The Home Foreclosure Crisis in Chicago

Transcription

1 The Home Foreclosure Crisis in Chicago An Assessment of Foreclosures and their Impacts in 2009 A report of NATIONAL PEOPLE S ACTION 810 North Milwaukee Avenue Chicago, IL MARCH 2010

2 About National People s Action: National People's Action (NPA) is a national organizing, policy, research, and training center for grassroots community organizations dedicated to building power to reclaim our democracy and to advance racial and economic justice. For more than 36 years, NPA has worked nationally to build and strengthen grassroots and community organizations, to develop local leadership, and to advance campaigns for a more just, equitable, and sustainable society. NPA, founded as a project of National the Training and Information Center (NTIC), has led efforts to reform the mortgage lending industry, combat discriminatory lending practices, and improve homeownership opportunities for low- and moderate-income families across the country and here in our hometown of Chicago. In the 1970s, the NPA network lead the charge to pass the Home Mortgage Disclosure Act (HMDA), which mandated public reporting from financial institutions that correlates the race, income, and gender of borrowers with the terms of the loan. This landmark corporate disclosure campaign made it possible to prove that banks were discriminating against minority borrowers, and helped build the political will necessary to pass the transformative Community Reinvestment Act (CRA) in CRA has since resulted in the reinvestment of trillions of dollars into low and moderate income communities throughout the country. NPA s work integrates expert research and analysis to inform community responses and initiatives that help American s to stay in their homes and to promote meaningful and comprehensive financial reform. About this Report: Why are Foreclosures in Chicago important? With the largest number of homebuyers of any metropolitan area in the nation, Chicago provides not only a snapshot of the latest urban real estate trends, but it is a revealing look into the economic wellbeing of American households across all income levels. Our homes continue to be our single largest purchase, our largest source of household wealth, and unfortunately our largest source of debt. On the family level, a foreclosure almost always reduces household wealth. On the community level, foreclosures negatively impact home values and reduce the wealth of other households. And, as we have painfully witnessed in recent years, when there are a huge number of home loans going bad it can even cripple the nation s financial system and economy. For over a decade this annual Chicago Foreclosure report* has documented the rise in risky, often predatory, home mortgage lending that frequently results in foreclosure. Ten years ago, the Chicago Foreclosure report witnessed an increase in foreclosures following the initial wave of subprime home lending in the 1990 s in lower income, majority African-American and Latino neighborhoods. Years before the housing bubble burst and brought the pain of foreclosures to the upper-middle class and high growth markets, abuses in the subprime housing markets and the resulting foreclosures had already began to devastate Chicago s most vulnerable neighborhoods. Then came the boom years of the subprime-fueled housing bubble ( ) when the entire mortgage industry raced to make or buy massive volumes of risky home loans, which were sold as investment products for a quick profit. We saw loan quality hit rock bottom and then the foreclosures spiked upward in By 2008, the crisis went full-scale as foreclosures raged across the greater Chicago region. The 2009 Chicago Foreclosure Report provides an on-going look and the impact of the foreclosure crisis. * Prior to 2009, the Chicago Foreclosure Reports were released under the name of National Training and Information Center (NTIC) name. Report written by Nicholas Bianchi, Research Analyst, National People s Action (nick@npa-us.org) Copyright 2010 by National People s Action. All rights reserved. No part of this publication may be reproduced in any form for profit purposes.

3 Table of Contents Report Introduction Page 4 Summary of Findings Page 5 Chicago Foreclosures: A Look at the Past Decade Pages 6-7 Analysis of Foreclosed Loans (by mortgage age and type) Pages 8-10 Community Report: Mapping of Foreclosure Hotspots Page 11 Analysis of Bank-owned Properties in Chicago Pages Chicago Home Price Analysis Page 15 Top Foreclosing Lenders and Loan Servicers Page 16 Policy Recommendations Page APPENDIX I-A. Chicago Foreclosures by Community Area Page 19 I-B. Chicago Foreclosures by City Ward Page 20 II. Research Methodology Page 21 III. Definitions and Terminology Page 22 IV. Chicago Home Sale Prices in Chicago: Page 23

