The Chicago Foreclosure Chapter

Posted in Foreclosed Homes, Foreclosure, Foreclosure Homes, Foreclosure Listings, Foreclosure Property, Foreclosures, Mortgage Rates, Mortgages, August 20th, 2007 |

One by one the chapters of the foreclosure story are unfolding. That which began in Wall Street has spread on to Main Street. The author of the script is the ARM or Adjustable Rate Mortgage. It initially gives the borrower a teaser interest rate, which is low. Later it resets at a much higher rate. The borrowers fall for the smart talk of the lenders who tell them that to avoid the increase they can easily go for refinancing.

Inevitably ARM’s gained in popularity during the first half of this decade. Brokers with the bait of commission dangling before them went all out to sell the mortgage scheme. The legal side with was purposefully not fully explained to the borrowers. But when the time came for the actual work of refinancing it was difficult to get in touch with the person whom the lenders had never seen. When the foreclosure went public prospective buyers began to crowd in. Such a situation spells trauma for a family with children.

Some are fortunate to refinance into a longer period fixed rate mortgage but others have to move out bag and baggage unable to repay mounting debts.

Chicago recorded 10,294 foreclosures in 2006 according to reliable sources keeping track of the situation. The number is 36% higher than the figures of 2005. This year and in 2008 the fear is that the numbers might rise to anything between 16,000 and 17,000.
During the early part of the defaulting crisis the families who were mostly affected came from the low or moderate income groups. However the scenario in Chicago is not quite so bad as that in other parts of the country because the economic picture here is diverse. A factory closing down in one place does not affect the whole of Chicago, unlike the tendency in places like Michigan and Ohio.

In Chicago foreclosures on prime loans jumped to 46% in 2006 as compared to 21% in 2002. Until the new players butted in Fannie Mae and Freddie Mac were the two largest loan wholesalers dealing with conventional loans. But the new comers saw to it that borrowers could not go back to the shelter of the traditional market by imposing fines for premature loan closure. The mortgage market became liquid trying to accommodate all and sundry. Solutions are being tried out but till then the borrowers remain in limbo.