The average North Shore home may be worth more than a half-million dollars, but that hasn’t made the affluent area immune to this year’s national spike in foreclosures. The number of foreclosures in the area jumped fourfold, to 111, from fiscal 2006 to fiscal 2007, according to Jasmine Brewer, director of housing counseling for Interfaith Housing Center of the Northern Suburbs, a non-profit fair housing advocacy group.
“The myth is that there are no foreclosures in the North Shore, but there are,” Brewer said. “It’s happening in Winnetka, Morton Grove – we never thought we’d see that.”
The national rise in foreclosures began in late 2006, the product of a slow economy, plummeting home values and a surge in defaults on subprime loans. More and more homeowners found themselves unable to pay ballooning mortgages on homes that had fallen in value, according to a recent story in the New York Times. Two years on, with a recession roiling the economy, foreclosure rates are still accelerating and legislation clamping down on predatory lending has yet to be enacted. Yesterday, however, the House passed a bill that would provide $300 billion for new, refinanced loans for homeowners at risk of defaulting and nearly $4 billion in emergency aid to buy foreclosed and vacant homes in especially hard-hit areas. (That legislation is expected to be passed by the Senate and signed by the president within days, according to the Associated Press.)
But before those measures take effect, Evanston and Illinois officials hope to start saving homeowners from foreclosure with an upcoming public awareness campaign and a new state law regulating mortgage brokers.
The story is the same across Cook County, where foreclosures shot up 53 percent in June. By the end of this year, the county expects 42,000 foreclosures, about 10,000 more than in 2007. “We knew there would be increased filings, but no one anticipated to this extent,” said Paul Bernstein, chief deputy clerk of the chancery division at the Cook County Circuit Court.
When homeowners miss three months’ worth of mortgage payments, they receive notices of foreclosure, which means the lending bank will reposess their properties if they cannot bring their loan payments up to date. Most foreclosures in Evanston are in the 5th and 8th wards, areas with high numbers of minorities and elderly people, Brewer said. These groups are especially vulnerable to predatory lending, according to a 2005 University of North Carolina study.
On July 1, Senate Bill 1167 went into effect, which regulates mortgage brokers and mandates housing counseling for certain homebuyers. For example, first-time buyers and anyone refinancing an existing mortgage must undergo counseling before closing on an adjustable-rate or interest-only mortgage, loans that are usually more difficult to pay back. SB 1167 joins recent national efforts to quell the foreclosure crisis. The Federal Reserve unveiled a new set of rules regulating abusive mortgage practices on July 14, although the regulations will not go into effect until October 1, 2009.
There are only two licensed counseling centers in the North Shore, Interfaith and Ceda Neighbors at Work. The demands of SB 1167 and the rising foreclosures have kept them busy. Interfaith recently applied for more funding from the US Department of Housing and Urban Development and hired another staff member. For the first time, one Interfaith employee works exclusively with foreclosures.
Slowly, Evanston officials are coming up with a plan to combat foreclosures. Alderman Lionel Jean-Baptiste (2nd) mentioned the problem at the last City Council meeting, and said he wants to start a public awareness campaign to educate homeowners about foreclosure. Many residents, especially the elderly, may not understand the foreclosure process or know about the resources available to avoid it, he said. Two of Jean-Baptiste’s neighbors have been forced out of their homes by foreclosure, he said.
“Let’s begin to provide more assistance to victims so they know they can go to someone immediately,” he said.
After less than a month in action, it’s too early to tell whether SB 1167 is making a dent in the bad loans that led to so many foreclosures. Brewer has counseled several prospective buyers, advising them on whether the loan they’re applying for is affordable or not. But she can’t stop someone from taking a risky loan.
“I just make sure they’re aware of what kind of loan they’re getting into,” she said.
The number one piece of advice she offers her clients? Don’t wait. Homeowners have more options when they’re one month behind on payments rather than nine months. There are many refinancing programs available to help people pay their loans and keep their homes, Brewer said.
Illinois’ high foreclosure rate is the 11th highest in the nation, according to RealtyTrac Inc., the online marketplace for foreclosed properties. Nationally, the foreclosure trend shows no signs of abating. Rick Sharga, RealtyTrac’s vice president for marketing, told the Associated Press in June that foreclosures were unlikely to peak until this fall, as more loans made to borrowers with poor credit records reset at higher levels.
“It’s been an eye-opening experience for us,” Brewer said. “The foreclosures just snuck up on us.”
