Update on Zombie Foreclosures in Chicago

Are Chicago neighborhoods continuing to grapple with boarded up homes due to foreclosure? According to a recent article in the Chicago Tribune, there are fewer “zombie” foreclosures, as they have come to be known. They have “plummeted from a year ago.” However, as the article emphasizes, “there are still more than 7,000 of the empty homes working their way through the foreclosure process.”

Foreclosures Remain, Numbers Decline

As a quick reminder, “zombie” foreclosures are those, according to RealtyTrac, where you have “a vacant home that is actively in the foreclosure process.” Other experts define these properties further as those in which the lender is not following through on the foreclosure, and thus the house is left in an empty, eerie state of limbo. In general, Illinois residents are seeing fewer “zombie” foreclosures than before. All of the counties in the greater Chicago area “recorded double-digit percentage decreases” in foreclosures when compared with the second quarter in 2014, based on data from RealtyTrac.

At the same time, however, decreases in the numbers do not necessary mean that foreclosed homes are not still a problem in many communities. Thousands of homes remain in foreclosure. As of March 31st of this year, the following counties still recorded foreclosures in the hundreds and even thousands:

• Cook County had about 3,600 properties in foreclosure
• DuPage County had 488 foreclosures
• More than 150 foreclosures in Kendall County
• 434 properties in foreclosure in Kane County
• 680 foreclosures in Lake County
• More than 600 properties in foreclosure in Will County

If there are still thousands of foreclosures in the Chicago area, should we really be emphasizing improvement?

Public Policy Measures Combat Zombie Foreclosures

In short, those foreclosure numbers reveal a salient improvement in the number of “zombie” foreclosures affecting Illinoisans. Indeed, according to Daren Blomquist, the vice president at RealtyTrac, he sees significant improvement in foreclosure activity in the Chicago area that is likely the result of considerable measures aimed at combating the problem.

As Blomquist explained, “A growing number of states and cities have enacted public policy measures to combat the problem of zombie foreclosures, and we are seeing the results of those efforts in the overall decrease nationwide as well as in several hard-hit markets such as Chicago.”

On the whole, “zombie” foreclosures have declined across the country. RealtyTrac’s data suggests that about 127,000 of these properties still exist throughout the country, but that number represents a 10 percent decrease from the same time last year. However, Chicago is one of a handful of metropolitan areas in which the rate of “zombie” foreclosures has decreased. While policies in our state have resulted in a decline in the number of abandoned properties in the Chicago area, cities such as Boston, Houston, Los Angeles, New York, and Philadelphia have actually presented an “uptick” in the number of “zombie properties” in existence.

For now, it is important to take action to prevent foreclosure if possible. Foreclosure remains a significant problem for homeowners throughout the Chicago area. If you have questions about avoiding foreclosure, don’t hesitate to discuss your case with an experienced Oak Park foreclosure defense attorney. An advocate at the Emerson Law Firm can discuss your situation with you today.

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Subprime Lending, Home Values, and the Reasons for Foreclosure

Are subprime mortgages really the reason for the foreclosure crisis? While this narrative has become the common one in America over the last five years, a recent study conducted by researchers at the University of Pennsylvania’s Wharton School of Business suggests that home values may be almost solely to blame. Indeed, Forbes Magazine reported on the study and emphasized, “The key variable driving all foreclosures wasn’t the type of loan, the amount of leverage, or the socioeconomic or ethnic status of the borrower, but whether a given house was underwater, or worth less than its mortgage.”

Prime Borrowers Losing Homes to Foreclosure

According to the recent study, in the early years of the housing crisis, “subprime borrowers were more likely to default.” However, in the past several years, “twice as many prime borrowers lost their homes as subprime, with correspondingly higher total dollar impact on the financial markets.” Why is this the case? The researchers emphasize that borrowers whose homes were worth less than the amount they owed on their mortgages were most likely to end up in foreclosure. In other words, being underwater on your loan, regardless of whether you had a subprime mortgage, was more likely to result in a foreclosure on your property.

Does this mean banks weren’t targeting low-income families with subprime loans? Not necessarily. However, it does mean that the reasons for a majority of foreclosures might not be what most of us believe. Fernando Ferreira and Joseph Gyourko, the  researchers who authored the study, “A New Look at the Foreclosure Crisis,” simply don’t believe the facts match up with the subprime premise behind the recent history of foreclosure in our country.

