As a result, foreclosure rates have spiked. Between 2005 and 2006, the Chicago region saw a one year increase of
over 36 percent––with every indication that the trend will continue into
2008.

The Office of the Comptroller of the Currency estimates
that banks lose between $40,000 and $50,000 per foreclosed home, with some
lenders reporting loses of 50 cents on the dollar. Many of the largest mortgage
lenders in the country have folded as foreclosures continue and losses continue
to mount. But there is another side to
the story, one which is too often overlooked by banking regulators and mortgage
professionals.

In Chicago,
Woodstock Institute has found that for every home where a foreclosure is
initiated, there is a significant negative impact on property values of the
surrounding homes. In fact, for each
foreclosure that is initiated, there is about a one percent decline in every
other property located within an eighth of mile. This finding corresponds to a city-wide loss
in single-family property values of just over $1.39 billion and an average
cumulative property value effect of more than $371,000 per foreclosure. And that’s just Chicago.

Foreclosure rates are readily available at the regional
and national level. But as part of a new
initiative to shed light on the neighborhood impact of predatory lending,
Woodstock Institute will continue to track foreclosures and will release a
year-to-date analysis of foreclosures in mid-2007, giving community
organizations and policymakers the up to date tools they need to make informed
decisions.