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ReStart Shore Salvages Underwater Mortgages in Struggling Counties

Another factor came as a surprise, he said. The organization viewed the prevalence of multi-family units in Essex County as an attraction, a way to keep more people housed. Instead, it has provided unexpected complications in restructuring mortgages, according to Meyer.

“We thought that would be an advantage, that even if the homeowners lost jobs they would still have rental income,” Meyer said. “Instead, we found that tenants also lose jobs or income and get behind on rent, compounding the problem.”

That was the case for Karla Roach of West Orange, whose father suffered a debilitating illness that interrupted his contracting business. At the same time, the recession hit his tenants, who stopped paying rent, she said.

The family tried to work with the mortgage holder, Bank of America, and even hired a lawyer to negotiate a modification, Roach said. The mortgage terms seemed workable when they bought the house on Main Street about eight years ago, but things changed, she said.

“In the beginning it was all right, but then taxes went and the interest rate went up after a year and a half,” Roach said. “It’s very frustrating trying to deal with the bank, because even when you submit all the paperwork, every week or two there’s something new that they want.”

Their attorney made little headway with Bank of America, but advised them to stop paying on the mortgage when the bank started trying to take the house, she said. “Many people are in the same situation,” Roach said, but then her family got lucky.

They were contacted by La Casa de Don Pedro, a Newark community development corporation, one of several around the state that provides housing counseling for NJCC. From there, the agencies moved swiftly to modify the mortgage, Roach said.

“My father is better, he’s happy and he’s now able to afford the mortgage,” she said, adding she hopes to take over the business when he retires.

As they deal with a wide range of properties in the new round, the NJCC officials are hoping for similar outcomes. After all, many of the homes and borrowers in places like Toms River and Smithville seemed solidly and safely middle-class before the double whammy of recession and storms.

But that is true even of Newark participants, Murphy said. NJCC has written down mortgages there by as much as $320,000 after the precipitous drop in values, she said.

With a long-time job as a toll collector, Newark resident Irene Crawford has been in her Lanark Avenue house for 17 years. She was able to take in her grandfather, now 92. But public sector cuts have contributed to New Jersey's slow recovery from the Great Recession. Crawford's finances faltered when she was forced to take a $15,000 pay cut along with her fellow toll collectors.

Her mortgage with Bank of America was not a bad deal, “I just had a lot of things in my life that went wrong,” Crawford said. That included hiring a law firm to supposedly work on a mortgage modification, money she considers gone. As for the bank, it simply “led me on,” she said.

But if the bank never gave Crawford a chance at a modification while it held the mortgage, it did refer her to La Casa after NJCC acquired it, she said. She contacted the agency and at the end of July, and by September had a new deal in place with NJCC.

“From what I can see now, we’re going to be here for a while,” Crawford said. “I don’t have to wonder. ‘What am I going to do with Grandpa?’”

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