By Matthew Blake
April 18, 2009
 
Chicago, April 18 — President Barack Obama called the home mortgage
crisis in February a “crisis that strikes at the heart of the middle
class: the homes in which we invest our savings, build our lives, raise
our families, and plant roots in our communities.”

But that description misses a lot of what is going on, especially
in big cities like Obama’s adopted hometown of Chicago. Here – as in
much of the country – low-income renters are as much victims of home
foreclosures as are middle class homeowners.

Renters are usually just concerned with paying the rent every
month, not with mortgages. But they can pay the price when building
owners, who have taken out mortgages from banks in order to purchase
multi-unit properties, don’t pay their bills on time. So unlike
homeowners who may have invested in risky loans, renters played no role
in the housing bubble. After the bubble burst, thousands of tenants who
paid their rent and utility bills on time were evicted because of
landlords who defaulted on their mortgage payments.

Absent strong action from Washington, community groups and local
government in Chicago and elsewhere are tasked with helping these
renters.

Foreclosure rates are on the rise nationally. The data firm
RealityTrac reported Thursday that in the first quarter of 2009 there
were 803,000 foreclosures, a nine percent increase from the previous
quarter. Foreclosures should increase even more over the next three
months since Fannie Mae and Freddie Mac along with major banks such as
Wells Fargo lifted their foreclosure moratorium on March 31 .

The National Low Income Housing Coalition estimated in February
that more than 20 percent of properties facing foreclosure nationwide
are rentals. And since rental properties house multiple families,
renters actually make up 40 percent of all families nationwide who face
eviction.

That percentage is even higher in Chicago and cities like New York,
Los Angeles, and San Francisco with a high ratio of multiunit
buildings. In the six-county Chicago metropolitan region there were
60,000 foreclosures in 2008, according to a January 2009 study by the
Woodstock Institute, a non-profit research and advocacy group. About 32
percent of the foreclosed buildings were two-to-six unit rental
buildings. With as many as six families in one foreclosed building,
renters are estimated to make up almost 50 percent of all Chicago-area
residents who can face eviction when building owners go into
foreclosure.

“Chicago is a rental city,” says Mark Schwartz, a staff attorney for the Lawyer’s Committee for Better Housing.

The foreclosure problem in Chicago picked up in late 2006 and hit a peak in 2008, according to the Woodstock data.

“We started getting calls from renters a couple of years ago, “
says John Bartlett, an executive director for Chicago’s Metropolitan
Tenants Organization, which runs a tenants rights hotline. “They were
calling saying their building had been foreclosed and they had no idea
it was about to happen. The sheriff was at the door saying there were
supposed to be out now. It was not just displacement but sudden
displacement.”

The city of Chicago worked to combat this sudden uprooting of
responsible renters in August 2008. Mayor Richard Daley announced that
if a building is foreclosed and taken over by a bank, the bank must
give tenants 90 days to relocate before eviction. Another law was
passed by the city council last November that requires landlords to
inform tenants if their rental property was to go into foreclosure
court. Previously, landlords were under no obligation to tell tenants
of an imminent foreclosure.

More dramatically, Tom Dart, sheriff of Cook County, which includes
Chicago, made national headlines last October when he announced a brief
moratorium on all evictions. “It sounds like it’s an antiseptic
process, and it’s anything but that,” Dart explained to Newsweek last
month. “In the majority of the homes I was going into, there were
always little kids around—I mean, really young kids, and we’re taking
them and putting them out on the street. A lot of them were seniors,
and a lot of them had issues with dementia. Once again—we’re taking
them out to the street … Most of these neighborhoods are not good
neighborhoods. Once [their belongings are] out on the street, we leave.
While they’re off looking for transportation, the few things they own
are being stolen.”

As Dart describes, renters in the poorest neighborhoods have been
disproportionately impacted. Sixty to eighty percent of foreclosure
filings in low-income, highly African American and Latino Chicago
communities like Garfield Park and Lawndale were multi-unit rental
buildings.

But if Dart and the city have made evictions less traumatic, they
have not made them less frequent. As is the case nationally, Chicago
will likely see a foreclosure increase.

“In lieu of government intervention, foreclosure problems will
probably be worse in 2009,” says Geoff Smith, vice-president of the
Woodstock Institute. “The only way things will be better is strong
government intervention.”

If Smith is right, what would such government intervention look
like? One possibility mentioned by the National Low Income Housing
Coalition and the Massachusetts Law Reform Institute’s Judith Liben, a
leading expert on renters and the foreclosure crisis, is to force banks
– many of which received taxpayer-financed bailouts – to let renters
stay.

But the Illinois Mortgage Bankers Association (which did not return
several calls for this story) has argued that banks are not in the
property management business. Smith says the banks might have a point.

“You would think the bank would want to keep the renters—why would
want a property to remain vacant?” he explains. “But you’re making the
bank manage the building and it’s very hard to have a uniform,
agreed-upon policy to deal with renters. Their number one goal is to
sell that property to a new owner. Existing tenants are a potential
impediment.”

Washington has yet to fully confront the problem.

The homeowner assistance plan Obama announced in February directs
$1.5 billion to assist renters displaced by foreclosure. Another $2
billion in neighborhood stabilization funds could also go to help
renters.

While hardly inconsequential, such funding is a fraction of a
homeowner assistance program expected to cost $275 billion, most of
which is government guarantees to banks that adjust loans. And it is an
even smaller percentage of the $700 billion in Troubled Asset Relief
Program money.

As of now, there are no federal laws to protect tenants. “The
status of renters in foreclosure is a matter of state law,” explained
the National Low Income Housing Coalition in their report on evicted
renters. But Rep. Keith Ellison, a Minnesota Democrat, has proposed
doing on a federal level what has been done in Chicago and other
municipalities and states – giving tenants 90 days to relocate after
their building is taken over by a bank. Tenants could also stay in
their apartments until their lease ends. While the legislation has not
gone anywhere, it did gain as a cosponsor Barney Frank, the veteran
Massachusetts Democrat and chairman of the powerful House Financial
Services Committee.

But Obama, who has eloquently described the plight of first-time
homeowners, has not used his bully pulpit to draw attention to the
plight of tenants. Nor, for the most part, have members of the
administration and Congress.

The lack of national attention on the issue may be leading to
increased evictions of renters who are unaware of what rights they may
have in an economic bailout tilted toward financial firms and
homeowners.

“Banks and landlords often just hope the renters are going to leave
out of frustration,” says Schwartz of Lawyers Committee for Better
Housing. “And that’s usually what happens.”

 
 
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