by Ken Walker
Subprime Lending Impact on Newark
March 28, 2007
The New York Times covers the impact of the subprime lending fallout in Newark, and is the most heartbreaking thing I’ve read in weeks: Behind Foreclosures, Ruined Credit and Hopes. The Times does some excellent work here at painting the big picture and adding to it the personal stories of some of the folks hit hardest by the massive debt squeeze of borrowing beyond your means:
But after two lenders told him he did not qualify for such a loan, he settled for something less: a $325,000 subprime mortgage from Wall Street Financial. It was actually two loans, with an 8.5 percent interest rate on the larger one and a 12.2 percent rate on the smaller one. His monthly payments are now more than $2,600.
Earning about $2,000 a month on his salary, he quickly fell behind. At first, he had assumed that he could find a tenant to help offset the cost of the mortgage, but soon discovered his neighborhood had a glut of vacant apartments. So last fall, he took a second job working nights helping mental patients at a state hospital.
In December, his wife gave birth to their first child, a son. But because they were still straining to pay their bills, she returned to work part time this month, at a home for the elderly.
Last month, they found a tenant, who pays $400 a month, far short of the $1,200 rent they had thought they could charge. They have fallen more than $3,500 behind on their mortgage payments. In November, they received their first foreclosure notice.
The Booker administration should take note: you can clean up the streets of drugs and gangs, bring business and jobs, and provide healthcare facilities, but the foreclosure crisis will only add to our already large number of working poor. And we already know that poverty adds to all of the other ills our city now endures.
For those who lost their shirts in unfair home financing, who have clear cases of abuse by predatory lending firms, Newark Now should step in and provide pro bono legal counsel to bring those lenders to accountability. The city should also seek to expand its efforts to provide financial education to city residents and seek to teach fiscal discipline — so those who might be thinking of taking out risky loans can think through the long-term consequences of their actions.
Providing leadership here would be a huge win for the Booker team by bolstering credibily with the community, as well as provide a national standard for urban transformation.
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