Condominiums and Foreclosure in Chicago

According to a recent article in Crain’s Chicago Business, it has now been ten years since the housing bust, but many condominiums have not bounced back from the high rates of foreclosure during the recession. Indeed, as the article highlights, “when the housing market crashed in 2006, Chicago was awash in unsold condominiums—and the wave tripled in size as the crisis deepened.” Even now, condos still are worth, on average, 7% less than they were just prior to the housing crash. What does this mean for condo owners in the Chicago area? A lot of these properties went into foreclosure, and they simply are not worth what they were a decade ago. As such, for any condominium owners who are underwater and are hoping to sell for a profit, it might not be possible.

The “Logjam” of New Condominiums in Chicagoland

In 2006, condominium construction was booming in Chicagoland—from buildings downtown in River North to suburbs in Naperville. Yet, as the article explains, this sudden growth in condo development ultimately led to “what would turn out to be an epochal logjam of new condos.” When 2006 came to an end, about 2,500 condominiums had gone unsold, and that number rose to more than 7,500 by the end of 2007. And for those who did purchase condos in 2006, many of them ended up underwater.

Why were many condo buyers underwater by 2008 and later? In short, at the peak of home sales and condominium construction, prices for condos were high—it was a seller’s market. For instance, if a buyer paid $400,000 for a condo in 2006, statistics show that the condo likely would have been valued at just over $270,000 by the start of 2012. If the condo owner was having difficulty making mortgage payments and decided to sell the condo, she probably would have ended up still owing more than $100,000 (to make up for the change in value), and that is assuming that she was able to sell the unit at all.

Chicago Continues to Have High Number of Bank-Owned Homes

In some ways, the market for condominiums has recovered more firmly than has the single-family home market. The change in average home prices dropped more substantially for condos than single-family homes (approaching a decline in value of nearly 35%, as opposed to an approximately 30% decline for single-family homes). However, the average difference between condo prices now as in September 2006—the peak of the market—is only minus about 7.5%. Compared with single-family homes, which remain at a deficit of about 13.6% since 2006, condos are selling, on average, for prices that are closer to those in 2006.

While condo prices may look like they are becoming steadier, presenting the possibility that Chicago can get out from under the “logjam” of empty condos, Chicago remains at the top of the list for unsold, bank-owned homes. According to a recent article in the Chicago Tribune, Chicago is second only to Detroit in having the highest number of bank-owned homes that remain empty. Although the number of foreclosures has declined significantly in the city and surrounding neighborhoods, “more buildings are sitting vacant as banks prepare to sell them,” the article explains.

If you have questions about avoiding foreclosure, an experienced foreclosure defense attorney in Oak Park can help. Contact the Emerson Law Firm today for more information.

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Protecting Widows and Widowers from Foreclosure

Protecting Widows and Widowers from Foreclosure

What happens is your spouse passes away unexpectedly and your name is not on your home loan? Generally speaking, if you are not having financial difficulties, you may be able to simply continue making monthly mortgage payments without any hassle. However, how will a mortgage servicer look at a widow or widower who is not on the original note but needs help with a mortgage modification? These situations can get complicated, and they can easily result in the surviving spouse having to contend with the possibility of foreclosure. According to a recent article in the Los Angeles Times, the Consumer Financial Protection Bureau (CFPB) has issued new rules that aim to prevent widowed homeowners from going into foreclosure.

Complications and Difficulties for Widowed Homeowners

Widowed homeowners tend to have a lot of trouble obtaining mortgage modifications. What is the issue? Often, survivors, including those who previously owned their homes through marriage or inherited them through the death of a spouse, run into difficulty with servicers. Even though they have a legitimate claim to the house following the death of a spouse, their names might not be listed on the original mortgage note. As such, when they have get behind on mortgage payments—often due to the death of the spouse—they cannot deal with the mortgage servicer in the same manner that the spouse who is the person listed on the loan.

