it happens in other communities.”

Anita Sims Rainford from East Orange had a full career at AT&T and spent ten years after that working for the Newark Public Schools. For her back to back deaths in her family found her on the brink of foreclosure. After the forum she said she was glad she came.

“And for most of my life I have been able to pay my bills and have discretionary income. I hit a perfect storm of hard times caring for my mother and husband who both passed away in March within a week of each other. And I am currently unable to work,” she said. “With all of that being a caregiver I fell behind and so I now find myself in a position of being foreclosed on and i think this information is helpful because I can see myself out of this situation.”

So far, the Hearing of Citizens Coalition has managed to get the ear of key political players like former Assembly Speaker Sheila Oliver and State Senator Ron Rice who have drafted a proposal for a statewide foreclosure moratorium. No doubt, the anti-foreclosure activists have their work cut out for them. It is hard to get elected officials in  and Trenton and Washington to respond to a crisis everybody thinks is over.  

Upcoming: What’s worked around the country to stabilize neighborhoods hit hardest by foreclosure and could any of those ideas work here?

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