The joint report, Thousands of Homeowners Still Drowning in Underwater Mortgages: How Toxic Loans Keep Fueling Foreclosures and the Need for Eminent Domain, was released on June 25 by New York Communities for Change, Mutual Housing Association of New York and New York City Council Members.
Over 60,000 homeowners are struggling, says the report, because the value of their homes is less than the outstanding balance on their mortgages. That constitutes almost 12 percent of all New York City homeowners.
The collective value of these underwater mortgages exceeds $13 billion, and the city lost $1.9 billion in property taxes and other vacant property-related expenses from 2008-2013.
Over 24,000 of those underwater mortgages are private-labeled securitized (PLS) mortgages, which are primarily high-interest and subprime mortgages that were sold on the secondary market and contributed to the economic collapse of 2008.
A study found that these types of mortgages are highly concentrated in African-American and Latino neighborhoods. The report states that 17 of the 20 zip codes with the highest number of PLS mortgages have populations that are more than 50 percent African-American and/or Latino, and seven of the top 10 zip codes are more than 90 percent African-American and/or Latino.
For many, this issue has gone unresolved for too long. Andrew Friedman, co-executive director of the Center for Popular Democracy, called on the city to lead in finding a solution.
“Across too many New York City neighborhoods, the foreclosure crisis continues to cause incredible harm and instability to vulnerable families,” Friedman said. “In six long years, neither the banks nor the federal government have come to the rescue. It is high time for New York City to take leadership on this issue.”
The City Council hopes to do exactly that, proposing within the report that the government use eminent domain to seize the mortgages and reduce the owed principal, if loan holders refuse to reduce the principal themselves.
The Council also suggested that foreclosed property should be sold to not-for-profit entities that can turn the properties into affordable housing.
Council members were joined by advocates and homeowners in calling for immediate action.
“As the City Council and de Blasio administration begin to combat the affordable housing crisis throughout the five boroughs, one thing is certain: we must act to end the foreclosure crisis, and the use of eminent domain should be explored as a tool to do that, before we run the risk of casting the neediest of New Yorkers into an uncertain future,” Councilman Jumaane Williams of Brooklyn said.
Fellow council member Daneek Miller concurred, noting that his community of southeast Queens has been “disproportionately affected by the foreclosure crisis.”
“The utilization of eminent domain to resuscitate properties burdened by underwater mortgages will have a positive impact on communities devastated by the foreclosure crisis, including my own in Southeast Queens,” Miller said. “It will allow entire neighborhoods to move forward and help break the cycle of declining values that stems from foreclosures.”
Members of the southeast Queens community supported Miller and the rest of the Council in calling for a solution.
“I am just one of the hundreds of residents of Queens trapped in an underwater mortgage,” Roxanne R., a southeast Queens resident, said. “For many of us underwater, the options are scarce. The banks won't help us even though we pay our mortgages. We have been suffering the consequences of predatory lending for far too long. That's why I support eminent domain, this is the best solution to save our homes and our neighborhoods.”