PI Original Ellyn Fortino Monday September 8th, 2014, 3:07pm

Chicago-Area Foreclosures Hit Pre-Recession Levels, But The Housing Crisis Is Far From Over

Chicago's six-county region recorded 13,916 new foreclosure filings in the first half of 2014, a nearly 38 percent drop from a year ago and the lowest level reached since 2007, according to a report by the Woodstock Institute. Local housing activists working to help struggling homeowners offer their take on the new data as well as policies meant to stymie the ongoing negative effects of foreclosures.

Chicago's six-county region recorded 13,916 new foreclosure filings in the first half of 2014, a nearly 38 percent drop from a year ago and the lowest level reached since 2007, according to a report by the Woodstock Institute.

The dramatic dip in foreclosure filings comes after "months of sustained year-over-year declines," the Woodstock Institute said in an announcement last week of the new data.

In the city of Chicago, a total of 3,950 properties began the foreclosure process during the first half of 2014, a 34.4 percent decrease from a year ago.

Although local foreclosure filings have hit pre-recession levels, Chicago activists working on the ground to help struggling homeowners say many communities, particularly low-wealth and majority minority neighborhoods, continue to grapple with the effects of the housing crisis. 

In the city's Austin neighborhood, for example, "We see more and more homes that are boarded up and abandoned than we have seen in the past," said West Side organizer Elce Redmond with the South Austin Coalition Community Council. "One week the place is fine. The next week it's boarded up. I've seen a lot of that."

Willie "J.R." Fleming, co-founder of the Chicago Anti-Eviction Campaign, said foreclosure filings in the Chicagoland area have plummeted for a number of reasons.

One of them is the 2012 national mortgage settlement, which provided opportunities for certain distressed borrowers to renegotiate loans with the country's five major mortgage servicers — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.

The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, also launched a Streamlined Modification Initiative last year meant to help delinquent homeowners avoid foreclosure.

"It's not like the market's recovering," Fleming said when asked about the new Woodstock Institute data. "More people got access to negotiations or modifications. There's no guarantees, but they got access to go back and talk to the bank."

"Some it worked for, some it didn't," he said. "But when you walk around the community, the blight is still here."

Both Fleming and Redmond stopped short of saying the banks have done a better job negotiating with troubled homeowners in recent years.

"People cannot get the banks to really assist them in working out a deal," Redmond said. "That's one of the big issues that we're running into."

And some of the homeowners who are negotiating under a "temporary foreclosure moratorium" with the banks will eventually "be put out of their homes," Fleming explained.

"It's not that (the banks are) not going to act," he said. "It's going to happen. It's just a matter of when." 

The Woodstock Institute data does, however, show that other tools have worked to reduce foreclosure starts, Fleming said.

"Now it's time for the policy makers to pull that out and apply that overall," he said.

Fleming expects to see new foreclosure filings in Chicago continue to decrease due to a new FHFA pilot program called the Neighborhood Stabilization Initiative (NSI), which is set to arrive in certain areas of the city in the near future. NSI, meant to help communities that have been impacted the most by the housing crisis, was recently launched in Detroit.

The main goals of the FHFA program are to increase the number of families able to stay in their current homes through loan modifications that reduce monthly principal and interest payments; effectively match distressed properties with responsible non-profits for property renovation and resale; and help hard-hit communities in executing building demolition plans, according to a FHFA fact sheet.

Principal reduction programs play a key role when it comes to addressing the foreclosure crisis and its aftermath, housing organizers said.

"Some of these mortgages need to be reduced based on a person's income, and the banks are really not doing that at all," Redmond said.

While Fleming is "a proponent of any resource or program that's going to keep foreclosures down and folks in their community," he said "debt forgiveness on a lot of properties" is needed more than anything else to seriously tackle the issue.

Increased donations of foreclosed properties from banks to non-profits and community land trusts would also help.

Centro Autónomo, also known as the Albany Park Autonomous Center, is at least one Chicago neighborhood organization currently asking financial institutions to donate local homes in foreclosure to its Casas del Pueblo Community Land Trust, a non-profit that wants to turn the properties into permanent affordable housing for low-income residents.

Last month, organizers with the Casas del Pueblo Community Land Trust said they were making progress with several banks to secure their first home donation. They have since hit at least one roadblock.

Centro Autónomo housing organizers have been in talks with Fannie Mae over a potential donation of a Belmont Cragin home in foreclosure. But Fannie Mae recently told the group that donation of the property was off the table, said Antonio Gutierrez, housing coordinator at Centro Autónomo. Fannie Mae is, however, open to having the non-profit buy the property, but at a price of $250,000.

"It was an outrageous price for a non-profit," Gutierrez said. "They know what our plan is, and we thought we were negotiating with them. It was such a slap in the face."

Gutierrez said those with the community land trust will submit a counteroffer to Fannie Mae.

If Fannie Mae does not accept the counteroffer, continues with the foreclosure and eventually evicts the family, the home will likely sit vacant for some time before it is purchased, Gutierrez said.

"The city of Chicago needs to back up non-profits like ourselves and other organizations … and help us to talk to these banks," he stressed. "We're just trying to provide a service to our community. We're not trying to make a profit out of it, and they should't be making a profit out of us."

The Woodstock Institute, meanwhile, also looked at foreclosure auction data.

Completed auction sales of foreclosed properties in the Chicago six-county region fell 16.7 percent from the first half of 2013 to the first half of 2014. Foreclosure auctions in Chicago dropped 20.6 percent over the same time period, the report showed.

When asked about the figures, Fleming said investors might not be buying as many foreclosed properties at auctions because they are waiting to scoop them up through a municipal receivership program.

"If you purchase at a foreclosure auction, you're going to take on possession and be responsible for property maintenance and boarding up this, that and the other," Fleming said. "From an investment standpoint, it makes sense to the let the foreclosure take place, let it sit on the market … let it deteriorate, and pick it up cheaper" through a receivership program.

Some potential buyers, Fleming added, are also waiting to obtain properties from the Cook County Land Bank Authority for the same reason.

Overall, Redmond said housing activists and other community leaders need to reorganize and ramp up their campaigns around foreclosures, which continue to plague many neighborhoods. 

"Foreclosure is the one single issue that destroyed the wealth of the African-American community, and that wealth is in the housing," he stressed.

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