Foreclosures- about the wave and Hyde Park

Presented by Hyde Park-Kenwood Community Conference, its Development and Condos-Co-ops Plus committees and its website hydepark.org

Visit also Affordable Housing Information home. Organizing for Affordability in Hyde Park. Housing in the Stimulus Act, housing initiative, and before the state. Ending Homelessness. Condos-Co-ops Plus home. Helpline. Housing and the Stimulus.
Affordability Hot Topics

Website of Coalition for Equitable Community Development.

The State Attorneys foreclosure settlement- from Lisa Madigan's office: http://www.illinoisattorneygeneral.gov/consumers/bankforeclosuresettlement.html

Site with information on trends and "wheres" in foreclosures: http://www.regionalhopi.org. And Woodstock Institute (see below).

Essential: http://www.makinghomeaffordable.gov, http://www.cityofchicago.org/housing.
Where do you find local trends in foreclosures? go to EveryBlock, run by the Chicago based Woodstock Institute.
As part of the source sharing arrangement, you will not get info by address-- you will have to take the PIN numbers given in the foreclosures-by-block to the city's website. Every Block allows you to assess by city, community area, which is the first 2 digits (Hyde Park 51-59 is #41, Kenwood incl. E. HP north of 51st, is #49) and census track (usually 1-2 blocks wide). There are a couple of ways to sort and map the data, although it only comes up a section at a time. Code numbers in which the last 4 digits are 0s are single family homes, those that include numbers are condos. The other category is multi-family buildings-- those digits (If this writer understands right) if 0s are rental, if numbered condo and maybe coop. Note: the Federal Program announced at the end of winter 2009 was expanded in May 2009.

To Lawyers' Committee for Better Housing July 2012 study - shows regulation of rental building foreclosures needs teeth; reinforces aldermen looking into new ordinance.

Foreclosures, already with the highest rates in the country, continue to rise in late 2012- well above 2011 as the stalled backup starts to be addressed. On the other hand, the number of mortages underwater is going down somewhat (to Metro average of c30%) due to recovering home prices. The area will lag the rest of the country into 2015.

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June 6, 2012 Herald carried an article about how much the mid South section represented by zips 60615 and 60637 is "underwater." Based on Zillow, a clearinghouse that takes mortgage data from Transunion based on negative equity, loan-to-value ratios, and delinquency rates, it reports the following. South Kenwood and Hyde Park represent about half the homes in each zipcode. 60615: 41% have values below what is owed of which 15.5% is behind (6.37% of all homes in the zip).
For 60637, 55% have values below what is owed of which 21.2% is behind (11.72% of all homes in the zip). Experts are quoted as saying the situation is much less worse in HPK, where the price peak and hot sales at 2006 were much less pronounced than in the surrounding areas. Prices here have largely stabilized since (with some exceptions mainly in association buildings), partly because of the adjacency of the university and a large stock of unique properties.

CITY PASSES "SUBSTITUTE" ORDINANCE TO SWEET HOME CHICAGO. Some reasons many affordable advocates will not like the ordinance: It sets neither a mandate or target to use X% of what's in or available in all or individual TIFs or equivalent to these amounts. Help and use seems to be available only within particular TIFs. Use of such funds for affordable vacant buildings/properties depends in every case on City Council approval and appropriation and may well require a change in state law to be implementable. It's amount of help may be considered by some to be low. Ditto for income cap for renting, although some would prefer the program be only for "truly needy" and not the struggling working class. The usual standards blocking flipping are applied and not strengthened.

Here are the conditions. It must be inside the TIF. Limit of eligibility to purchase is 120% of the regional medium, to rent 50%. For the individual the help is limited to 25% of total of base purchase price + up to 3% closing plus rehab costs (over $25,000).
They buyer must agree to stay put for at least 5 years if getting up to $15,000 in assistance, 10 if $15-40,000, and 15 if more and must undergo counseling.
A developer using the program must set aside 30% to 50% of units for affordable rental housing. The caps are 30% of price and costs if setting aside 30%, 40 if 40, 50 if 50. The affordable units mus stay so for at least 15 years.
A TIFs funds can be so used only if in compliance with state law and are specifically approved and appropriated by City Council.

Illinois Treasurer Dan Rutherford has re-adopted and re-posted the Citizen CRA
(Community Reinvestment Act) Complaint Form, negotiated by the Community
Reinvestment Organizing Project (COP), two years along as a bank accountability
process for Illinois citizens with concerns by limited or non-existent CRA activity
of state depositories.

