The Jersey City Independent"

In Jersey City, the poorest neighborhoods  — once popular territory for subprime mortgage lending — are now facing the overwhelming proportion of foreclosures. While homeowners in these neighborhoods fight to keep their homes, agencies that provide legal and counseling services for housing say they are swamped with foreclosure cases. Advocates say that the sprawling foreclosure problem, too big for local governments to fix, will be somewhat abated by new state and federal programs, but they say more could be needed to reverse what data suggests is a deepening regional and national trend.

Hudson County ranked 13th among New Jersey counties in foreclosure filings in 2008 with 3,950, more than four times the amount of filings in 2007 and more than six times the amount of filings in 2006, according to RealtyTrac, a national website that tracks foreclosed properties.

There were a total of 1,937 foreclosure filings, affecting 2 percent of all housing units, in Jersey City in 2008. That’s a higher rate than the statewide (1.8 percent) and nationwide (1.84 percent) rates for the year.

The bulk of the city’s foreclosures came in lower-income areas, as shown on the map below.

The 07305 ZIP code, comprising mostly Ward A and the Greenville neighborhood, saw the most foreclosure filings with 792, or 3.6 percent of all housing units. The 07304 ZIP code, which includes parts of Wards B and F and the West Side, Bergen-Lafayette and McGinley Square neighborhoods, was second highest with 409 filings (2.6 percent of all units). By contrast, the 07302 ZIP code, which is mostly made up of of the downtown neighborhoods, only had 129 filings, less than one percent of all units.

Jorge Aviles, general counsel of the Hudson County Housing Resource Center and a former Jersey City councilman, isn’t surprised that the 07305 ZIP code saw the greatest number of foreclosures in the city. He describes the area as a likely hotbed for the kinds of troubled mortgages that were packaged as securities and sold to the investment community.

“Even in the worst areas of town, you could take somebody that had basically no income but a good credit score and put together a package that would allow that person to get a mortgage merely based on anticipated equity,” he says. “The 07305 was the classic thing they were selling on Wall Street, these collateralized debt obligations.”

Aviles’ organization, which offers counseling to troubled homeowners of all incomes, is facing an unprecedented spike in foreclosure cases that started after Labor Day and snowballed in January and February of this year. He says Jersey City is probably worse off than the rest of the county because a greater number of subprime mortgages were given to people here, a sentiment echoed by HUD officials and other advocates.

The city was also hit hard by foreclosures because of the disproportionate housing burden on households. For years, the general rule of thumb has been that a household’s housing costs shouldn’t exceed 30 percent of it’s monthly income. But in 2007, 42 percent of Jersey City’s owner-occupied housing units with mortgages surpassed that threshold, up from 34.7 percent in 2000, according to Census data. An Associated Press analysis of the same data showed that nationwide, minorities — particularly Hispanics — had much higher housing burdens than whites.

With so many households already overleveraged, the economic collapse has caused homeowners to fall behind on mortgage payments, whether subprime or standard. As Ward A Councilman Michael Sottolano points out, job loss has been a driver of foreclosure filings in his ward.

“Obviously the job market is extremely frightening. It’s one thing if the person who had some means put aside from a job to sustain themselves for a year or so, but the majority of the people that we’re talking about who are losing their homes are paycheck-to-paycheck people,” Sottolano says. “As the unemployment rate keeps rising, the problem is just going to increase.”

Gregory Diebold, director of litigation for Northeast New Jersey Legal Services, which serves low-income residents of Hudson, Passaic and Bergen counties, estimates that his organization’s load of foreclosure cases has tripled during the past year. Using extra funding from the state, the organization recently hired a second attorney to specialize in foreclosures.

Diebold says homeowners facing foreclosure should seek legal help as early as possible.

“The worst thing from our perspective is when people wait until just before the property is going to be sold to come in. That really makes it difficult to do anything,” he says. “People have a lot of options now, the state and federal government are taking some steps to try to alleviate the foreclosure crisis, so there are all sorts of possibilities out there for people.”

When people come to the Hudson County Housing Resource Center for help, Aviles says the first thing he often has to do is calm them down.

“Many of the people that got into these situations are decent people who are really troubled by this,” he says.

