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Points of light amid foreclosure funk

Home prices keep falling and mortgage foreclosures keep rising.

A new study on renters, meanwhile, counts 12,334 apartment buildings going into foreclosure during 2009-2010 and with them a whopping 37,726 rental units. LISC/NCP neighborhoods were among the hardest hit, with five losing more than 200 rental buildings just during 2010: Humboldt Park (284), Logan Square (253), Little Village (231), Englewood (218) and North Lawndale (203.)

Photo: Gordon Walek

Mike Tomas, NCP director for the Garfield Park Conservatory Alliance, believes NSP could become a win-win if the program scales up to not only rehab houses but also train young people in the building trades.

So if you’re looking for good news on the housing front this summer in Chicago, good luck. There isn’t much … but there is some.

The federal government is moving to improve its under-performing Home Affordable Modification Program (HAMP) by prodding mortgage lenders and servicers to move faster and even reduce balances owed to reflect the declining market. Meanwhile, the city’s Neighborhood Stabilization Program (NSP), managed by Mercy Portfolio Services, is restoring dozens of foreclosed and vacant homes and is having success selling them to new owners at affordable prices.

Sure, the HAMP and NSP efforts are but a trickle against foreclosure’s grim flood. But they’re a start. And every small victory has important lessons on how foreclosure-fractured neighborhoods can get back on their feet.

East Garfield Park glimmer
Consider the three sturdy houses in East Garfield Park newly rehabbed by the Community Male Empowerment Project (CMEP) with help from the Garfield Park Conservatory Alliance, the LISC/NCP lead agency there.

Photo: Gordon Walek

Developer Melvin Bailey and his crew stand in front of a two-flat they're rehabbing in East Garfield Park.

CMEP leader Melvin Bailey says he recruited young men from the neighborhood to work alongside skilled tradesman on the rehab of 3352 and 3412 W. Walnut St. and 327 N. Central Park Blvd.

“The idea is to teach young men skills so they can move forward with their lives,” Bailey said. “Other young men in the neighborhood see our guys working a trade and they get the idea they could too.”

The Walnut Street houses already have been sold to mortgage-capable families on discounted terms set by Chicago’s NSP Program and the Central Park building will go on the market shortly.  A more complete description of the program—and a more detailed story on the East Garfield Park rehabs—can be found at http://www.chicagonsp.org/news/962

“We’re 3 for 3,” said Bailey of the rehabs. “And we’re talking to some banks about scaling up … taking on more houses and turning this into a real training program.”

That would be a welcome win-win for Mike Tomas, the NCP director at GPCA.

“This way the neighborhood gets more than just a fixed-up house,” Tomas said “You help youngsters learn along the way. Like everything we do in NCP, it’s a more comprehensive strategy.”

Federal help
Since inception in 2008 Chicago’s NSP program has been awarded a total of $169 million by HUD to buy and rehab from 2,000 to 2,500 lender-repossessed properties in 29 target neighborhoods. In the latest funding round East Garfield Park was designated an “area of greatest need,” meaning more funds and more rehabs for a neighborhood that was hit hard by a pre-crash speculative bubble.

Photo: John McCarron

Large numbers of foreclosures continue to reflect a generally fragile economy.

Meanwhile, the Mortgage Relief Fund (MRF), directed by Mercy’s William Goldsmith, is negotiating with the U.S. Treasury Department for permission to buy delinquent mortgages from banks so as to avoid the lengthy foreclosure process. Better for MRF to keep viable owners in place, the reasoning goes, than allow vacant houses to slip into Illinois’ year-plus judicial foreclosure process, after which time many are stripped and vandalized beyond repair.

"We know there's a very large swath of families that are working that are underwater and can no longer afford this mortgage," Goldsmith recently explained to the Chicago Tribune.

Mortgage mods via MRF would be a welcome addition to those being negotiated—or not negotiated—under the federal government’s Home Affordable Modification Program (HAMP.)  More than 4.5 million mods have been applied for nationally since program launch in 2009, but as of this April only 1.5 million had been finalized.

Many blame lenders—who are paid to modify mortgages with easier terms—for not following up with some applicants and giving others the runaround.  Doubtless the slow economy also plays a role, with folks losing their jobs even as home values slip below the balance owed.

The government recently ordered lenders to provide a single “point of contact” for customers seeking to modify, and the Treasury has begun publishing a monthly report card on how lenders are performing.

Market stalled
But no amount of blame-naming is going to stem the foreclosure tide unless the economy, and especially the housing market, turns around. The Illinois Association of Realtors recently noted that, although home prices tend to reach their annual peak in the May-June buying season, home prices in the Chicago area are from 9 to 15 percent lower than one year ago.

An apartment building at 6015 S. Indiana Ave. that's being renovated through NSP.

With sales volume off by 26 percent year-over-year, and with so much foreclosed and otherwise “overhang” inventory, the Realtors predict, at best, a flat housing market for 2012.

RealtyTrac, the Web-based information service, counted 33,508 city residential properties in some stage of foreclosure as of the end of May 2011.  The Southwest Side’s 60629 zip code that includes Chicago Lawn led all neighborhoods with 144 foreclosures filed just in the month of May.

Renters routed
As bad as the situation is for struggling homeowners, the new study by Lawyers’ Committee for Better Housing LCBH) reminds that things are even worse for limited-income renters. During 2010, according to the report, Chicago was losing 123 apartment buildings per week to the foreclosure menace.

And new laws designed give renters an early warning, along with a grace period to find another apartment, were widely ignored by both landlords and by lenders doing the foreclosing. LCBH found many landlords fail to notify tenants of an impending foreclosure, as required by law, and even kept on collecting rent after losing control of the building.

Many foreclosing lenders, meanwhile, fail to honor still-valid leases and frequently use “constructive eviction” tactics—such as no maintenance, utility shutoffs and take-it-or-leave-it “cash-for-keys” offers—to clear buildings so as to limit their liability.  

Seven NCP neighborhoods are among the 20 LCBH says lost more than 10 percent of their apartments to foreclosure over the past two years. They are East Garfield Park (17.3 percent), Englewood (14.6 percent),   Humboldt Park (14.3 percent), Washington Park (13.5 percent), North Lawndale (12.9 percent),  South Chicago (12 percent) and Chicago Lawn (10.6 percent).

LCBH, a recent grantee of LISC/Chicago’s Foreclosure Response Fund, has made the full report available online at http://lcbh.org

For more information:

Renter’s rights—LCBH’s Mark Swartz 312.784.3520 
NSP—William Towns 312.447.4609
Foreclosure counseling—Neighborhood Housing Services 773.329.4185.

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