“If I try to sell this house,” Froylan Sr. says. “They won’t even give me a stick of gum for it.”
The Nuñezes’ story is replicating itself on blocks throughout the region. New data from Woodstock Institute found that in the first three quarters of 2010, more than 25,000 homes in the Chicago region completed the foreclosure process and were repossessed by the lender. Lender-owned foreclosed properties often stay vacant for a long period of time—our analysis shows that, in Chicago, it took lender-owned properties almost 16 months to be absorbed into the housing market. This figure was even worse in predominantly minority communities: lender-owned homes took almost 17 months to be absorbed in those communities. As the Nuñezes know all too well, an accumulation of vacant homes causes blight, which destabilizes neighborhoods and local real estate markets. Vacant properties also weaken the ability of municipalities to maintain a comfortable quality of life by shrinking tax rolls and increasing maintenance costs.
The new Woodstock data highlighted key areas of concern where more and more properties are completing the foreclosure process, the vast majority of which are becoming lender-owned. Throughout the six-county Chicago region, completed foreclosures rose by 45 percent from the third quarter of 2009 to the third quarter of 2010. Ninety-five percent of these properties were repossessed by the lender. The highest areas of growth within the region were Northwest Cook County (93.7 percent), Southwest Cook County (74.4 percent), and South Cook County (50.9 percent). For more community-level data, please see the fact sheet and the press release.
Additionally, the recent “robo-signing” controversy may prolong the time that vacant properties drain communities’ resources. Some mortgage servicers have implemented moratoria on foreclosures in some or all states in order to review their files and ensure they were properly prepared. One of the components of the moratoria is that lender-owned properties cannot be listed or sold during the moratorium while their files are being reviewed, which means that a large number of properties will stay vacant for an even longer period of time and contribute to neighborhood decline in areas that have high concentrations of vacant properties—namely, communities of color. Additionally, potential home buyers may be deterred from buying foreclosed homes because of the added delay and concerns that the lender listing the property for sale may not be able to prove that they have the right to sell the property.
The data show that vacant, foreclosed homes are going to continue to be a major concern for local governments and families like the Nuñezes. In order to recover, neighborhoods hard hit by the foreclosure crisis are going to need access to safe and sustainable credit so that potential homeowners can turn vacant properties into homes. That’s why we need to expand the Community Reinvestment Act and make sure financial institutions offer safe and sustainable products and services in South Chicago and throughout the Chicago region. You can take action by asking your representative to support the American Community Investment Act of 2010.
If you have questions about the foreclosure crisis in the Chicago region, please join our researchers on a conference call on Tuesday, October 26. You can also tweet questions to @WoodstockInst before or during the call.