Home counseling centers are struggling to keep up with the demand for homeowner assistance after a flood of new foreclosures in Chicago during 2007, according to just-released data by a local nonprofit community agency.
The data, compiled by Chicago-based National Training and Information Center (NTIC), shows that the greatest percentage increase in foreclosures occurred in near West and near North Side neighborhoods during 2006. Logan Square, for instance, had a 108-percent increase in foreclosures from 2006 to 2007, from 101 to 210 foreclosures. The community ranked 14 out of 77 Chicago community areas in foreclosures.
West Town, which encompasses Wicker Park, Bucktown and Ukrainian Village, also saw a huge increase, up 87 percent in 2007 to 234, according to the study. Humboldt Park had 57 percent more foreclosures, or 426, ranking 39th among the city’s community areas.
Housing counselors working in community agencies say they are dealing with the consequences of loan products that took advantage of unsuspecting consumers in the housing market.
“We are swamped with people who are in trouble,” said Ofelia Navarro, executive director of the Spanish Coalition for Housing, a home counseling agency that serves neighborhoods, including in Humboldt Park. “A lot of the cases are difficult-they are upside down on their mortgage [payments], or don’t have the money to pay.”
The Loop and nearby lakefront communities also suffered from a dramatic rise in foreclosures, showing that even affluent areas of the city are not immune from the effects of the housing meltdown. Lincoln Park’s 79 foreclosures for 2007 were up 65 percent over those in 2006. The Loop experienced a 51-percent rise, climbing to 83 foreclosures, while the Near North saw a 33-percent increase in foreclosures, up to 249.
“We’ve been trying to track this as it’s exploded in the Chicago area,” said Andrea Frye, spokeswoman for the NTIC, adding that the organization is getting feedback from partner community groups indicating that people are stuck in bad loan products.
“There is something structurally that needs to be addressed with these loan products,” she added. “It’s a benefit to everyone to set up people to be successful.”
The group’s study found that of Chicago’s 14,250 new foreclosure cases in 2007, more than 87 percent were on loans not covered by the Illinois High Risk Home Loan Act. That bill, passed in 2003, aimed to regulate high interest rate loans.
Many of those sub-prime loans had interest rates just under the cut-off for loans that had to conform to the act. They nevertheless remained at high rates in comparison to conventional mortgages, with interest rates between 3- and 6-percent higher than those of the U.S. Treasury rate.
In addition, many of the city’s foreclosures last year were on so-called “young loans”-those less than 24 months old. Ninety percent of those loans likely did not have to conform to the act. Of the young loans that went into foreclosure, 75 percent were on adjustable rate mortgages, with rates that can adjust up or down every six months after an initial introductory fixed rate.
Navarro noted that most clients facing foreclosure at the Spanish Coalition for Housing had high interest rates or adjustable rate mortgages.
“For example, the [interest rate] may start at 5.5 percent but now it’s 8.5 percent,” she said. “These loans adjust every six months. We have not seen any [rates] going down unless we intervene and get a loan modification.”
The coalition group has taken the route many home counseling agencies have of late: they are working directly with lenders to renegotiate interest rates to a temporary lower-rate, or to one that is fixed for the life of the loan. The group’s counselors also negotiate to get overdue mortgage payments added back into the mortgage.
The number of people needing help has exploded across the city. Navarro has seen her clientele expand from a largely Latino population to one that is more diverse. Meanwhile, four of the five counselors on her staff work only with foreclosure clients or those who are having other mortgage troubles.
Navarro indicated she might have to hire additional staff to cope with the sheer numbers of people looking for help.
“I strongly feel we haven’t seen the worst of it yet,” she said. “I don’t see it having a dramatic slowdown until late next year.”