Chicago has not reached the other side of the foreclosure crisis, a new report from the Woodstock Institute has revealed. But with new ordinances like the Cook County Land Bank Authority, the Windy City may be headed in the right direction.
Last year, Chicago’s six county region saw the highest year-over-year growth in completed foreclosure auctions since the beginning of the foreclosure crisis in 2008, according to the Woodstock Institute report. Foreclosure auctions, which indicate the foreclosure process is finished, grew by 73.8 percent, from 20,281 auctions in 2011 to 35,244 auctions in 2012.
But the increase in foreclosure auctions may be attributed to the “robosigning” scandal being settled. November saw an executive from Lender Processing Services plead guilty to a scheme to prepare and file more than one million fraudulently signed and notarized mortgage-related documents.
While the scandal was being investigated, banks were forced to freeze foreclosures for several months and repair improper legal filings.
Chicagoland saw a small increase in the number of new foreclosure filings last year, but the settlement of the “robosigning” scandal will force banks to work through a backlog and may lead to an influx of vacant properties on the market, according to Spencer Cowan, vice president of research at the Woodstock Institute. Combating foreclosure activity requires “creative solutions,” such as the newly enacted Cook County Land Bank Authority, which aims to get vacant homes back to productive use and will geographically be the largest land bank in the country.
“The number of new foreclosure filings in the region was up modestly, only about 3 percent, that’s an increase from just under 65,000 in 2011 to nearly 67,000 in 2012. But our figures are well above the historic averages,” said Cowan on a conference call Thursday.
Cowan said some community areas are experiencing decreases in the number of filings, but many communities like Auburn Gresham, Calumet Heights, West Englewood and West Garfield Park are still seeing double digit increases in the number of new foreclosure filings.
“The market may be recovering slowly in some areas, but we still have major issues in too many neighborhoods and those neighborhoods are still suffering from the foreclosure crisis,” he said.
Cook County Commissioner Bridget Gainer (D-10th) and board President Toni Preckwinkle sponsored an ordinance for the Cook County Land Bank Authority, which the Board of Commissioners unanimously approved on January 17.
Aimed to return vacant and abandoned properties to productive use, the land bank will acquire vacant, foreclosed and tax delinquent properties in order to redevelop the sites and help revitalize communities.
“The land bank will bring the ability to execute more cleanly the idea of an intermediate use, so acquisition and sale (of vacant properties) is one thing, but one of the issues in our community is that there is way too much supply of housing, but not enough demand to purchase,” said Gainer on a conference call this afternoon. “The intermediate use is what the land bank will focus on, whether it is rental housing, or open-space urban agriculture, or whether it’s other mid-term or short-term intermediate uses, that’s the type of the thing the land bank will do to make this market a little healthier.”
“We need to take some of the supply off the market right now… There’s 200 to 300 vacant homes in some communities and there is just not going to be that kind of demand,” she said.
More than 90 percent of the foreclosure properties sold at auction in the Chicago region become real estate-owned, or bought by the lender. These properties are more likely to become vacant and, according to Cowan, the number of real estate-owned properties is a direct contributor to the increases in vacant houses.
The number of vacant properties in Chicago has doubled in the past five years, and quadrupled in suburban Cook County.
The Cook County Land Bank Authority’s Board of Directors, a 10-person committee that has been working to develop a business plan and create program and operating policies and procedures, was appointed earlier this week. Start-up activities have been funded by a $149,000 grant from the Chicago Community Trust.
To assist in the initial phases on the Land Bank Authority’s work, the Cook County Bureau of Economic Development is preparing a $20 million grant proposal to the Illinois Attorney General’s office in attempts to secure capital from the National Foreclosure Settlement.
“The foreclosure crisis in Chicago varies from neighborhood to neighborhood, and the worst is probably over in some of the more affluent neighborhoods. But in the more impoverished neighborhoods, there is still a huge stock of vacant and foreclosed properties, they’ll be dealing with the foreclosure crisis for years to come,” said Bob Palmer, policy director for Housing Action Illinois.
“We are still very much in the midst of the foreclosure crisis,” he added. “We’re slowly recovering, but we need the banks to be more proactive about working with homeowners to avoid foreclosure and accept that home values are not going to bounce back to where they were before the bubble burst.”