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“These new data show that even those buyers who took the less risky route of buying a home with a conventional mortgage are not immune from the impacts of the foreclosure crisis,” said Spencer Cowan, Vice President of Woodstock Institute. “Homeowners who have had a financial situation stable enough to pay their mortgage for many years are now going into foreclosure. These findings track with geographical trends showing that lower-wealth communities were hit hard early in the crisis, while in recent years, more affluent neighborhoods have seen elevated levels of foreclosure activity.”

 

“Without concerted effort to address the forces that drive foreclosure activity, such as negative equity and unemployment, foreclosures will continue to drain wealth from all corners of our society,” Cowan says.

 

The data on trends in foreclosure filings and auctions in the Chicago six county region in the second half of 2011 show that:

 

Conventional mortgages represent a growing percentage of overall new foreclosure filing volume. At the beginning of the current downturn, mortgages of single-family homes entering foreclosure were almost equally divided between conventional and government-backed fixed rate loans, at 50.1 percent of filings, and riskier mortgages, at 49.2 percent of filings. By 2011, 68.2 percent of single-family home mortgages entering foreclosure were conventional or government-backed loans, and only 29.4 percent were adjustable rate mortgages (ARMs) or balloon mortgages.

o From 2008 to 2011, between 20.7 and 24.1 percent of all filings were on loans originated before 2005.

 

Foreclosure filings in recent years consist primarily of mortgages originated during the period between 2005 and 2007, suggesting that underwriting during that period did not adequately ensure that the borrowers had the ability to repay the loan as agreed. Over a quarter of all single-family mortgages entering foreclosure in the six county region between the beginning of 2008 and the end of 2011 were originated in 2006, and two-thirds were originated between 2005 and 2007.

 

Foreclosure filings for the second half of 2011 continued the downward trend that began in the fourth quarter of 2010, dropping to about the same level as in the second half of 2008. Overall, there were 30,943 foreclosure filings in the six county Chicago region during the second half of 2011, compared with 40,775 for the second half of 2010, a decrease of 24.1 percent. For the full year, foreclosure filings decreased by 18.9 percent, from 76,986 in 2010 to 64,877 in 2011.

o All six counties saw declines in foreclosure filings, ranging from a decrease of 28.6 percent in Will County to 11.6 percent in Lake County.

o The City of Chicago experienced a decline of 20.1 percent in foreclosure filings between 2010 and 2011.

 

While the number of foreclosure filings continued the general downward trend that began in the fourth quarter of 2010, the number of auctions of foreclosed properties increased for the second consecutive quarter. The number of auctions grew from a low of 3,604 in the second quarter of 2011 to 4,594 in the third quarter, an increase of 27.5 percent, and to 7,172 in the fourth quarter, or 56.1 percent over the third quarter. Between the second and fourth quarters of 2011, the number of auctions almost doubled.

 

For more information, please contact Spencer Cowan at scowan@woodstockinst.org or 312-368-0310.