4 Report Introduction Chicago weathered a third year of economic turmoil in 2009 with an average of one new foreclosure filing every 22 minutes. Chicago s foreclosure crisis was deepened in the past year as unemployment and overall weak economic conditions conditions created by irresponsible and predatory home lending 1 - circled back on the real estate market and hit the city with a record number of foreclosures. The crisis is increasingly affecting Chicago homeowners who were not victimized by subprime lending as one out of three foreclosures in 2009 were on prime-rate home loans. While the foreclosure crisis is raging on in Chicago, to date the federal program designed to modify troubled loans is having little impact. 2 There was on average one new home foreclosure filing in 2009 for every residential block in the city. Chicago had numerous foreclosure hotspots (areas averaging more than 2 foreclosures per city block) ranging from the weaken upscale condominium market of the Near North side to the suffering moderate-income neighborhoods of Chicago s bungalow belt which covers most of the City s Southwest and Northwest sides. Minority and lower-income neighborhoods however were overall the worst affected areas as Chicago s Black and Latino neighborhoods had three times as many homes lost to foreclosure as majority White areas. Chicago s high number of foreclosures impacts far more than the 23,200 borrowers who fell into foreclosure in A majority of homeowners, even if they are not facing foreclosure, have been hit hard by falling home prices and reduced access to credit spawned by the foreclosure crisis. 3 This report finds that the impact of the foreclosure crisis is widespread with over half of the Chicago s land area within one block of a bankowned home lost to foreclosure in This report also finds that the real value of an average Chicago residential property in 2009 declined between $27,000 to $49,000 from 2004 values. With Chicago home prices now around the 2003 price level and with very slow growth predicted for the next year or two 4, homeowners face a real risk of a decade lost in terms of home prices. In summary, the average homeowner faces a substantial reduction in wealth due to the irresponsibility and greed of the home lending industry. As this report documents, foreclosures are still too damaging to our economy to ignore. Yet, to date, Congress has taken no real steps to reform the flawed home finance system at the root of the problem. We still have a financial system rife with deceptive and unsafe home lending practices. We still have the same patchwork of federal bank regulators, who stood by as the banking industry repeatedly took enormous risks in pursuit of massive profits and then failed to act or even disclose most risky practices to the public. And regrettably, we still live in a nation where public funds are used as the financial industry s ultimate insurance policy when their latest profit-making schemes fail. We can and we must create a safer and fairer financial world in which to live. National People s Action calls on Congress to: 1) Fix our Nation s Broken Financial Regulatory System, and, 2) End the foreclosure crisis by giving more support to keep families in their homes. 1. See Appendix III for description of predatory lending practices. 2. Under the Home Affordable Modification Program (HAMP) as of January 2010, 11.5% of trial modifications have become permanent nationally, while 11.2% of trial modifications have become permanent in Chicago. See: 3. In 2009 U.S. Banks posted their sharpest decline in lending since Lending Falls at Epic Pace. Wall Street Journal. Michael R. Crittenden and Marshall Eckblad Feb 24, Why Servicers May Bite the Bullet this Year. American Banker. Kate Berry. Jan 19, The number of homes 90 days+ past due on mortgage or already repossessed, the shadow inventory amounts to approximately half the number of homes on the market. Page 4

5 2009 Chicago Foreclosure Report NPA March 2010 Summary of Report Findings: 1. A 16% annual increase in Home Foreclosures makes 2009 Chicago s worst year ever for foreclosures. 2. Foreclosures on prime-rate loans increased 40% from 2008 and now account for approximately one out of three new foreclosures filings. This signals that even homeowners who were not sold risky subprime loans are now increasingly at risk of foreclosure. 3. Chicago has numerous foreclosure hotspots which averaged more than 2 new foreclosures per city block in 2009 (greater than 200 foreclosures per square mile.) 4. More than half of Chicago s land area (53%) is within 0.1 mile (540 feet, approximately one city block) of a residential property lost to foreclosure that became bank-owned in In lower and moderate income neighborhoods homes were lost to foreclosure and became bankowned property at double the rate as homes in wealthier areas. 6. Bank-owned homes were three times more concentrated in minority areas as they were in majority-white areas in Chicago in An average Chicago homeowner has lost an estimated $27,000 in the value of their home compared to prices 5 years ago. Citywide, an estimated $15 Billion in total Chicago homeowner equity has been lost over the last 5 years. 8. The nation s 5 largest banks are foreclosing on more than half (53%) of all Chicago s residential properties in foreclosure. Page 5