Nearly 50 Million Mortgages Can’t Be Wrong

The data gathered by Ferreira and Gyourko is immense, and it suggests that we should take notice of their findings. According to Forbes Magazine, the authors “pulled together a remarkable set of data to reach these conclusions, following the trajectory of 34 million first mortgages and 14 million second mortgages through the crisis.” They identified each of the borrowers, and they classified them according to the following:

• Race
• Income
• Loan category
• Initial loan-to-value ratio (LTV)

In addition to looking at initial LTVs, Ferreira and Gyourko also “calculated loan-to-value ratios over the period for each home, as well as the economic characteristics of the surrounding neighborhood, in order to isolate the variables that were most predictive of foreclosure.” We know that the study determined subprime loans weren’t the primary cause of foreclosure. But what else did the authors discover?

• Race may not play as significant a factor in foreclosure as some researchers previously believed.
• Timing is everything. Even with a prime loan, paying more for a house than it is currently worth can seriously impact your risk of foreclosure.
• When people’s homes are worth less than what they owe, they are more likely to stop making mortgage payments.

The study suggests that its foreclosure-prevention solutions might be more complicated than most of us would hope. Do you have questions or concerns about foreclosure? Don’t hesitate to contact a dedicated Chicago foreclosure defense lawyer at the Emerson Law Firm. We’re here to help.

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High-End Foreclosures in Chicago

In general, sales of foreclosed homes in the Chicago area have fallen this year, according to a recent report from Crain’s Chicago Business. However, sales of foreclosures “at the high end of the market” have remained quite steady. Do trends in high-end real estate and foreclosure sales reflect on the city generally? Or do niche markets looks more like anomalies when we get an image of the big picture of foreclosure sales in Illinois?

More Buyers in the High-Value Marketplace

According to the article, between January 1st and May 1st of this year, 67 properties in the Chicago area sold for more than $500,000. During the same period in 2014, 66 homes sold for $500,000 or more. In other words, houses in foreclosure with price tags of more than half a million dollars are selling at a steady pace. For buyers looking at high-end homes, “they know a foreclosure lets them into the luxury market at a lower cost.”

For example, Crain’s featured one couple’s story about shopping for houses in Highland Park. They planned to spend in the range of $750,000, but they realized that many of the homes they were looking at in the area were selling for around $1.2 million—a price far exceeding their budget. However, they happened upon a 5-bedroom home listed for $732,000. Why was the asking price so much lower than comparable homes? The 5-bedroom house was a foreclosure. The couple ended up paying $700,000—less than they had been approved to spend—and felt like they got “a fantastic deal.”

However, other foreclosures have not sold at the same pace. According to data gathered by the Illinois Association of Realtors, “sales of all foreclosed homes in the area fell by 9.3 percent in February from a year earlier, and 6.6 percent in March.”

Banks Want to Move Pricey Homes Quickly

As you might imagine, there’s more incentive for banks to sell high-priced foreclosures than a house with a $100,000 price tag. Selling these properties is particularly important given that analysts indicate that “the pipeline of foreclosed homes for sale will remain full for the foreseeable future.” To be sure, banks repossessed a number of Illinois homes between January and March of this year—more properties than in the same number of months last year. In other words, the rate of foreclosure hasn’t exactly ceased. And in Cook County, DuPage County, and Lake County alone, around 45 foreclosures currently are for sale for more than $500,000.

Who’s buying these expensive properties that are in foreclosure? In general, three different types of buyers tend to be interested: 1) developers with plans to tear the homes down or rehab them; 2) individual investors who are planning to flip the homes for a profit; and 3) individuals who are planning to make the foreclosures their new primary residences. The last category has expanded greatly in the last year or so as Chicagoans become more open to buying foreclosures. Indeed, consumer analysts believe that the stigma of buying such a property has diminished substantially.

If you have questions about avoiding foreclosure or purchasing a property that has gone into foreclosure, you should be sure to speak with an experienced Oak Park real estate attorney. An advocate at the Emerson Law Firm can answer your questions today.