As the article explains, “often companies won’t allow a modification until the surviving spouse assumes the loan, which can’t happen until the owner is current on the mortgage—something of a Catch-22.” Additionally, surviving spouses have complained that mortgage servicers do not provide accurate or up-to-date information about the documentation they need to provide in order to be listed on the mortgage in order to be eligible for a modification.

Given these facts, it can be extremely difficult for a surviving spouse to avoid foreclosure when they cannot afford mortgage payments. What is the CFPB doing to help?

New CFPB Rules to Protect Surviving Spouses from Foreclosure

Recognizing that many surviving spouses are at risk of foreclosure in the weeks and months following the death of the other spouse, the CFPB has announced new rules to protect those widowed spouses. Earlier this month, the CFPB said that its regulations will “generally give surviving spouses who are not on a mortgage note the same protections borrowers have.” The regulations will also protect against dual-tracking, which is a process “in which mortgage servicers negotiate with clients to modify a mortgage while simultaneously pursuing foreclosure.”

When will surviving spouses begin receiving these protections? The article highlights that the new rules are scheduled to take effect about a year and a half from now. But just because surviving spouses will have these protections does not mean that they will be able to obtain a mortgage modification regardless of other factors. To be sure, widowed spouses still will need to provide evidence in support of a modification, and the servicer will not be required to provide it.

Contact an Oak Park Foreclosure Defense Lawyer

If you have questions about avoiding foreclosure, an Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm today to learn more about how we can help with your situation.

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Chicago Suburbs and the Slow Recovery from Foreclosure

As a recent article in the Chicago Tribune establishes, it has now been seven years since the “Great Recession,” which left individuals and families throughout Chicagoland with costly mortgages that many simply could not afford to pay. Given the financial difficulties of the first decades of the 2000s, many homes went into foreclosure, empty houses and properties in varying states of disrepair blighted neighborhoods throughout the state. According to recent news from RealtyTrac, for example, foreclosure filings reached all-time lows this year. Such numbers suggest that Illinois and the rest of the country truly are in a state of recovery after the housing crisis.

Are all neighborhoods in Chicago and its suburbs experiencing recovery from the foreclosure crisis, or have some places remained economically troubled? According to the Chicago Tribune article, there are still a number of Chicago suburbs that simply have not entered into a clear phase of housing recovery, and it is possible that such revival may never come—or at least in the near future.

Abandoned Homes Remain in Many of Chicago’s Suburbs

For certain neighborhoods, housing market recovery simply is not a phrase that has any meaning. Indeed, suburbs like Markham largely do not seem to be faring any better than they were at the lowest points of the housing crisis. For instance, the article cites one family’s home: a 900-square-foot modest house that has been “well-kept, with a neatly trimmed lawn and hedges, four bedrooms, and a two-car garage.” The family purchased the house in 2007—shortly before the housing crisis would sweep the country—for around $137,000. Now, their house is positioned just across the street from a home that has been abandoned for quite some time. And that property that once cost the family $137,000 was listed recently for only $29,500.

To put that number another way, the family may not even be able to sell their home for 20% of what they paid for it. As the article emphasizes, such poor resale values—even at a time in which much of the Chicago area as well as urban regions across the country have seen housing prices rise—do more than simply leave the homeowners underwater. As the article intimates, they “find themselves not so much underwater as buried in a cave beneath the ocean floor.” In other words, continuing to use the term “underwater” in suburbs like Markham is a drastic understatement.

Remaining Impact of the Recession and Resulting Economic Difficulties

For families like this, the economic difficulties associated with the recession remain palpable. For instance, in the example we gave above, the recession resulted in one of the primary earners of the family losing her job and that house—originally purchased for $137,000—going into the early stages of foreclosure. In order to avoid foreclosure, the family obtained a loan modification just a few years ago. However, including late fees and the new terms of the modification, they now owe around $180,000 for this house.

This story is one that is all-too-common among “predominantly African-American parts of the south suburbs and in pockets of mainly Latino and white ethnic suburbs just south of O’Hare International Airport,” where housing prices simply are not rising. These families, as the article suggests, have been “left behind by recovery,” and foreclosure remains a very real problem.

