FOR IMMEDIATE RELEASE

Thursday, August 21, 2008

Contact:  Geoff Smith, Vice President, 312-368-0310 

 

Investors Shun Chicago
Region Foreclosure Auctions, Says New Report

Huge inventory of foreclosed properties and fewer bidders
means lenders on the hook for billions in Chicago region so far

Chicago – According to a
new report, the flow of vacant properties is quickening across the region, and
in many parts of the Chicago
region the overwhelming majority of those properties are now owned by the
lender.    

File Icon Foreclosure Fallout: An Analysis of Foreclosure Auctions in the Chicago Region

Property investors, who in previous years helped drive
the housing boom, acquired just six percent of the properties being sold at
foreclosure auctions, down from nearly 30 percent just three years ago.

“With fewer buyers, these foreclosed properties are
reverting to lenders, who are in the business of lending, not managing huge
real estate portfolios,” says Geoff Smith, Woodstock Institute’s vice president
and author of the report. 

Communities throughout the region are saddled with more
and more of these real estate owned (or REO) vacant properties, with the South
suburban Cook County
and the City of Chicago
hardest hit. 

Even areas not previously associated with foreclosure and
vacancy, such as North Cook, Kane County, and DuPage County
have seen steep increases.  “This poses a
significant challenge to cities and neighborhoods struggling to get these
properties back into productive use,” says Smith.

Providing detailed 2007 and first half 2008 foreclosure
auction results for all Chicago region
municipalities as well as City of Chicago
community areas and wards, the Woodstock Institute report found that:

1. Recent increases in foreclosure auctions greatly
outpace increases in foreclosure filings. 
Between 2006 and 2007, foreclosure filings in the Chicago
region (excluding Lake
County
) increased by
roughly 32 percent while the number of foreclosures going to auction increased
by over 97 percent.

2. As investors shun foreclosed properties, a growing
share of foreclosure auctions is going to lenders.  In 2005, 70.5 percent of regional auctions
went to the foreclosing lender while 29.5 percent went to a third party
investor.  By 2007, this number jumped to
94 percent, with only six percent of properties in foreclosure auctions sold to
third party investors.  South Cook County and the City of Chicago had the largest share of properties
in foreclosure auctions reverting to the lender with 97.2 percent and 95.8
percent, respectively. 

3. The flow of properties into the REO inventory has
increased substantially.  Between 2005
and 2007, the number of properties entering into the regional REO stock
increased by 231 percent.  In total, over
22,500 properties entered the REO portfolio of lenders through foreclosure
auctions between 2005 and 2007, with nearly 13,000 in 2007 alone.

4. The cost of acquiring 2007 REO properties at auction
value exceeded $2.5 billion.  Several
proposals to mitigate the effect of vacant properties are under consideration
but the key issue is cost.   At the
current auction value, this report suggests that the overall cost could be
considerable.

5. The City of Chicago and
South Cook County
have the largest number of REO properties and the highest levels of REO
properties per mortgageable properties in 2007. 
In 2007, there were over 5,800 REO foreclosure auctions in the City of Chicago and over 2,100 in South Cook County. 
South Cook County
had the highest level of REO auctions per property in the region at 16 per
1,000 mortgageable properties, almost three times the regional level of 6.2 per
1,000 mortgageable properties.

6. A growing share of REO foreclosure auctions in the
City of Chicago
are on small multi-unit buildings.  The
share of City of Chicago REO
auctions that were on small multi-unit rental buildings was 36.5 percent, up
from 30 percent of REO auctions in 2005. 
Lenders have repeatedly stated that they have no interest in being
landlords, suggesting that these properties have been taken off the market,
reducing the available rental housing stock.

7. The problem is getting worse.  In the first half of 2008 alone, over 10,000
properties became lender owned.  This was
a nearly 98 percent increase over the first half of 2007. 

Beyond reporting raw foreclosure figures, Woodstock
Institute advocates policies and practices that reduce the neighborhood impact
of the foreclosure problem.  The
Institute has released a series of reports tackling issues such as the
concentration of high-cost loans in minority communities, lending patterns of
defunct mortgage companies, and, most recently, the growing number of
multi-family foreclosures.

For more information on our Chicago-region foreclosure
research program visit us at:

http://woodstockinst.org/programs/foreclosure-research/

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