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Illinois’s Foreclosure Alternative Program

Despite many efforts to lower the number of foreclosures in our state, Illinois continues to maintain a foreclosure rate that’s “still far above the national average,” according to a recent article in the Chicago Tribune. However, there may be some light at the end of the tunnel. Recognizing the foreclosure problem in Chicago and throughout the state, a “Boston-based nonprofit is extending a lifeline to a select group of Illinois homeowners in danger of losing their homes.”

Buying Mortgages, Selling to Homeowners

What’s the plan for Boston Community Capital? It’s goal is pretty simple, and it might be able to provide some relief for homeowners in Oak Park and other neighborhoods in the Chicago area. Through the Stabilizing Urban Neighborhoods program, this nonprofit aims to “buy the mortgages of qualified homeowners in foreclosure from lenders at a discount, then sell the homes back to homeowners at the current market value, with lower monthly mortgage payments.”

Thus far, the program has helped more than 500 families in states such as Massachusetts, Rhode Island, and Maryland. In the amount of time since it began operation, Stabilizing Urban Neighborhoods has purchased and resold more than 400 properties, allowing homeowners to stay in their houses at mortgage prices they can afford. “On average,” the Chicago Tribune reported, “monthly mortgages payments toward the loan balance were cut by 40 percent” after the Boston-based program got involved. The program offers participants a 30-year mortgage with a fixed 6.375 percent interest rate.

How is the program working as well as it is? And will it be able to provide as much relief to homeowners in Illinois? In short, the nonprofit’s actions serve to reduce the principal on the mortgages. That way, homeowners have lower payments, and in most cases, they’re paying less over time. Reducing the principal is “the very thing that housing advocates have called for” in order to truly lessen the foreclosure crisis, but it’s also something that has been noticeably absent from foreclosure relief programs put into place by the government.

Illinoisans in Need of Foreclosure Assistance

Are Illinoisans really in desperate need of foreclosure assistance? To be blunt, the answer is yes. Last month alone, mortgage lenders began foreclosure proceedings against nearly 2,500 homes in the Chicago area. This number represents an increase from just a month prior, with 2,397 initial filings. To put it another way, “one in every 221 residential properties in Illinois last month received a notice related to foreclosure action.” And when you compare that number with the national average, the situation looks grim. Indeed, the national average of initial foreclosure filings in March was one out of every 421 residences.

Who’s eligible for the Stabilizing Urban Neighborhoods program? The article reports that ideal candidates are those homeowners “who experienced hardships that put them behind on their mortgages, like unexpected medical expenses, they lost one job and found another that paid less, or they were unwitting borrowers in a predatory mortgage scheme.” The Boston-based nonprofit currently is working to identify Chicago-area homeowners who may be eligible for assistance.

Do you have questions or concerns about foreclosure? Although the real estate market is getting back on track, many families continue to deal with financial problems and the threat of foreclosure. If you need help learning about ways to keep your home, you should contact an experienced Oak Park foreclosure defense attorney today.

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Unclaimed Foreclosure Settlement Checks and Reissues

You might remember hearing about a foreclosure settlement that resulted in numerous Americans receiving settlement checks. From fraudulent lending practices to problematic involvement in foreclosure proceedings, many banks agreed to settle.

However, according to a recent article in DSNews.com, it looks like a surprisingly high number of settlement recipients haven’t cashed their checks. As such, Rust Consulting, the paying agent for the settlement, will be “mailing the checks this week to borrowers who are eligible under the payments agreements and have not yet cashed or deposited their check.”

History of the Independent Foreclosure Payment Agreements

Are you trying to remember how the foreclosure settlements came about? Back in January of 2013, federal bank regulatory agencies and twelve different mortgage servicers came to agreements about responsibility for consumer losses. We know those agreements as the Independent Foreclosure Review Payment Agreements.

Specifically, according to the Comptroller of the Currency (OCC), the mortgage servicers involved in those agreements “to provide cash payments totaling $3.6 billion to borrowers with a mortgage serviced by one of these servicers, their affiliations, or subsidiaries whose homes were in any state of foreclosure during 209 and 2010. The mortgage servicers involved in the agreements include: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.

After federal regulators and the servicers reached a settlement, Rust Consulting began mailing out checks “to nearly all of the 4.2 million eligible borrowers.” Payments for each homeowner varied, depending on specific losses. All in all, the checks ranged anywhere from “several hundred dollars to $125,000 plus lost equity.”