6 Chicago Foreclosures: A Look at the Past Decade 2009: The Worst Year Ever A 16% increase in Home Foreclosures in 2009 gave Chicago another record-breaking year for home foreclosures filings. 5 Some 23,200 residential foreclosures were started in the City of Chicago during 2009, which now marks the third year in a row with a record number of foreclosures hitting Chicago s neighborhoods s foreclosure total is almost triple the average number of annual foreclosures prior to the mortgage meltdown of Residential Foreclosure Filings in Chicago: ,000 23,200 20,000 20,000 15,000 14,600 10,600 10,000 7,000 8,800 9,750 8,700 7,900 8,100 5, Data Source: Record Information Services, A foreclosure filing or foreclosure start is the initial legal filing made by lender/plaintiff to begin the foreclosure process, usually after 90 days delinquency in a mortgage payment. This figure counts only initial foreclosure filings on a unique property. See Appendix II: Report Methodology for details. 6. Chicago averaged 8,375 foreclosure filings per year from Page 6

7 Page 7 Residential Foreclosure Filings: 2006, 2008 & ,600 Foreclosure Filings 44.4 Foreclosures per Square Mile Home Foreclosures in Chicago through the Years ,200 Foreclosure Filings 118 Foreclosures per Square Mile 19,950 Foreclosure Filings 90.6 Foreclosures per Square Mile foreclosure filing In the late 1990 s risky and predatory home lending practices gained a hold in the city s lower-income and minority neighborhoods. Independent mortgage companies entered these credit-starved neighborhoods and issued mortgages with high interest rates, costly fees, and unfavorable terms. Foreclosures from these loans were common but were largely concentrated in communities on the South and sides of Chicago (see map for 2006). By 2005, the predatory and risky home lending practices of these independent mortgage companies had become the standard practice for much of the mortgage industry funded by Wall Street and major national banks. By the end of 2007 defaults on mortgage spiked upward and the housing market and economy was shaken to its core. Home foreclosures in Chicago have surged in the last three years and continue to impact almost all of the city s neighborhoods s crop of foreclosures is similar to 2008 s: numerous and widespread. foreclosure filing foreclosure filing Data Source: Record Information Services, 2008, 2009

8 Foreclosed Loans in Chicago by Mortgage Age Recently Issued Mortgages still make up the Bulk of Foreclosures The age of mortgages going into foreclosure in 2009 closely follows the trends set out in the previous year with the majority (83%) of home foreclosures occurring on loans made since Mortgages made in 2007 were the most frequent to end up in foreclosure in 2009, accounting for 29% of all foreclosures filings in the city. Notably there were some 2,400 foreclosures dating from 2008 going into foreclosure in This suggests that attempts to refinance troubled loans in the past year have had limited effect and increasingly resulted in default and foreclosure. The data also shows a smaller but steady of number of older home loans, made in 2002 or earlier, are going into foreclosure. Less than 6% of foreclosures in 2009 were on mortgages made in 2002 or before. Year of Mortgage Origination of Chicago Foreclosures: 2008, ,000 20, ,000 10, , or before 2002 or before Filied in 2008 Filied in 2009 Data Source: Record Information Services, 2008, 2009 The average age of a home loan in foreclosure in 2009 increased to 3.4 years, up from 2.7 years in This increase points to the continued impact of the massive crop of failed loans made between 2005 and 2007 on the current state of Chicago s foreclosure crisis. Page 8

9 Chicago 2009 Foreclosure Report NPA February 2010 Chicago Foreclosures by Mortgage Type Foreclosures from the massive number of risky and poorly-underwritten home loans made during the subprime years declined somewhat in 2009, yet they continued to reek havoc during the third year of the foreclosure crisis. Not only were the number of foreclosures on the most risky categories of loans - adjustable rate mortgages (ARMs) and high-cost fixed-rate loans 7 - still very high by historical standards, they have also triggered an overall decline in the housing market and the economy which claimed a greater share of prime-rate mortgages in The number of ARMs resulting in foreclosure in 2009 remained at a high level and continues to be the leading source of foreclosures in Chicago, despite an overall decrease from the previous year. The data shows that ARMs were still the loan product to most frequently result in a foreclosure and made up 40% (9,350 foreclosures) of all foreclosures reported in Over the last three years of the foreclosure crisis about one half (50.4%) of all Chicago foreclosures were from failed ARMs. High-cost fixed rate loans accounted for another 11.6% of Chicago s foreclosures since All together, at least two thirds (65.6%) of the foreclosures in the last three years were from the risky and inappropriate use of Adjustable Rate Mortgages ARMs, high-cost fixed rate loans, or other exotic loan products (including balloon payments). Annual Chicago Foreclosures by Interest Rate Type: 2006 to ,000 20,000 ARM Fixed Rate- High Cost Fixed Rate - Prime Balloon/Commercial N/A 15,000 10,000 5, Data Source: Record Information Services, High Cost fixed-rate loans had an average interest rate of 8.9%. Prime rate fixed-rate loans had an average interest rate of 6.7%. See Appendix III for definition of high cost and prime-rate loans. Page 9