Do you have questions about avoiding foreclosure in the Chicago suburbs? An experienced Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm to learn more about our services.

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Update on Distressed Homes in Chicago

Update on Distressed Homes in Chicago

How are Chicago neighborhoods faring when it comes to housing recovery and distressed homes? It has been a number of years since the housing bubble burst, but distressed homes still line a number of streets. However, according to a recent article in Crain’s Chicago Business, the fact that distressed homes remain on the market is not necessarily a bad thing. The article suggests that these properties are an “improbable bright spot” in “Chicago’s lackluster residential real estate market.”

Finding Value in Distressed Properties

For individuals selling their homes, there is not a lot of opportunity in the Chicago market to make a profit right now. However, as the article notes, “banks and other firms selling foreclosed houses were far luckier.” The median sale price for distressed homes, including foreclosures and short sales, actually rose by 6.3% in 2015. To put that number in perspective, the median sale price increase for conventional home sales was only 0.4% last year. In other words, the price increase on distressed homes was 16 times better than the price increase on standard properties.

This gap between distressed and conventional property sales is not limited to lower socioeconomic brackets. The disparity in sale prices “shows up even in many more-affluent parts of Chicago and its suburbs where the real estate recovery came earlier and stronger than it has for the metropolitan market as a whole,” according to the article. On the Near North Side of Chicago, for instance, lender-mediated sales rose by about 6% by the end of 2015, compared with a 2.8% price increase for conventional properties. In Buffalo Grove, for example, lender-mediated sales climbed nearly 19%.

Need for an Improving Economy in Chicago

While it might seem as though high selling prices on distressed homes is a good thing, it may point to a sluggish Chicago economy. Chicago has seen relatively stagnant job growth and limited investment returns. The decline in conventional home sales may be evidence of the sluggish economy.

In terms of decreasing conventional home prices in Chicagoland, sales showed no growth at all in Evanston last year, and home prices dropped in Oak Park by 4.1%. In other words, the conventional real estate market does not look especially good outside out distressed home sales. But at the same time, the fact that more distressed homes are getting bought is a good thing, no matter what lens you view it through, according to the article.

According to Jonathan Smoke, the chief economist at Realtor.com, this trend is a common one toward the end of real estate recovery periods. While he remarks that Chicago remains behind in its recovery compared to many other urban areas in the U.S., the price gap that we are seeing between distressed and conventional properties simply makes clear that Illinois is “working through [its] foreclosure overhang.”

If you have questions about distressed properties or avoiding foreclosure, an experienced Oak Park foreclosure defense attorney can help. Contact the Emerson Law Firm today to learn more about how we can assist you.

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Foreclosure Inventory Remains Above Normal Levels

Have we really recovered from the economic downturn if there are still a higher-than-average number of foreclosures lurking in Chicago neighborhoods? According to a recent article from DSNews.com, the foreclosure inventory across the country remains at “more than double” the normal level of foreclosures we would expect to see.

Foreclosures on the Decline, But Numbers Remain High

Over the last several years, the number of foreclosures across the country has declined substantially. Yet according to the article, the rate of foreclosure inventory (or the “percentage of residential properties that were in some state of foreclosure”) is more than two times what it was before the recession. As of the end of September, nearly 740,000 properties were listed as being in pre-foreclosure inventory. While that number represents a decline by more than 200,000 properties at this same time last year, the total nonetheless is higher than most commentators would like to see. In total, homes in some state of foreclosure account for almost 1.5% of “all residential mortgages nationwide.”

While the rate of foreclosure has declined in significant ways of the last three or four years, consumer advocates would like to see a lower number of properties classified as part of the pre-sale foreclosure inventory. The reported numbers do not mean that we are not handling the foreclosure crisis and its aftermath in a useful manner. Many states, including Illinois, have been lowering the total properties in foreclosure throughout the year. But we may still have a long way to go before we see the foreclosure inventory numbers that were typical before the housing market crash.

Who is Buying Houses After the Foreclosure Crisis?