Time: Mortgage Defaults: Many Are Intentional, Study Finds – Research by Prof. Luigi Zingales ( of C) suggests many homeowners owe more than their houses are worth (July 7, 2009). And many banks are accused of ignoring contact with owners and forcing foreclosures to get added fees from court proceedings.

Foreclosures are climbing in Hyde Park, too by early 2010- but largely of buildings.

Foreclosure modification program.

Many fairs and forums are being held that will put homeowners in touch with servers or certified counselors:
This page will have information of use to persons facing foreclosure or stress that could lead to loss of home, as well as track what's happening on the ground in our neighborhood.

Meetings, seminars, workshops

If you encounter deceptive or fraudulent business practices in the credit industry, you may visit http://www.ftc.gov/bcp/conline/edcams/credit/index.html to file a complaint.

From Woodstock Institute: Of the 10 Chicago neighborhoods with the most foreclosures in 2008, half were on the South Side--West Englewood, Englewood, Roseland, West Pullman, and Auburn-Gresham were on the South Side. A nearly different set were in the 10 with highest rate among 1000 mortageable properties: Washington Park, Grand Boulevard, Woodlawn, Englewood, Burnside, West Englewood, and South Shore- 7 of ten were South Side neighborhoods. Overall in Chicago, the number of foreclosures doubled between 2006 and 2008. 32% were on 2-6 unit properties (up 36.3 % in a year.) 60-80% of filings were in in African-American and Latino communities, 48* of all in Chicago were single-family homes, 20% condo units.

We start with an article in the Herald inspired by and reporting on a panel forum sponsored by our two aldermen on the subject on April 15, 2009:

There have been a few apt. bldg. foreclosures in the area. One is a building at 52nd and Harper that was walked away from and foreclosed by Bank of America. Also in lawsuit is the owner of 4901 S. Drexel, the Wilmington with 122 units, accused by Bank of America of failing to deliver $8 million in mortgage payments while taking out a non-permission loan from another bank.

Nationally, banks have been very reluctant to either grant any kind of relief, especially principal (partly because many borrowers have so many debt problems and or unemployment), have people in the homes, or push through either to resale to new occupants or switch to renting. There are some programs a few banks or other receivers have signed up for, but the rate of change is very slow. Fannie Mae and Freddie Mac are among those that refuse.


Foreclosure waves touch Hyde Park

Hyde Park Herald, April 22, 2009. By Sam Cholke

Foreclosure filing rates continue to rise on the South Side, affecting more condominiums than in previous years. While Hyde Park is less impacted than other neighborhoods, it has not gone untouched by the national foreclosure crisis. "We're seeing a big jump in condo foreclosures," said Jeff Smith, vice president of the Woodstock Institute, a Chicago-based community economic development research institute that tracks foreclosure filings and auctions.

There have been 162 foreclosure filings already this year in the 4th and 5th Wards, 77 of which were condos. Hyde Park had seen 831 foreclosures in 2008, according to Woodstock. "Where you're gong to see it is going to be condos," said Ald. Leslie Hairston (5th), whose ward has seen 453 foreclosure filings since the beginning of 2008. The area, particularly the 4th Ward, has fared better than other parts of the city. "A lot of the redevelopment we did goes back a decade or more," said Ald. Toni Preckwinkle (4th). A neighborhood stabilization plan has helped reduce foreclosures in the ward, she said. The 4th Ward has experienced fewer foreclosure filing since the beginning of 2008.

The comparatively affluent Hyde Park may contribute to the lower foreclosure rates. "Hyde Park is pretty stable, as far as the area I represent," Hairston said.

A panel of experts convened April 15 at the Hyde Park Neighborhood Club to offer advice to those who may be facing foreclosure. "Even if you're not delinquent yet and you feel a hardship coming on you and think it's going to be hard to pay your mortgage next month, come to us: do not wait until you're delinquent," said Dolores Allen, director of mortgage lending at South Side Community Federal Credit Union. Homeowners who are having trouble -- or think they will soon have trouble -- paying their mortgages should talk to their lender, servicer or a U.S. Department of Housing and Urban Development-certified counselor, she said. "These are the only three parties you will want to talk to in this situation," Allen said.

The panel continually warned of a spate of scams targeting propel in foreclosure. "It is illegal for anyone to charge you an upfront fee to modify your mortgage," said Michael Van Zalingen, director of homeownership services at Neighborhood Housing Services. "Unless it's Oprah coming to your house, they're lying."