10 Chicago Foreclosures by Interest Rate Type: 2009 Fixed Rate- High Cost 10% Fixed Rate - Prime 34% ARM 48% Balloon or Commercial 8% Data Source: Record Information Services, The number of foreclosures on high-cost fixed-rate loans in 2009 remained relatively high (1,890 fillings) despite an decrease from 2008 when more than 2,600 high-cost fixed-rate loans failed. With foreclosures on ARMs and high-cost loans leveling off and decreasing, respectively, 2009 still produced an overall record number of foreclosures due to an increase in foreclosures on other types of loans most notably prime rate loans. There was an 40% increase in foreclosures on fixed-rate loans with a prime interest rate in 2009 compared with the previous year. Furthermore, foreclosures on balloon loans, construction loans, and other commercial loans on residential real estate also surged upward 75% in This trend suggests that failing home prices, the continued economic recession, and unemployment claimed a growing share of (fixed-rate) prime mortgages which accounted for 34% of Chicago s foreclosures in Total foreclosures used in the above chart exclude filings that did not have mortgage type and rate information reported, which was 11% of all foreclosure filings in Page 10

11 2009 Chicago Foreclosure Report NPA March 2010 Chicago s Foreclosure Hotspots In 2009 there were 118 home foreclosures filings per square mile in Chicago, or an average of approximately one foreclosure filing for every block in the city. Mapping the concentration of foreclosure fillings shows that few areas of the city have been untouched by the crisis. The greatest geographic concentrations of residential foreclosures were found in a diverse group of Chicago communities on all sides of the City, underscoring the depth and widespread impact of the foreclosure crisis in the past year. In Chicago s foreclosure hotspots (see darker red areas on map below) there were on average multiple foreclosures per block in Rank Top Communities by Foreclosures per Sq. Mi. Community Area Name 2009 FCs per Square Mile 09 1 Ridge Belmont Craigin Near North Rogers Hermosa Chicago Lawn Grand Boulevard Englewood Humboldt Albany O'Hare Rogers Edison Ridge Forest Glen Norwood Edgewater North Jefferson Lincoln Square Albany Uptown Portage Irving Dunning North Center Lake View Avondale Montclare Belmont Cragin Hermosa Logan Square Lincoln Humboldt Town Near North Side Austin East Garfield Near Side Loop On the City s Far North Side, the Ridge community topped all communities in the City with 245 home foreclosures per square mile. Ridge s witnessed the largest number of condominium foreclosures (610) of any community in the past year. Neighboring Rodger s (ranked #4) also had more than double the City s average concentration of foreclosures making the Far North Side one of the most hard hit areas of the City Garfield Ridge Clearing North Lawndale Near South Side Lower Side South Lawndale Armour Square Bridgeport Douglas McKinley Oakland Brighton Archer Heights New City Grand Boulevard Fuller Kenwood Elsdon Gage Washington Hyde Englewood Woodlawn Lawn Chicago Lawn Greater Grand Cros South Shore Belmont-Craigin ranked second in foreclosure concentration (240 foreclosures per square mile) and had most single-family homes in foreclosure (575) in the City. The nearby Hermosa and Humboldt communities were also ranked in the top ten making this area of Chicago s Northwest side a major foreclosure hotspot in Map Layers Community Area 2009 Foreclosure Hotspot Foreclosures per Sq Mi 0 to to to to to or More Other Ashburn Mount Greenwood Auburn Gresham Chatham Avalon South Chicago Calumet Heights Washington Heights Beverly Roseland Pullman East Side Morgan South Deering Pullman Hegewisch Riverdale The upscale Near North Side ranked third overall as a foreclosure hotspot (231 foreclosures per sq. mi.) mainly due to a large number (605) of foreclosures on condominiums in the community. And the foreclosure crisis still rages on Chicago s South Side with Chicago Lawn, Englewood, and Grand Boulevard all ranking among the top 10 communities facing high concentrations of foreclosures in Page 11

