By Desirée Taylor
Irvington’s lost 1,800 homes to foreclosure since the housing bubble burst in 2008. Mayor Wayne Smith says it hurts families and harms property values. That’s why he’s considering a bold step to fight foreclosures. Smith wants to declare eminent domain and seize these houses — not for public use, but for their families.
“It’s a way, legal approach, allows a person stay in their home, allows mortgage to get written down in an affordable way. So the person stays there. Financial institutional that takes the risk will have the ability to recast the mortgage and let the person have an option to own it, or rent it and stay in their home,” Smith explained.
Smith admits this plan won’t help every homeowner who is underwater on their mortgage. Only homeowners who have a job and can pay back the mortgage would be eligible. And there are legal questions, which the ACLU of New Jersey is exploring.
“There are legal concerns and we want to be measured to make sure that we are not over looking any of them but don’t want banks to scare cities away from fully considering these options. So there are legal concerns but those are in the details not in the big picture about whether eminent domain can be sued to seize a mortgage. That much is clear,” said Alexander Shalom, Senior Staff Attorney ACLU of NJ.
Shalom says a lawsuit challenging a similar plan in a California city was recently dismissed by the court. But critics from the financial industry are still voicing their concerns. Chris Killian is from the Securities Industry and Financial Markets Association.
“The way this plan works is a seizure of a loan at far below its value and at the profits are divided between the city and the investment fund. We don’t think that’s right and the impact we think is much broader. They will hit as I mentioned before, pension funds, mutual funds, 401K’s,” said Killian, SIFMA managing director.
“They’re scared of it because it’s new. They don’t want small profits, they want giant profits. And think this has risk of reducing of their profits,” said Shalom.
The Irvington city council has expressed support for the use of eminent domain. But Mayor Smith says this plan won’t be implemented until it has been fully vetted by legal experts and community stakeholders.