Poorer neighborhoods hit hardest, but wealthy, middle class also squeezed

Posted On: December 2007

The home mortgage meltdown isn’t just gutting the poorer parts of town.

It’s beginning to hammer wealthy and middle class Chicago neighborhoods like Lincoln Park, Lincoln Square, Irving Park, Portage Park and Mt. Greenwood — all areas where home mortgage foreclosures have shot up by 100 percent or more from 2006 to 2007.

Data released Monday by the National Training and Information Center shows that in Lincoln Park there were 18 homes in foreclosure during the first six months of 2006 — but that number more than doubled to 37 for the first half of this year.

In terms of sheer numbers, poor neighborhoods still are feeling the worst pain. But percentage increase in mortgage defaults is climbing faster in middle class areas, according to the data.

Poverty stricken West Englewood, for example, had 348 foreclosures, or 111 per square mile — yet that was just a 58 percent increase over the previous year.

But in middle class Portage Park, the heart of the Northwest Side Bungalow Belt, mortgage defaults jumped from 32 homes to 94, a whopping 193.8 percent.

"You had a lot of upper-income people taking advantage of the low rate adjustable rate mortgages, interest only loans and other programs that were available in order to move up, to get an extra two or tree bedrooms," said Jeff Metcalf, president and CEO of Record Information Services, which provided much of the raw data used NTIC analysis.
"And when the job loss, economic slowdown, or declining home values hits, it hits all spectrums rich and poor,” Metcalf said.

A glance at a list of foreclosure sales compiled by Metcalf and posted at www.suntimes.com, shows most of the homes are in poorer neighborhoods in than South and West Sides.

But Monday, a single family home at 2040 N. Sheffield, in the heart of Lincoln Park, was due to be auctioned by a lender to recover $625,000 still owed on the mortgage. Also up for auction was a 36th-floor Gold Coast condo at 111 E. Chestnut to reclaim $542,00 in borrowed money.

Harold Freeman’s home nearly wound up on that list. A truck driver, he had realized his dream of home ownership by buying a three-bedroom brick ranch in the mostly black, middle class neighborhood of Calumet Heights, near 87th and Stony Island.

Then came the one-two punch of a job loss and increases in his adjustable rate mortgage, which soared from 6 to 11 percent while he was out of work. That boosted his monthly mortgage from $1100 to $1900.

"My dream turned into a nightmare. The phone calls didn’t let up, morning noon and night. The pressure and stress brought on migraines. My doctor took my blood pressure and said ‘What’s going wrong in your life?’ ” Freeman said.
Freeman paid "a lot of money” to services to try and renegotiate his loan with no success. Then a month ago he found the non-profit NTIC, which charged him nothing and got his lender to shave off $60,000 in missed payments and knock the interest rate down from 11 to 6 percent.

"Then the calls stopped, the harassment stopped I can breathe,” he said.

Losing a home through can be traumatic for the family that is forced out, but it also can be devastating for those left behind.

In West Englewood, with an average of one foreclosure on every block, the empty homes not only drive down property values for everyone else and become boarded up eyesores, they become targets for vandals, scrap thieves, and drug dealers, said David Rose, director of research and technology at the NTIC.

Federal regulators hope to slow the rate of foreclosures by pushing the banking industry to freeze adjustable rate mortgage "resets,” for those who cannot afford them.

"Freezing the ARMS is a good first step,” said Rose, but he added that lenders should also work with borrowers to permanently change the terms of the loans so they don’t get into trouble again.

Also, government and lenders should to find new, healthier ways to bring mortgage money into poorer neighborhoods rather than just subprime lending.

"And to make sure this doesn’t happen again we’ve got to slap some rules on an industry that has gone virtually unregulated,” said Rose.

Overall in Chicago, the foreclosure rate was 40 percent higher for the first six months of this year compared to a similar period in 2006.


BY ART GOLAB Staff Reporter/agolab@suntimes.com
December 4, 2007

Posted On: December 2007

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