Boom shifts to foreclosures
U.S. activity nearly doubles in year; experts cite variety of factors
By Mary Umberger | Tribune staff reporter
August 22, 2007
The shriveling subprime mortgage market may be getting the lion's share of the blame, but industry
experts say chaos in subprime lending is not the only factor in the financial squeeze that has
pushed national foreclosure activity up 93 percent from a year ago.
RealtyTrac, a foreclosure data firm in Irvine, Calif., reported Tuesday that the nation saw about
179,600 homes in some stage of foreclosure last month, one for every 693 U.S. households.
And though the Chicago area saw a slight month-to-month decline in July, foreclosures for the first
half of the year are up 42 percent here from a year earlier, according to Rick Sharga, a RealtyTrac
The firm said many property owners with adjustable-rate mortgages who were seeing their
payments rise were shut out of refinancing into better rates because of the subprime lending crisis.
quot;Interest rates are just one of the culprits,quot; said Marki Lemons, a Chicago
real estate agent who specializes in pre-foreclosure sales. She said it is
one of a trio of factors she sees regularly. Taxes are another. quot;We're in a
city that has an abundance of new development, and people aren't fully
assessing what their taxes will adjust to in 12 to 18 months -- in some
cases it's double what they thought they were getting. Assessments are a
third. quot;And we have a large percentage of condos, and people are seeing
increases in monthly assessments and special assessments. In some of
those cases they have doubled, also.quot;
The situation has grown so serious that consumer-advocacy groups in California, where RealtyTrac
said foreclosures were running at three times last year's pace, on Tuesday called for the state to
declare a moratorium on foreclosures. They say consumers have been victimized by predatory
lending or otherwise are facing a mortgage-induced squeeze that threatens to put thousands out of
quot;A moratorium doesn't really fix the situation,quot; said Lynnette Briggs, a counselor for the DuPage
Homeownership Center in Wheaton. quot;You can postpone the foreclosure but the steam just keeps
quot;What we need in order to recover are more refinancing options and more loan-modification
Illinois' 5,530 homes in foreclosure in July put the state 15th in the nation, RealtyTrac said. Of
those, 4,652 were in the Chicago area.
That works out to one of every 930 households in Illinois, according to RealtyTrac. In Nevada, the
No. 1 state for foreclosures, it's one per 199 households.
The firm said 43 states saw year-over-year increases, with five -- California, Florida, Michigan, Ohio
and Georgia -- making up more than half the total.
California and Florida suffer from high foreclosure rates because rapid appreciation led buyers to
borrow huge amounts of money, while the economy in Michigan and Ohio has been weak. Many
Georgia homeowners relied on subprime mortgages, and the region also saw a significant number
of mortgage fraud cases.
RealtyTrac saw one small glimmer locally.
quot;Actually, Chicago had a good second quarter relative to the rest of the country,quot; said Sharga.
quot;Chicago's foreclosure activity was down 6 percent in the second quarter compared to the first
quarter, while the rest of the country was going up.
quot;But that dropping-back by 6 percent is a number that's still almost twice last year's first-quarter
number,quot; he said.
Nonetheless, real estate professionals say the pain is widespread.
Hudson & Marshall of Texas, an auction firm that specializes in foreclosure properties, conducted a
sale last week of 190 Chicago-area homes attended by hundreds of bidders.
quot;When we were in Chicago for an auction last fall there were about 25 homes auctioned,quot; said
Crystal Wright, a spokesman for Hudson & Marshall.