12 Chicago 2009 Foreclosure Report NPA February 2010 Foreclosures Completed: Homes Lost to Foreclosure In addition to new foreclosure filings, of equal or more concern are their unfortunate end result: a home lost to foreclosure 9. A home is lost to foreclosure when it is sold in foreclosure auction or reverts to the lender as a bank-owned property, also called Real Estate Owned (REO) property recorded another devastating year with over 8,500 homes lost to foreclosure citywide. Geographic analysis shows that more than half (53%) of Chicago s total land area is within 0.1 mile (540 feet) of a residential property lost to foreclosure in This is important as past studies have estimated that a residential foreclosure negatively impacts neighboring property values within one city block. 10 Homes Lost to Foreclosure and Their Area of Impact, Includes residential properties that reverted to the plaintiff/lien holder REO or were sold in a foreclosure auction to a third-party. In 2009, 97.2% of Chicago s foreclosure auctions became bank owned, 2.8% were sold to a third-party buyer. 10. There Goes the Neighborhood: The Effect of Single-Family Mortgages on Property Values. Immergluck and Smith. The Woodstock Institute, This report estimates that properties within 1/8 of a mile of a foreclosed property are impacted by reduced property value. Page 12

13 Homes Lost to Foreclosure in Chicago The neighborhoods where Chicago s working families live, and where practically all the City s Black and Latino population resides, are those hardest hit by the fallout of the foreclosure crisis. Banks and mortgage servicers repossessed homes in foreclosure twice as frequently in the lower and moderate income neighborhoods 11 of Chicago, where the families on average earned less than $60,000 a year. Residents of these lower and moderate neighborhoods lost their homes to foreclosure at double the rate of wealthier areas. Homes Lost to Foreclosure by Census Tract Income Level, Low and Moderate Income Middle and Upper Income City Average (all tracts) REOs per Sq Mi REOs per 1,000 Housing Units** * 1-4 unit buildings only Source: US Census 2000, Record Information Services 2009 Source: US Census 2000, Record Information Services 2009 The 2009 data shows bank-owned properties were twice as concentrated in Low and Moderate Income tracts as in Middle and Upper tracts. In Low and Moderate Income neighborhoods there approximately 55 properties lost to foreclosure per square mile compared to 28 per square mile in Middle and Upper Income areas of Chicago. 11. See Appendix III for definitions of Income Level classifications. Page 13

14 Homes Lost to Foreclosure in Chicago The foreclosure data also shows Chicago s minority neighborhoods had the most homes lost to foreclosure. In 2009 bank-owned homes were three times more concentrated in minority areas as they were in majoritywhite areas 12. On Chicago s South, Southwest,, and near Northwest Sides where the majority of Chicago s Black and Latino population resides, there were an average of almost 60 REO properties per square mile. This was more than triple the average rate found in majority White areas (18 REOs per square mile). Homes Lost to Foreclosure by Census Tract Race 70 Minority Tract (>80% Minority) Mixed Tract (20% to 80% Minority) White Tract (>80% White) 50 City Average (all tracts) REOs per Sq Mi REOs per 1,000 Housing Units** * 1-4 unit buildings only Source: 2000 US Census, Record Information Services 2009 In minority neighborhoods on average one home became bank-owned in 2009 for every two city blocks. 12. See Appendix III for definitions of census tract race classifications. Page 14

15 Foreclosure s Impacts: Failing Home Prices in Chicago Over the last five years a majority of Chicago s communities have experienced a decline in home values due to the foreclosure crisis. A comparison of 2009 s reported home sale prices on residential properties with sale prices from 2004 shows that for nearly three quarters (73%) of the City s community areas (56 out of 77 communities) housing prices have decreased from Another 10 community areas reported 5-year residential price gains of less than 10%, which is less than the rate of inflation over this period. While homeowners hope for a quick recovery and to put the year of 2009 behind them, the current reality for a majority of Chicago homeowners is that homes are selling for less than they were 5 years ago and they have lost equity in today s market. Change in Home Sales Price, 2004 to 2009 O'Hare Edison Norwood Forest Glen Jefferson North Albany Rogers Ridge Edgewater Lincoln Square Uptown Dunning Portage Irv ing Av ondale North Center Lake View Montclare Belmont Cragin Hermosa Logan Square Lincoln Austin Humboldt Town Near North Side East Garfield Garfield Near Loop Side North Near Lawndale South Lower Side Side Armour South Square Lawndale Bridgeport Douglas McKinley Oakland Brighton Archer Grand Heights New City Boulev ard Kenwood Garfield Ridge Elsdon Gage Washington Hyde Clearing Lawn Chicago Lawn Englewood Woodlawn Greater Grand South Cros Shore Avg Home Sales Price Change % or More -25% to -33% -10% to -25% 0 to -10% 0 to 5% 5% to 10% 10% to 25% 25% or More NA Ashburn Mount Greenwood Auburn Av alon Gresham South Chatham Chicago Calumet Burnside Heights Washington Heights Bev erly East Roseland Pullman Side Morgan South Deering Pullman Hegewisch Riv erdale Source: Record Information Services This report undertakes two analyses to estimate the average change in Chicago home prices between 2004 and This analyses finds that the average Chicago residential sales price decreased between $27,000 and $49,000 from comparable sales prices five years ago. 13 Multiplying the lesser of these two figures ($27,000) by the estimated 568,000 mortgageable properties in Chicago, this report estimates a total loss of $15.3 billion in Chicago homeowner equity since The $27K to $49k estimates used in this report are supported by real estate industry data provided by the National Association of Realtors and Case-Shiller Home Price Index. See Appendix IV for more details. Page 15