After the meeting, Van Zalingen said the current housing crisis has hit Chicago particularly hard. "Chicago is probably the worst non-bubble city for foreclosures," Van Zalingen said. Studies from the National Training and Information Center say that Chicago has a disproportionate number of exotic loans, many of which were aggressively marketed in minority communities. Many of these loans were misrepresented to people in ways that often constitutes fraud, said Hyde Parker and attorney Al Hofeld.

"If you have a fraud claim, you've maid it very expensive for the defendants to litigate the case, plus you can claim damages," Hofeld said. Filing a case can also help delay a foreclosure filing, he said. "Delay really is still worth something - it's worth quite a bit now because the president's plan is really just getting off the ground."

President Obama's Making Home Affordable program is designed to help homeowners reduce mortgage payments to no more than 31 percent of their income. More information is available at makinghomeaffordable.gov. The city of Chicago also offers free assistance for homeowners who may be facing foreclosure. For more information visit cityofchicago.org/housing or call 311.


Foreclosure modification program

Am I eligible for modification? You may be if you: Are behind or at risk, are an owner-occupant of a 1 to 4 unit property, originated before Jan. 1, 2009, HAVE INCOME THAT WILL SUPORT MONTHLY MORTGAGE PAYMENTS.
To preregister for a fix-your-mortgage with real HUD-certified counselors: call 773 329-4185 or www.nhschicago.org.

This is a subsidy to lender program in exchange for lowering monthly payment on 1st mortgages to nom ore than 31% of gross monthly income. A three month trial: If make the payments, it will be extended 5 years- then can rise 1% a year to then market rate. Taxes and insurances are escrowed; accrued interest and fees- but not late fees are added to principal; there is no fee for this modification; pending foreclosures are postponed. If your payment adn other debt exceed 55% of your gross monthly income, you must enroll with a HUD-certified Housing Counseling Agency.

How it's done: lower interest to as low as 2%, extend loan length to up to 40 years, reduce or defer principal to extent there is substantial negative equity. If these won't do it, you may not qualify.

How can you qualify? Loan is on a owner-occupied 1-4 unit property in first mortgage under $c1.4 m for 4-unit, 1.2 for 3, 934.2 for 2, 729,570 for 1 unit); entered before January 1, 2009, you have income that wil support the payments at 31% of gm income; it's not FHA or VA, you have a hardship such as job loss or illness, and the current PITIA payment is over 21% of your gm income. So, calculate gmi, subtract monthly property tax payments and monthly homeowners insurance payment-- this is "available funds for principal and interest. Then divide principal by 1,000 and multiply by 3.7 to get potential P&I payment at 2%. If the latter is at or less than the funds available, you should qualify.

There are major documents you need to assemble and or sign from the counselor, of all your income or debts and properties owned, IRS 4506-T, HUD How To Kit. You will have to fill out as Hardship Affidavit that explains why you need help, most recent pay stubs and tax return. Get the application form for President Obama's Home Affordable Loan Modification Program and fax or mail the competed Application with your documentation to the lender with the Cover Letter. You can modify only once and deadline is Dec. 31 2012.

Making home affordable guidelines, based on Treasury Dept. guidelines

Home Affordable Refinance is for those under Fannie Mae or Freddie Mac, having a track record, and unable to use normal channels because their homes have lost value. Flexibility is built in. Expires June 2010.

Home Affordable Modification reduces monthly payments in tandem with Hope for Homeowners. See How Can I Qualify in preceding section. Servicers are required to cooperate and use a net present value test (if risk is imminent or is 60+ days delinquent whose result shows cash flow greater under the modification. Must result in payment of under 31% of gross monthly income. First interest reduced to as little as 2%, if not sufficient then extend loan term and or forbear principal or forgive principal.

Looking up your loan, if FM or FM. 1-800-7FANNIE, www.fanniemae.com/loanlookup. 1-800-FREDDIE, www.freddiemac.com/mymortgage.

Finding HUD Certified Mortgage Counseling Agencies in Illinois:
http://www.hud/offices/hsg/sfh/hcc/hcs_print.cfm?webListAction=search&searchstate
(c 30 pages).