Consumers Aren’t Cashing Their Settlement Checks

Rust Consulting initially mailed out those checks as early as April 2013. By January of 2015, approximately 87 percent of the eligible borrowers had cashed their checks, totaling about $3.1 billion. However, that leaves a relatively large number of consumers that haven’t yet gotten their settlement money. To be sure, 600,000 checks remain outstanding, and those checks have since expired. In other words, even if a borrower planned to make a deposit, the check is no longer valid.

Given that so many people haven’t obtained the settlement funds to which they’re entitled, Rust Consulting “has been directed to conduct additional services for update[ing] addresses as part of an ongoing effort to reach the in-scope borrowers.” The consulting company’s current attempts to reach those consumers will represent the third time that Rust has reached out to those who haven’t cashed their checks.

When borrowers receive a settlement check, they must cash or deposit it within 30 days. For borrowers who haven’t cashed checks related to the later settlement with GMAC Mortgage and EverBank, replacement checks will soon be on their way. Rust Consulting will mail those in May of 2015 to borrowers who failed to cash or deposit the original check.

Why wouldn’t someone cash a settlement check? It just may be that nationwide trust in mortgage servicers is a bit bleaker than we’d like to think. If you have concerns about whether you’ve been treated fairly as a consumer, you should speak with an experienced Oak Park consumer protection lawyer about your rights.

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Empowering Consumers with New Mortgage-Shopping Tools

Over the last decade, Illinois consumers have learned the hard way that sub-prime mortgages plague homeowners and often lead to foreclosure. And foreclosures across the Chicago area have left neighborhoods with abandoned homes and lower property values. Many borrowers also learned in recent years that their mortgage servicers had committed fraud and other bad acts, and as a result certain lenders and servicers have agreed to settlements worth millions of dollars.

How can home loan borrowers avoid these life-changing headaches in the first place? According to a recent article in the New York Times, nearly 50 percent of all homeowners “fail to shop around for a mortgage lender.” Failing to shop around for the best mortgage rate doesn’t necessarily mean that you’ll become the victim of an unscrupulous lender or servicer. However, shopping around for your mortgage lender can make a difference in your financial status, the Consumer Financial Protection Bureau (CFPB) emphasizes. As such, the CFPB is taking steps to “empower consumers to be more discerning when selecting a home loan.”

New Website Tool to Aid Consumers

The CFPB worries that consumers aren’t shopping around for mortgage lenders, which means that they may not end up with the best mortgage rates. Given that many mortgages are particularly long-term loans—many of us, for instance, have 30-year mortgages—it’s important to check out all the options available to you.

In order to aid consumers, the CFPB has a new set of online tools “to help consumers better navigate the mortgage process.” What do these tools include? For example, consumers now have access to a “rate-checking tool.” When a consumer enters her credit score into the tool, along with information about her geographic location and the type of mortgage she wants, she can “see a range of interest rates local lenders are offering.”

But are interest rates really one of the most important things to consider when selecting a lender? Certain industry groups have pushed back against the CFPB’s emphasis on interest rates, emphasizing that “there are other costs associated with mortgages.” Other complaints have arisen, too. For instance, according to John Councilman, the president of the Association of Mortgage Professionals, “just because consumers report that they did not seriously consider more than one lender . . . does not necessarily mean that they were uninformed.”

Drawbacks of Consulting with Only One Lender

Based on results from a recent survey sponsored by the National Survey of Mortgage Borrowers and the Federal Housing Finance Agency, nearly 50 percent of soon-to-be homeowners only seek rates from one lender. And an even larger percentage of borrowers—nearly 80 percent—end up applying for a loan with only one lender.

While interest rates might not seem like one of the most important aspects of a mortgage, consumer advocates emphasize that they can make a big difference in the long run. Indeed, Richard Cordray, the director of the CFPB, emphasized that “the failure to look around can mean real money lost for consumers.” To be sure, “a difference of half a percentage point in the interest rate on a mortgage can add up to thousands of dollars for borrowers in just a few years.”

Do you have questions about seeking a fair home loan? Or do you have concerns that your mortgage lender or mortgage servicer hasn’t treated you fairly? Contact an experienced Oak Park consumer protection attorney today.

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