16 The Lenders and Loan Servicers Behind the Foreclosures Listed below are the top 30 institutions with foreclosures in Chicago during Bank of America, which purchased the failed lender and loan servicer Countrywide, led all banks with the most foreclosures in Chicago. Bank of America was behind one out of every 6 foreclosures in Togther, the nation s 5 largest banks, Bank of America, JP Morgan Chase, US Bank, Wells Fargo, and Citigroup, are the foreclosing institution on more than half (52.5%) of Chicago s foreclosure flings. Rank Chicago s Top Foreclosing Lenders or Loan Servicers in 2009 Foreclosing Company Name Number of Forclosure Filings % of Total Foreclosure Total $ Amount in Default % of Total $ Amount 1 BANK OF AMERICA (Countrywide) 3, % $932,155, % 2 JP MORGAN CHASE 2, % $652,303, % 3 US BANK 1, % $452,690, % 4 DEUTSCHE BANK 1, % $435,388, % 5 WELLS FARGO BANK (Wachovia) 1, % $398,978, % 6 CITIGROUP 1, % $403,172, % 7 ONE WEST BANK (Indymac) 1, % 310,876, % 8 HSBC % $227,597, % 9 BANK OF NEW YORK % $210,902, % 10 AURORA LOAN SERVICES INC % $188,074, % 11 PNC (National City) % $145,108, % 12 GMAC/HOMECOMINGS % $89,293, % 13 FIFTH THIRD % $82,884, % 14 TAYLOR BEAN & WHITAKER MTG % $40,849, % 15 SUNTRUST BANK % $33,895, % 16 CITY OF CHICAGO % $1,005, % 17 ROYAL BANK OF SCOTLAND % $78,776, % 18 BANK UNITED % $36,019, % 19 MIDFIRST BANK % $11,646, % 20 FLAGSTAR BANK % $19,741, % 21 TCF NATIONAL BANK % $19,572, % 22 BANK OF MONTREAL % $33,088, % 23 OCWEN LOAN SERVICING % $16,370, % 24 NATIONSTAR MORTGAGE % $15,940, % 25 SECOND FEDERAL SAVINGS & LOAN % $11,700, % 26 REGIONS FINANCIAL CORP % $14,841, % 27 MB FINANCIAL BANK % $39,670, % 28 GOLDMAN SACHS/LITTON Loan Servicing % $11,588, % 29 AMTRUST BANK % $13,392, % 30 ASTORIA FEDERAL SAVINGS & LOAN % $15,715, % Totals 23, % $5,937,755, % 14. Foreclosing institutions have been consolidated under the name their current corporate ownership. Page 16

17 2009 Chicago Foreclosure Report NPA March 2010 Conclusion and Policy Recommendations The costs of the foreclosure crisis grew higher still in 2010, yet common-sense reform of the very practices that spawned the financial disaster has been stymied by hundreds of millions of dollars in political contributions and lobbying by Wall Street and the big banks. At the root of the foreclosure crisis is the failure of regulation of our financial system. There is a crucial need for independent and effective regulation that will appropriately manage risk, maintain transparency, and ensure fairness and security for consumers in home lending and in other financial services markets. Without it, we cannot recover from the current crisis and are doomed to repeat it. National People s Action calls for Congress to: 1. Fix our Nation s Broken Financial Regulatory System We call for Congress and regulators to: Create a powerful, independent Consumer Financial Protection Agency to safeguard the public s interest and financial wellbeing by regulating financial products including mortgages, payday loans and credit cards. Modernize the Community Reinvestment Act (CRA) in several areas, including extending CRA to the entire mortgage lending industry. During the recent subprime lending spree, the majority of all home lending, and, upwards of 90% of risky subprime lending was issued by lenders that were not subject to CRA. Expand the disclosure of mortgage loan and borrower characteristics as reported in the Home Mortgage Disclosure Act (HMDA). Currently, HMDA data does not report adjustable interest rate products (ARMs) which played a significant role in the recent mortgage crisis. Furthermore, in light of the subprime mortgage meltdown, additional loan and applicant information (including loan term, Loan-to-Value ratio, and FICO score) must be reported to identify risky and potentially predatory lending practices. A universal home mortgage identification number must also be instituted so that when risky home loans are resold to investors worldwide (and while loan servicing rights may be held by banks and other companies) the source of any problem, the loan s originator, is publically disclosed and identified. Reduce the risk to the public and to the financial system by limiting the size of large banks and financial institutions. These enormous institutions continue to engage in systemically risky behavior while benefiting from the implicit guarantee of the American taxpayer, TARP bailout funds, and deep discount borrowing from the Federal Reserve. Many of the largest financial institutions and banks continue to grow in size and profitability during the financial crisis, despite having played a major role Page 17