Did you know.... from a seminar sponsored in spring 2009 by our aldermen, the city and counselors

50% of borrowers never talk to the ir lender when they get in trouble? And the city is considered a more reliable advisor. The banks and servicers are way behind in getting "back to" borrowers-- or are out of town etc. -- and it's sometimes in their interest to not get back. Better you go to a HUD certified counselor, perhaps calling 311 or going to a seminar. Shorebank is one of several that run careful Rescue programs, and will tell you ways to get reprieves or work the system in your favor-- also South Side Consumer Credit Union.
f you are not yet in foreclosure and can find grounds to sue for fraud or technical faults in the loan or to get the language, it will help, several advisors say. Beware of some so-called modifications that make you pay more, or deed-over and get evicted. Questions? call Illinois Department of Financial and Professional Regulation- 1 800- 532-8785.

What if the math doesn't allow a sustainable modification? If you have a temporary hardship, make small payments? If a permanent hardship consider pre foreclosure sale. Don't rule out a hardship case because you are "only struggling." And note that lenders getting federal money have to join the federal Home Affordable program. The city has a program for seniors involving a reverse mortgage--you stay in your home, pay o interests.

Note that bankruptcy is a poor last resort and "walking away" is the very worst.

Live in a multi-family, rental building that goes into foreclosure? Illinois has passed a law requiring notice and other safeguards for evictions.

 

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Information from HOPI- Home Ownership Preservation Initiative

This is a partnership started in 2003 between NHS (Neighborhood Housing Services of Chicago), City of Chicago Department of Housing, Federal Reserve Bank of Chicago, and major lenders and servicers.

It promotes or provides:
-Quality homeowner education to prevent delinquencies
-Direct interventions to assist homeowners at risk
-Reclaims foreclosed homes for owner-occupants
-Studies mortgage and servicing impacts on neighborhoods to develop best practices

Causes of high foreclosures

-No or reduced documentation loans, esp. income documentation
-ARM resets
-Loose wording including high allowable debt to income ratio and teaser rates
-Inappropriate loan products
-Origination and appraisal fraud
-Severe economic downturn
-Declining market value

The servicer problem

-Investors distanced from borrowers
-Most of the funds invested in a pool of loans are immune from credit risk
-Multiple layers of investors and approvals for workouts creates a culture that denies justified workouts and modifications
-Over-reliance on repayment plans that can't be sustained
-Loan abuses and investor risks that are "priced into the transaction" rather than eliminated through corrective action

Loan modifications

-A high proportion of these are not on sustainable terms: Only 1/3 lower monthly payment, just freeze them or even increase them
-Workable Mods require considering Homeowner's Total Budget (and income)
-Still takes at best 3-6 months to get a mod started and government plans hasn't made it to the servicer staff level

Why aren't loan modifications sustainable?

-Investor restrictions on whether and how much loans can be modified (and inability to identify, contact/talk to, or leverage true holder)
-Lack of accurate data on what the homeowner can afford
-Volume of requests high, servicers don't have information or don't want to hire staff to handle
-Investors and services waiting on bailouts or incentives too low/not as high as servicer wants
-Disincentives to modify vs foreclose, unwillingness to be a "renter/manager" rather than a loan servicer or holding property vacant

Current purchase, rehab, resale issues

-Very soft market
-Tight credit
-Overall holding costs
-Decreasing sales prices
-Increased subsidy needs and lower acquisition costs
-Rental single-family option

Value of Nonprofits

-Gain greater contact with borrowers
-Third party trusted advisor role creates solutions
-Cost effective borrower outreach
-Outsource of staffing needs, filing a gap
-Assistance in accurate analysis of borrower
-Proactive loss mitigation efforts
-Access to other resources: public funds, other private

NEW REALITY

-97% of properties that go to foreclosure auction end up in REO inventories (investor interest has declined)
-Large inventories of bank-owned REO property are putting downward pressure on real estate markets
-Servicers are actively pursuing opportunities to move REO including "make us an offer."


Beware of foreclosure rescue scams. Real help is always free, says Shorebank.

For a HUD-approved counselor visit http://www.hud.gov/offices/hsg/sfh/hcc/fc/.

Beware of anyone who says they can "save" your home if you sign or transfer the deed. And never make payments to anyone other than your mortgage company without their approval.

July 2012 study shows regulation of rental building foreclosures needs teeth, prompts aldermen to look into new ordinance.

Based on Tribune story July 24, 2012. The study is by the Lawyer's Committee for Better Housing.
276 Chicago apartments are in buildings falling into foreclosure any given week, and some renters are being pressured, even intimidated, including with utility shut-off into vacating. And what value is the 90-days grace or a lease if the building and livability are not being maintained?
The study (released July 24) calls for strengthening protections for renters, citing shrinking options in affordable housing and rising rents. Director Mark Swartz says we can't loose even another unit and "should be creating more rental units, not losing the ones we have."