The organization then tries to work with the bank or lender holding the mortgage and prepare for possible litigation. Aviles says that, because of the massive number of foreclosures, even someone in litigation may remain in the house for an extended period of time. It presently takes about 18 months from the filing of a foreclosure to the auction and sale of the house, at which time the former owner is legally obligated to vacate, Aviles says.

“Unless somebody waits until the auction to come see us, and that has not happened to anybody yet, there are very few people you can’t do anything for,” he says.

Once a foreclosed home becomes vacant, it impacts a community in myriad other ways.

“Usually if [a home] is vacant, there’s a good chance, depending where in my ward it is, that it may be vandalized or could have squatters or somebody else coming in there,” Sottolano says. “We try to keep an eye on it. It’s very difficult to get the banks to be receptive to not only securing the place but making sure it stays secure. Generally the best eyes and ears are the neighbors.”

As of July of last year, 2,217, or 2.4 percent, of the city’s 94,211 residential addresses, were believed to be vacant for at least 90 days, according to United States Postal Service and HUD data.

City spokeswoman Jennifer Morrill says the city was awarded $2.15 million last fall through the HUD-administered Neighborhood Stabilization Program. The money is slated to be used for demolition of foreclosed and abandoned properties as well as rehabilitation and stabilization of targeted communities throughout the city, according to Morrill, who says the city has applied for additional funds from the state and will develop a final plan once officials learn if they are receiving more money.

Intervention

Sottolano says cash-strapped cities aren’t equipped to deal with the massive scope of the foreclosure problem, but many advocates say that state-level action has created new options for homeowners facing foreclosure.

“We probably have the best foreclosure prevention legislation of any other state in the country as a result of the bill that the governor signed in January,” says Phyllis Salowe-Kaye, executive director of the consumer group New Jersey Citizen Action.

That legislation created the Mortgage Stabilization Program, which allows non-amortizing matching loans of up to $25,000 to encourage lenders to modify mortgages in danger of foreclosure for qualified homeowners. A second program under the bill provides funding to nonprofit and public entities that would take over the mortgages of troubled homeowners and charge them affordable rents until they can could buy back the property.

In addition, several state agencies are partnering on a free program that gives residents access to HUD-certified housing counselors, attorneys and neutral mediators who work with lenders to reach a solution. The mediation temporarily halts the foreclosure process, but agreements reached are not binding.

Citizen Action also provides HUD-certified counselors for homeowners facing foreclosure. While Salowe-Kaye says little can be done for those who have mortgages they never really could afford or have drastically changed incomes, she says it’s still critical to meet with a counselor and explore one’s options.

Those options could include refinancing the loan or modifying it — or in more drastic cases, a short sale, a deed in lieu of foreclosure or a regular sale. The latter options are less-than-ideal, but still better for a homeowner’s credit than an outright foreclosure, Salowe-Kaye says.

There has also been movement at the federal level.

A program unveiled by President Barack Obama last month provides funding designed to entice lenders to reduce monthly mortgage payments for homeowners who are defaulting or at risk of defaulting. A second part of the program enables those with loans owned or guaranteed by Freddie Mac or Fannie Mae to refinance despite a steep drop in the value of their homes that would otherwise shut them out of doing so.

The state and federal measures provide hope, but Salowe-Kaye says they should have gone further. The Obama plan doesn’t actually mandate a modification of the mortgage except in some cases where the financial institution received other federal bailout money, nor does it mandate any reduction in the principal mortgage amount for troubled homeowners, she notes.

In addition, the state measures should have included a stipulation that lenders put up $2,000 every time they file a notice of foreclosure, with that money going into a fund to pay for counselors and providing an incentive to renegotiate the mortgage’s terms, Salowe-Kaye says.

Lastly, she adds that the state needs to tighten up protections and notice requirements for renters living in foreclosed homes. Aviles concurs, saying he has seen hundreds of cases in which a foreclosed property has tenants — who are legally protected from eviction — who are getting conflicting notices from the foreclosing agency. This is the scam known as “cash for keys,” in which a bank offers a tenant a lump sum to agree to vacate the property.

“They’ve basically been trying to tell the tenants this house is in foreclosure, get lost, when the reality is, if the house is in foreclosure, it has no affect on them,” Aviles says.

Resources:

President Barack Obama’s housing plan
NJ HOPE
NJ Judiciary Foreclosure Mediation Program

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