U.S. Senator Robert Menendez  (D-NJ), one of the leading voices for housing policy in Congress, believes efforts should be made to turn foreclosed homes into badly-needed rental properties. Menendez, chairman of the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation and Community Development, held a New Jersey field hearing Feb. 10 on “Saving Our Neighborhoods From Foreclosures.”The hearing coincided with the announcement a day earlier of a $26 billion settlement between 49 states and major banks. The agreement will bring roughly $190 million to Connecticut.

Menendez said that the settlement announcement was a “long way from healing wounds” and was just a drop in the bucket compared to the massive size of the problem. While acknowledging that the dream of owning a home “still lives,” Menendez  said solutions to the foreclosure crisis should include incentives for rental alternatives. Senator Menendez expressed support for additional resources for the Neighborhood Stabilization Program as well as efforts to transition foreclosed homes into rental properties.  He endorsed the strategy of Shared Appreciation Mortgages, in which a lender agrees to an interest rate lower than the prevailing market rate, in exchange for a share of the appreciated value of the home upon its sale.

The National Low Income Housing Coalition (NLIHC) reported that several witnesses at the hearing spoke about potential strategies for limiting the damaging effects of foreclosure:

• New Jersey Assembly Speaker Pro Tempore Jerry Green said he is working on a bill  that would let towns purchase foreclosed homes and turn them into housing for low- and moderate-income families. The bill would create a temporary Foreclosure Relief Corporation to purchase the homes. Municipalities where the homes are located would then get a “right of first refusal” to purchase them through the $268 million affordable housing trust fund, then dedicate them as affordable housing.
• Wayne Meyer, representing New Jersey Community Capital (NJCC), said NJCC is offering “mini-perm” loans to developers to convert what were to be homes sold to owners into rental housing.
• Alan Mallach of the Brookings Institution said that a shared appreciation mortgage program would have far more impact than the announced “settlement.”  Mr. Mallach said that reducing the number of homes in foreclosure is a key way to stabilize neighborhoods and that legislation is needed to enforce principal reductions.

Click here to read the NLIHC’s detailed description of the hearing.