Left Behind: Troubled Foreclosed Properties and Servicer Accountability in Chicago

Left Behind: Troubled Foreclosed Properties and Servicer Accountability in Chicago

The following report illustrates the relationship between foreclosures and vacant properties in the City of Chicago. It combines data from the City of Chicago on vacant and potentially vacant buildings with data on foreclosure filings, completed foreclosure auctions, and property transfers to better understand the number of vacant properties that have at some point been part of the foreclosure process. It identifies a group of ―red flag‖ properties which are troubled vacant properties where a foreclosure has been filed, but no outcome has been reached. For such vacant properties, particularly those that have been in the foreclosure process for many years, there are concerns that the servicer has chosen to ―walk away‖ from the property leaving no clear accountable party for problems that may arise there. The report also identifies a group of lender-owned, foreclosed properties that most likely are vacant and not in compliance with the City of Chicago’s vacant building regulations.

Vacant Properties and Foreclosures in Chicago

foreclosehouseVacant and abandoned buildings have been a problem in certain Chicago neighborhoods for many years. Shifts in population from economically distressed City neighborhoods to other urban neighborhoods, suburban communities, or other parts of the country led to an excess supply of housing and commercial buildings in parts of the City. Poorly maintained vacant buildings can destabilize communities by serving as a magnet for criminal activity, increasing the risks of fire or health hazards, and decreasing the values of nearby properties.1 At the end of the third quarter of 2010, 6.3 percent of the residential addresses in the City of Chicago were categorized as vacant for 90 days or longer by the U.S. Postal Service. Of these vacant addresses, 55.8 percent had been vacant for one year or more.2

The foreclosure and economic crisis has exacerbated the problem of vacant and abandoned properties in Chicago. Starting in 2006, distressed communities that were already dealing with vacant and abandoned building issues began to experience dramatic increases in foreclosure activity. Between 2006 and 2008, new foreclosure filing activity in the City roughly doubled from 10,268 in 2006 to 20,592 in 2008. The communities most heavily impacted by the City’s foreclosure problem, however, were largely concentrated on Chicago’s South and West Sides. For example, citywide in 2008, there were 36.2 foreclosure filings per 1,000 mortgeagable properties. However, in communities such as Englewood, West Englewood, Washington Park, and Chicago Lawn on the City’s South Side and North Lawndale, West and East Garfield Park, Humboldt Park, and Austin on the City’s West Side, foreclosure filings per 1,000 mortgeagable properties ranged from 67 to over 180.3

A number of factors drive up the volume of distressed, vacant and abandoned properties in communities hit hard by foreclosures. Through the foreclosure process, existing homeowners or tenants typically are evicted from a property upon completion of a foreclosure auction. This creates a vacant property. In some cases, these properties have been vacant for many months prior to the foreclosure being completed and, as a result, are damaged either due to lack of regular maintenance or through theft and vandalism. These properties are added to the inventory of available housing even if the building is not immediately marketed for resale. However, many communities hit hard by the foreclosure crisis have weak demand for housing for reasons such as high levels of unemployment, economic distress, physical deterioration of the building stock, declining property values, and lack of access to financing for interested buyers. This combination of growing numbers of distressed properties in certain communities and a lack of demand for those properties has led to an accumulation of properties for which there is no market.4

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