The Star-Ledger

Newark: Where The Crisis First Struck, Who Will Help?

The Star-Ledger — Friday, October 24, 2008

By Joan Whitlow / The Star-Ledger

A lot has been said about bailing out Wall Street and protecting Main Street in the current economic crisis.

What about Norwood Street or Lehigh Avenue in Newark, and similar places where the mortgage crisis was causing financial pneumonia before the rest of the country started to sniffle?

Newark's building boom of two- and three- family homes attracted lots of buyers. I've heard that in some cases, the rent money people hoped to collect once they bought a house was included in the income put down on the application to buy the house.

Whether the people who bought understood they were applying for disaster, the people who sold the mortgages certainly did.

Newark's streets are once again sprouting signs like one we found on Clifton Avenue. "Why rent?" it asked, promising zero down payment and zero move-in costs. That's the kind of dealing that created the mess we're in.

Other signs advertise help to escape foreclosure. Ask the state At torney General's Office about those promises. The state just filed suit against 37 people involved in firms charged with stealing $13 million by getting people to sign their homes over to the companies as part of the "rescue plan." The companies pocketed the money, the homeowners became homeless.

If you live in Newark and want real foreclosure rescue, go to City Hall. From everything I hear, Newark is doing a good, aggressive job of assisting beleaguered homeown ers. Lamar and Alvornia Davis, a couple in their 70s, provide one example.

The couple needed to make repairs to keep their tenants, and got talked into refinancing to an adjustable-rate mortgage that jumped to 13 percent and $3,000 a month. The Davises could not pay the mortgage, afford repairs or keep the tenants.

Alvornia Davis said all her be longings were packed in boxes, and she was waiting for the sheriff to put a sign on her door, when a friend invited her to a meeting where city officials were offering help.

With the power of the city behind them, Newark officials talked to a top executive at the Davises' mortgage company. They got the mortgage adjusted to something affordable. The Episcopal Community Development, a rehab program, is making repairs. The Davises have gone through credit counseling to help them budget so they don't fall behind again.

They seem headed for a happy ending. I can't help thinking, however, that doing more to help people keep up with repairs would keep more people out of the trouble the Davises got into.

In the meantime, some folks want to blame the nation's economic mess on those who pushed home-buying as a option for people of very moderate means. I talked to Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, which for a dozen years has been working with several banks to successfully secure affordable mortgages.

It works if it's done right.

Salowe-Kaye says Citizen Action can still get someone a 30-year fixed-rate mortgage below 6 percent. People must repair any credit problems, which usually means a full year of paying every bill on time. Prospective buyers must go through counseling so they understand the financial obligations and set a budget to accomplish their goals. And nobody gets to apply for a house they can't afford.

In the meantime, the domino effect of the mortgage crisis is being felt -- hard. People lose their homes, then have trouble renting because "foreclosure" pops up when the prospective landlord runs a credit check.

Salowe-Kaye said Newark needs to develop a panel of landlords willing to take such people as tenants.

Tenants who pay rent in good faith suffer when landlords who can't afford the mortgage stop providing maintenance.

A bill by state Sen. Ronald Rice offers a number remedies. Mort gage holders who foreclose would be charged a fee that would go into a legal fund for people who have mortgage problems and cannot qualify for Legal Services help. The company that sold a mortgage would have to take care of maintenance for tenants if a landlord in foreclosure proceedings didn't.

On the federal level, Newark's Rep. Donald Payne also has a to-do list. Payne voted against the $700 billion federal bailout package be cause of items it did not include.

He and officials of many housing groups want to change the federal rules so Bankruptcy Court judges can do something about the terms of a mortgage so people can stay in their homes. Not everybody is losing a house because they signed on for a home they could not afford. Some are losing their homes be cause they lost their jobs, Payne said. Extending unemployment benefits yet again would give more people the means to pay their house note while they look for jobs.

Prevention is the best medicine.

"They talk about Wall Street and Main Street. I have to have something for Bergen Street. I have to worry about the back streets," he said.

Someone has to.

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