18 2009 Chicago Foreclosure Report NPA March 2010 Conclusion and Policy Recommendations (Cont.) National People s Action calls for Congress and regulators to: 2. End the foreclosure crisis by giving more support to keep families in their homes. Improve the HAMP program by requiring mandatory modifications of eligible home loans with principal reductions when appropriate. Allow the judicial modification of home mortgages so that struggling homeowners can receive the same relief currently allowed only for investment properties and vacation homes. Institute a loan and/or grant program to assist unemployed and underemployed homeowners remain in their homes until they can regain lost income. Page 18

19 Page 19 South Deering Austin Near Side Hegewisch New City Ashburn Roseland Town South Lawndale Norwood Garfield Ridge Portage Belmont Cragin Auburn Gresham Dunning Pullman Humboldt Logan Square Greater Grand Cros Chicago Lawn Ridge Riv erdale South Chicago Lincoln O'Hare Irv ing North Lawndale Forest Glen Bev erly Morgan Lake View Englewood Lawn Chatham South Shore Lower Side East Side Washington Heights Near North Side Mount Greenwood Brighton Lincoln Square Clearing North Uptown Jefferson Gage Woodlawn Pullman Bridgeport North Center Archer Heights Av ondale East Garfield Albany Rogers Calumet Heights Near South Side Grand Boulev ard Edgewater Hyde Douglas Loop Washington McKinley Garfield Av alon Elsdon Edison Hermosa Kenwood Montclare Armour Square Burnside Oakland Englewood APPENDIX I-A: 2009 Chicago Foreclosure Fillings by Community Area Source: Record Information Services, Inc Community Name Foreclosures in 2009 Foreclosures per Sq. Mi. Albany Archer Heights Armour Square Ashburn Auburn Gresham Austin Avalon Avondale Belmont Craigin Beverly Bridgeport Brighton Burnside Calumet Heights Chatham Chicago Lawn Clearing Douglas Dunning East Garfield East Side Edgewater Edison Englewood Forest Glen Fuller Gage Garfield Ridge Grand Boulevard Greater Grand Crossing Hegewisch Hermosa Humboldt Hyde Irving Jefferson Kenwood Lakeview Lincoln Lincoln Square Logan Square Loop Lower Side Mckinley Montclaire Morgan Mount Greenwood Near North Near South Side Near Side New City North Center North Lawndale North Norwood Oakland O'hare Portage Pullman Riverdale Rogers Roseland South Chicago South Deering South Lawndale South Shore Uptown Washington Heights Washington Elston Englewood Garfield Lawn Pullman Ridge Town Woodlawn CITY TOTALS / AVG. 23,

20 Page 20 Data Source: Foreclosure Report of Chicago, 2009 WARD FORECLOSURE FILINGS REOs APPENDIX I-B: 2009 Foreclosure Filings by Chicago Ward OUT OUTOUTMap Layers Foreclosure Filing City Ward41412