Throughout Illinois and across the U.S., courts carry on with foreclosures. As homeowners continue to face the repercussions of being unable to make mortgage payments (including hits to their credit reports), a recent report from Black Knight Financial Services reported that high-credit borrowers seem to be the ones making a serious impact on the housing market. Based on the buying patterns of high-credit borrowers, “it would appear that the market is experiencing a vibrant recovery.” Yet the conclusion is not so simple.

In the last three years, “only 20% of purchase loans . . . involved borrowers with credit scores of less than 700,” which is “the lowest level for that segment in over 10 years.” The disproportionate buying of homes does not stop there. The current average credit score for new homebuyers is 755, which is a “record high.” To put that another way, high-credit borrowers who are buying houses help to give the appearance that we are nearly back on track when it comes to the real estate market. The number of homes still in a state of foreclosure, however, tells a different story.

In addition to drawing a connection between market recovery and high-credit borrowers, Black Knight also noted that “third quarter foreclosure starts were up 1.70 percent from the second quarter due to a rise in repeat foreclosure.” In other words, Chicagoans should not assume that foreclosure risks have been eradicated.

Do you have questions or concerns about foreclosures in the Chicago area? Do not hesitate to reach out to an experienced Oak Park foreclosure defense attorney with your questions. Contact the Emerson Law Firm today to learn more about how we can assist you with your case.

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New Mortgage Disclosure Rule

Homeowners Win Mortgage Foreclosure Appeal

New Mortgage Disclosure Rule

In the age of the real estate crash and the foreclosure crisis, many Chicagoans found themselves with subprime mortgages and the inability to make any headway on their home loans. Now, while the risk of foreclosure in Illinois remains a reality for many homeowners, many more find themselves in a better financial situation. One of the reasons that more homeowners are under control of their financial futures, according to a recent news release from the Consumer Financial Protection Bureau (CFPB), is the institution of laws aimed at protecting consumers.

Consumer advocates have emphasized that soon-to-be home buyers simply need more information about the terms of their loans, and how those terms are likely to impact their financial futures. A new rule that aims toward the goal is now in effect.

Know Before You Owe and Mortgage Disclosure Requirements

The “Know Before You Owe” mortgage disclosure rule represents one of those legal changes. As the CFPB explains, the “disclosures required for getting most mortgages have been redesigned to help you shop around to compare offers and find the loan that is best for you.” In addition to underlining the need for consumers to shop around to find the best mortgage for their needs, the new rule also requires the following:

• Lenders to give homeowners more time to review the terms of a mortgage prior to acceptance;
• Lenders allowing homeowners to ask direct questions or to seek advice about the terms of a loan from an experienced consumer protection lawyer.

The Know Before You Owe rule is not entirely new. The Dodd-Frank Act mandated mortgage disclosure changes for new homeowners. At the same time, the new rule does even more for consumers. In addition to disclosures, as we mentioned, it also gives soon-to-be homeowners additional time to understand the terms of the loan and to ask questions they need to know to feel comfortable with the mortgage. For most Americans who apply for a mortgage on or after October 3rd, the new disclosures will be mandatory.

Helping Consumers to Avoid Costly Mistakes

The Know Before You Owe initiative from the CFPB is designed ultimately to prevent consumers from seeing “costly surprises” once they agree to the terms of a mortgage. When it comes to getting a fair mortgage and affordable terms based on your income and lifestyle, education is the key. In addition to “making the mortgage process easier” for consumers, the CFPB’s initiative also comes with tools to help you make the right decisions—and ultimately to avoid foreclosure—including but not limited to:

• Sample loan estimate for consumers considering a mortgage;
• Closing disclosure for soon-to-be homeowners so they do not have any financial surprises when it comes time to close on a house;
• Tools to help you learn more about the process of getting a mortgage, including information about local rates, loan options, and the steps in a closing; and
• Budgeting information, including worksheets and checklists to help you get through the process of buying a home affordably.