Parallel, a group of aldermen will introduce in the same week an ordinance requiring owners of repossessed apartment buildings including Fannie Mae and Freddie Mac to continue renting to those who are paying rent and not breaking laws, with relationships continuing even when there is not a written lease, until the building is sold.
The proposed ordinance, "Keep Chicago Renting," modeled on a 2010 Massachusetts law, extends the rental period for those paying rent and abiding by laws until the building is sold, even if there is a cut-off in the lease, and require notifications. Rents could be increased only by court petition with right to defend. Helping draft the ordinance were community organizations and Business and Professional People for the Public Interest.

The lawyers committee found that neither existing federal, state, and municipal protections nor the announced programs of some financial institutions are sufficient or not followed. In fact, of 500 counseling cases, renters were NEVER given the required landlord's 7-day notice when foreclosure starts. And they saw only 3 successful rental options put into effect- and those involved condo buildings.

How big is the problem? In March c. 8% of 114K+ Fannie Mae foreclosed properties have been rented and occupied.
Community Areas with most foreclosed rental units- Austin (914), Englewood (726), Humboldt Park (620), South Shore (609), Rogers Park (289)
Community Areas with most foreclosure filings in 2011- Austin (298), Humboldt Park (224), New City (202), Belmont Cragin (193), Logan Square (181). Citywide, monthly apartment building foreclosure filings are still 50-60% of those in 2009, the number is still high (December 2011 332 was higher than three other months. The peak in 2011 was in March, about 550)

The Lawyers Committee for Better Housing July 2012 study itself:
To ask to receive the full documennt, visit http://www.lcbh.org.

What's the upshot? Largely as a result of an onslaught of rental buildings being foreclosed and emptied indefinitely or torn down:
"With rising rent rates that increasingly exceed the
cost of home ownership, stagnating household income,
and the predicted shortage of housing units,
many residents may be compelled to search
outside of the City for housing.

"Clearly, policies must be put in place to ensure that rental units
remain available, occupied, and well-maintained.
The report makes recommendations to mitigate the impact of
foreclosures on the availability of rental units throughout Chicago."

What are four issues the study identified that if not addressed will damage, perhaps irreparably renters, community areas and the city as a whole.

Lack of information regarding renter's rights during foreclosure > people's susceptibility to instability
Community-wide impact from foreclosures > community destabilization
Vacant buildings are a problem city wide > siphoning of substantial municipal funds
Banks refuse to keep tenants in buildings > exacerbation of Chicago's rental housing shortage

It's cumulative and must be studied as a cycle

2009- 6,560 Apartment buildings into foreclosure- 20, 691 units
2010- 5,907 Apartment buildings into foreclosure- 17, 467 units
2011- 4,447 Apartment buildings into foreclosure- 13, 841 units (and so forth)
Total for these 3 years- over 50,000 units or 9% of the stock

From the executive summary- what they studied and how

Three Year Impact Assessment--
Apartment Building Foreclosures and the Depletion of Rental Housing in Chicago
Tenants in Foreclosure Intervention Project

July 25, 2012

Apartment Building foreclosures continue to be filed at alarmingly high rates in Chicago, threatening to reduce the number of available housing units. This has serious implications as Chicago is already facing a rental housing shortage and an affordability crisis. LCBH reports that from 2009 to 2011, more than 50,000 rental units went into foreclosure in Chicago, which comprises nine percent of Chicago’s entire rental housing stock. The collective impact of unrelenting foreclosures over the last three years has not only impaired the rental housing market, but has had devastating effects on individual households, Community Areas, and the City as a whole. The loss of housing units strains an already overburdened and increasingly unaffordable rental housing market, potentially resulting in higher rates of homelessness, and families having to “double-up” or lease unsuitable units. Many neighborhoods are experiencing severe blight, and the City is incurring catastrophic expenditures to deal with empty buildings.

After tracking Apartment Building foreclosure filings in Chicago for three years, it is apparent that rates of filings within a single year cannot be viewed in isolation. The foreclosure crisis is cyclical in nature: a building that underwent foreclosure in 2009 potentially became a bank-owned building in 2010 and a vacant board-up in 2011. The filing of a foreclosure alone, and more so the building vacancy, drives down property values and depresses the tax base in the surrounding area, contributing to further foreclosures. The compounded impact of several years of alarmingly high foreclosure rates has ramifications for individual households, neighborhoods, and the City as a whole.