Mortgage crisis hits home

Elise Foley

The number of Evanston homeowners unable to pay their mortgages tripled in the past year, leaving more than 300 homes in a state of mortgage crisis.

About 220 homes in Evanston are in a pre-foreclosure state, meaning owners are three or more months behind on mortgage payments, according to RealtyTrac.com, a realty Web site that compiles a foreclosure database. About 65 properties are bank-owned, and about 35 are being sold in auction, often at below-market prices.

The problem is rooted in a national economic downturn. Federal Reserve Chairman Ben S. Bernanke said Tuesday that more needs to be done to prevent foreclosures, which could hasten what many say is a coming recession in the national economy.

In Evanston, the crisis will likely lower property values and hurt the city’s income from taxes, said John Lee Bingham, a realtor with Baird and Warner who submitted a report to Mayor Lorraine Morton about the problem.

Morton was visibly upset when speaking about the crisis at her State of the City address Feb. 22.

“I’m upset about this because when the council is working on a budget there are anticipated revenues,” Morton said. “We now have, when we add those numbers up, properties from which the city will not receive any money. We want to maintain what we’re doing and we need money to do it.”

Many homes in crisis are in the Fifth Ward, where Ald. Delores Holmes (5th) said the city is working to figure out the issue. The city approved on Feb. 27 a property tax increase of 7.02 percent, but these taxes would not come in from foreclosed properties.

“It certainly puts the city in more financial restraints, because the money’s not coming in,” Holmes said.

The city has tried to attack the problem, in part by educating residents about “predatory loans,” said Housing Planner Donna Spicuzza. These loans often pressure homeowners into mortgages that seem fair at first but later charge excessive fees, according to the National Association of Realtors.

The problem of foreclosures has grown worse in the past year due to skyrocketing mortgage rates and, sometimes, irresponsible financial decisions, Bingham said.

“Once in a while you’d even see what I think is the most foolish thing of all, and that would be people living way beyond their means,” he said. “We joke about it, but I’ve seen people living in Wilmette in a big house and they have no furniture. Those are the kind of people who get into real trouble when there’s a downturn in the economy.

“I’d say most people are one health problem away from bankruptcy.”

Property values are based on supply and demand, Bingham said, which makes foreclosures a problem for the entire neighborhood. When homeowners are unable to pay their mortgage, their home can be seized by the mortgage company and sold for a lower price than the market value. This drives down prices in the surrounding area, making neighbors sell their homes for less than they paid originally.

Bingham said the housing market could be helped by real estate agents and homeowners looking to other strategies to sell their properties instead of lowering prices, which in turn lowers prices in the whole area.

“People depend so heavily on price to sell their condos and their houses, when you can benefit everyone in the building and keep the price respectable,” he said.

Although Evanston’s housing market is better than in many cities, Bingham said he has seen many property owners lose their homes to high mortgage prices. The situation is made worse by the fact that 10 years ago, home-ownership was at an all-time high in the U.S.

“It’s devastating for so many people that this has happened,” Bingham said. “I was watching people buy homes that had dreamed of owning homes all their life. They’re losing those homes now.”

elise.fole[email protected]