If you have concerns about how the new rule will affect you, or if you have questions about avoiding foreclosure, it is important to seek advice from an experienced Oak Park foreclosure defense lawyer. Do not hesitate to contact the Emerson Law Firm. We can discuss your case with you today.

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Homeowners Win Mortgage Foreclosure Appeal

Illegal Mortgage Servicing Results in $1.5 Million Fine

Homeowners Win Mortgage Foreclosure Appeal

The dedicated foreclosure defense attorneys at the Emerson Law Firm recently helped homeowners in the Chicago area to win an appeal concerning the foreclosure of their homes. If you are at risk of foreclosure, it is extremely important to speak with an experienced foreclosure defense lawyer who can provide you with advice for keeping your home. To better understand the significance of the recent Court of Appeals decision in foreclosure actions, we should take a look at the facts of the case and the court’s reasons for finding in favor of the homeowners.

Details of the Appeal

In U.S. Bank v. Kosterman, the homeowners executed a mortgage in 2006 and made payments on their loan for a number of years. In 2011, the bank began foreclosure proceedings by filing a complaint, contending that the homeowners had not made timely payments. The homeowners responded with two affirmative defenses: lack of standing and lack of capacity to sue.

In effect, the trial court treated both defenses as concerning a lack of standing, and it emphasized that lack of standing is not an affirmative defense. As such, the trial court dismissed the homeowners’ affirmative defenses with prejudice. The bank filed a motion for summary judgment, which the trial court granted. When a motion for summary judgment is granted, it simply means that the court will enter a decision without hearing a full trial. Given that the motion for summary judgment was granted in the bank’s favor, the bank received an order of possession and an order of foreclosure, and the homeowners appealed.

The Appellate Court of Illinois disagreed with the trial court and remanded the case. How did it comes to its decision? In short, the Court made clear that “a challenge to standing in a civil case is an affirmative defense,” and this remains true even in a foreclosure action such as this one. The Court then had to determine whether the trial court had improperly granted summary judgment to the bank. Ultimately, the Court determined that summary judgment was granted erroneously. What did the Court’s reasoning look like?

When is Summary Judgment Inappropriate in a Foreclosure Action?

After the Court of Appeals made clear that the trial court should not have dismissed the homeowners’ affirmative defenses with prejudice, it turned to the question of summary judgment. How did the Court come to its conclusion that the bank should not have been granted its motion for summary judgment?

The Court emphasized that summary judgment is “appropriate when the pleadings, depositions, admissions, and affidavits, viewed in a light most favorable to the nonmovant, fail to establish a genuine issue of materials fact, thereby entitling the moving part to judgment as a matter of law.” In other words, a motion for summary judgment should only have been granted in this case if the facts presented by the bank, when viewed in the light most favorable to the homeowners, did not establish a substantial issue with regard to the homeowners such that it would have made sense to move forward with the case.

However, under this standard, the trial court improperly granted the bank’s motion for summary judgment. The Court emphasized that the bank’s motion was supported by an affidavit from a bank official that referred to “various records” concerning the foreclosure action. Yet, as the Court pointed out, “none of the records were attached to her affidavit.” According to the Illinois Supreme Court Rules, “affidavits submitted in support of motions for summary judgment ‘shall have attached thereto sworn or certified copies of all documents upon which the affiant relies.’”

Lack of Access to Records and Other Evidence

Many communications occurred between the homeowners and the bank, but the homeowners did not receive access to all of the records relied upon in the affidavit. The Court determined that the homeowners were denied the records and the ability to depose the bank official who provided the affidavit. As such, the Court concluded that the homeowners “had no meaningful change to challenge [the bank’s] contentions” since all the information they needed to do so was in the “sole possession” of the bank.

Upon retrial, the Court emphasized that the homeowners will be able to seek evidence for their affirmative defense and to replead that defense, as well as to seek access to the evidence surrounding the bank’s affidavit.

If you have questions or concerns about foreclosure defense, it is extremely important to contact an experienced Oak Park foreclosure defense lawyer. An advocate at the Emerson Law Firm can help with your case today.

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