Last week four members of the City Council of New York, along with a coalition of housing advocacy groups and Professor Robert Hockett, called upon the Mayor and City Council to take up serious study of the eminent domain approach to underwater mortgage debt that Professor Hockett has been successfully advocating across the nation for several years. That call appears to have been heard.
'It is easy to be misled by the performance of Manhattan home prices into thinking that New York City has escaped the underwater mortgage and foreclosure crisis that has hit other American municipalities so hard,' says Professor Hockett. 'That would be a mistake. The other four boroughs have high incidences of negative equity and consequent foreclosure activity. Indeed my colleagues at New York Communities for Change and the Mutual Housing Association of New York have just issued an important report indicating that some 60,000 New York households - 12% of all mortgaged homes - are in serious crisis.'
'Negative equity and foreclosure activity on that scale harms creditors as well as debtors and their communities,' Hockett continues, 'and the only way creditors can get to the relevant loans and write them down under current securitization arrangements is by partnering with cities using their eminent domain authority.'
If New York decides to adopt the plan, it will join cities in California and New Jersey that already have blazed the trail. But in virtue of being New York, it will immediately be at the cutting edge of this cutting edge approach to addressing the national mortgage problem.
'New York doesn't generally follow,' Hockett adds, it leads.