Advocates Propose "Win Win" to Cure Chicago's Foreclosure Contagion

The foreclosure endemic is not unique to the River North area of Chicago, which runs parallel to the Chicago River. Although, certain states and municipalities managed to subdue foreclosure inventories, foreclosures remain a looming crisis throughout the city. As real estate prices continue to slump in Chicago, the moratorium - to stall foreclosures, that was due to expire, received a three-month extension through April 1, 2011.

In an effort to minimize foreclosures and vacancies, non-profit organizations, private investors and community leaders propose that an affordable housing program would serve as a "win-win" for all involved parties: distressed property owners, homeowner associations, communities, low income families as well as investors.

Despite the positive reports by RealtyTrac that foreclosure rates dipped below 14 percent in November 2010, the decline is attributable to the federal moratorium. Data, released by Lender Processing Services (LPS), indicates the total U.S. foreclosure inventory rate increased by 4.08 percent at the end of November.

Insiders, who are familiar with the situation, forecast that another series of foreclosures are imminent in the Chicago metropolitan area, unless there is an immediate solution. LPS also documents that Illinois has a 5.7 percent inventory on foreclosed property, which happens to rank fourth among three other states: Florida, Nevada and New Jersey, respectively.

The problem is that Chicago does not have an organic real estate demand to offset the glut of homes facing foreclosure. Along the corridors of Larrabee and Kingsbury, north of Chicago Avenue, condominiums to riverfront homes have been afflicted by the foreclosure contagion. (As of January 2011, RealtyTrac's statistics show 344 foreclosures in the 60610 zip code).

In lieu of the ominous concerns over the next series of Chicago foreclosures, coupled with the implications of displacing an exorbitant number of distressed owners - 27th ward, alderman Walter Burnett, as well as organizations like Mercy Homes Chicago and Enterprise Community deem the "affordable housing program" as the best solution to the foreclosure quandary. Representatives propose that an affordable housing program will diminish foreclosures, minimizing vacancies.

"The objective is to keep vacancies at a minimum and families in their homes," says Bill Goldsmith, the president of Mercy Portfolio Services (MPS). In confluence with the City of Chicago, MPS manages $169 million National Stabilization Program (NSP) initiative. MPS was established as a wholly owned subsidiary of Mercy Housing, Inc. in response to help quell the nation's foreclosure predicament.

Rob Grossinger, the vice president for national foreclosure advocate group, Enterprise Community Partners, Inc., says, "Non-profit organizations and private entities have already been assisting Chicagoans, who had defaulted loans."

In Cook County, it's easier for investors to intercept a home before the bank forecloses on the loan. Mercy Housing, Inc. and Enterprise Community give homeowners, who are on the brink of foreclosure the opportunity to circumnavigate foreclosure.

The process entails an investor or company negotiating a short sale with the bank or server. Depending on whether the homeowner can afford to maintain the newly structured home loan, or prefers to stay reside in the property as a renter, the redevelopment partner assumes the note. In cases, where owners opt to walk away from the property, the investor resells the property to a new owner or a qualified low-income family backed by government funding and grants.

"Property owners don't realize that foreclosures also drive up condominium and homeowner association fees," asserts Mr. Burnett. Since the Chicago Housing Authority (CHA) has a 30 percent stake in the area, coupled with the need to find housing for the former residents of the Cabrini-Green housing project, Mr. Burnett perceives the impending foreclosure problem as a solution to keeping condominiums and single family homes occupied. "It also prevents these homes from becoming havens for drug users and other crimes," Mr. Burnett adds.

In an effort to stabilize the community's economic infrastructure of what was once part of Cabrini Green, the alderman is in negotiations with prospective retailers. Mr. Burnett disclosed that the Wisconsin-based grocer, Roundy's plans to open a store at 1515 N. Clybourn (the former home of the YMCA), adjacent to the new Apple Store in Lincoln Park. There are other proposals for a hotel, movie theatre along with a mixed-use space.

Meanwhile, on the other side of the foreclosure debacle, some owners consider affordable housing to be a threat to the areas prime property value and inequitable to homeowners, who paid premium real estate prices.