21 APPENDIX II: Report Methodology Foreclosure Data Source and Counting Methodology: This report covers all foreclosures filed and completed foreclosure auction sales on residential properties in the City of Chicago as reported in the calendar year of 2009 by the data vendor Record Information Services (public-record.com). Duplicate filings on the same address and unit number are counted as only one filing. Only properties that were geocoded were counted as a foreclosure filings and/or a foreclosure sale. Residential Properties reported by Record Information Services include: single-family, Condominium, Townhome, and Apartment Buildings. The Apartment Building category includes 2-6 unit buildings together with multifamily properties that are 7-units or greater. The Institute for Housing Studies at DePaul University estimates that approximately 5% of the multi-unit foreclosures in were on large multi-family properties of 7-units or more. Methodology for estimated change in Property Values: Method #1) All raw data was provided by Record Information Services (Public-Record.com) new homeowner reports. The property purchase price for 30,850 residential property sales sold in 2004 were averaged citywide and by community area. Note: residential properties exclude Condominium, Townhomes, and Apartment Buildings, which are categorized differently in the data. The residential property type identifies primarily single-family homes although in the context of Chicago, these properties sometime have an additional rental housing unit. These prices were then compared to 9,634 residential property sales in Analysis excluded sales on properties above $2 Million and below $1 Thousand, to best capture the an average Chicago home price and to eliminate the effect of potential large-scale purchases, high-end luxury purchases, or charity purchases. Year Number of Single Family Sales Avg Purchase Price ,691 $ 275, ,120 $ 248,339 Avgerage Change In Home Price 04-09: $ (27,085.64) Est. Mortgageable Properties in Chicago: 568,000 Total Est Change in Equity: $ (15,384,642,782) Method #2) In the Same Home analysis we examine a sample of 3,917 residential (single-family including single family with rental units, townhomes and condominium) properties that reported a sale both in 2004 and in This analysis shows an average home sales price decline of $48,988 in 2009 compared to its 2004 sales price. This property analysis offers a direct comparison of home prices as only sale prices from the same property are used. Estimating Foreclosures per Chicago Residential Block: This report estimates there are an average of 117 residential city blocks per square mile in Chicago. This is derived from a maximum of 128 standard city blocks per square mile following Chicago s standard 8 block faces from East to per mile, and 16 block faces north to south. The number of residential blocks is then reduced to account for parkland throughout the City (as a nonresidential land use which produces zero foreclosure filings) which accounts for 8.2% of Chicago s land use (7,600 acres). A more through analysis of this issue would also account for single-use industrial or commercial land use, which would likely further decrease the number of residential blocks per square mile. In 2009 there were foreclosures per square mile citywide using a total residential land area of square miles. Page 21

22 APPENDIX III: Definitions and Terminology Census Tract Income Level Definitions: Low-income: up to 50% of MSA Median Family Income Moderate-income: between 50% and 80% of MSA Median Family Income Middle-income: between 80% and 120% of MSA Median Family Income Upper-income: more than120% of MSA Median Family Income Census Tract Race Definitions: Minority Area: more than 80% non-white population Mixed Area: between 80% and 20% non-white population White Area: less than 20% non-white population Predatory Lending: NPA defines predatory lending as the origination of a loan with unfair, deceptive, or fraudulent practices to the financial benefit the issuing party (usually a mortgage broker and/or lender) and which incurs undue expenses of the borrowing party. Typically, a predatory loan is made without consideration of a borrower s ability to repay and is often promoted through aggressive and/or misleading sales practices. Many but not all subprime loans may be predatory loans. Common predatory home lending practices include: Excessive and/or duplicate fees financed throughout the life of the loan Flipping or repeatedly refinancing a homeowner s mortgage in a 12-month period without a tangible benefit to the borrower. Deceptive terms where a lender initially offers a teaser rate which is then increased at the time of closing. High-Cost Loan According to guidelines set by the Federal Reserve Board, a high cost loan has an interest rate 3% points or more above treasury securities of the same maturity. As treasury and interest rates can vary monthly, the interest rate at which a loan is classified as a high-cost loan will also vary. In general for the majority of loans in foreclosure in Chicago, a high-cost loan had an interest rate above 7.5%. Prime-Rate Loan In this report a prime rate loan refers to a fixed-rate conventional loan with an interest rate 3% points less than a comparable treasury security. As treasury and interest rates can vary monthly, the interest rate at which a loan is classified as a high-cost loan will also vary. In general for the majority of loans in foreclosure in Chicago, a prime-rate loan had an interest rate below 7.5%. Page 22

23 APPENDIX IV: Home Sales Prices in Chicago: These average price decline of between $27,000 and $49,000 found in this report is supported by leading real estate industry analysis of areas home prices, including the National Association of Realtors (Graph II-A) and the Case Shiller Home Prices (Graph II-B) which find price around the 2003 level for a median price decrease of approximately $30,000 or 14% of median home prices. Graph II-A Chicago MSA Median Home Price Source: Case-Shiller weighted home prices also show an approximate 15% price decline in Chicago home prices between 2009 and Graph II-B. Case-Shiller Home Price Index (Weighted Home Prices of Major Markets plus 20 City Composite: ) Source: Page 23