Rising foreclosure numbers point to increase in abusive high-interest loans

By Cathy Klump

Over 60 bankers, community organizations, government representatives and foundations attended the National Training and Information Center’s Chicago Foreclosure Crisis meeting on Dec. 4.NTIC’s goals were to: 1) share new data on foreclosures analyzed by NTIC and 2) start a conversation with the various entities investing in Chicago neighborhoods about solutions to the foreclosure crisis.

NTIC analysis shows that the total number of foreclosures started in Chicago has nearly doubled, from 4,927 in 1993 to 8,556 in 2001. More than $800 million in home mortgages are also at risk meaning that the homeowner has a foreclosure started against them and is experiencing severe financial distress. Perhaps most significant is that over 50 percent of the foreclosures started are happening within the first two years of the loan.

The U.S. Department of Housing and Urban Development (HUD) has said that mortgages that go into default within the first two years most likely include some type of mortgage fraud that is reducing the borrower’s ability to repay. In fact, among high interest rate mortgages (those with interest rates of six percent or more above 30-year Treasury), younger mortgages accounted for 28 percent of foreclosures started in 1993 but soared to 75 percent in 2001.

Attendees discussed the neighborhood implications of the foreclosure data and shared what they were currently doing to curb the growth in foreclosures. Theresa Welch of the South Austin Coalition Community Council (SACCC) explained their efforts to enforce the Illinois regulations against predatory lending. Rev. Christine Schrey of the Northwest Neighborhood Federation provided a description of their efforts to create a Northwest Side Housing Center and a pool of funding to fill the affordability gap so that borrowers can refinance out of bad loans.Neighborhood Housing Services of Chicago also surfaced their innovative project to acquire vacant, bank-held properties and then rehab them to sell to first time homebuyers in their nine target neighborhoods.

Related Article: NTIC research leads to significant policy reform

Cathy Klump is a Director of Strategic Planning and a National Housing Organizer at NTIC. Cathy is kicking off a national campaign to rid neighborhoods of abandoned buildings and working to continue a longstanding relationship with HUD and the Federal Housing Administration for policy and program reforms. Prior to joining NTIC in November 2001, Cathy was the Director of the Neighborhood Technical Assistance Center in East St. Louis, IL and vice-chair of the East St. Louis Action Research Project of the University of Illinois at Urbana-Champaign. Cathy holds a Masters degree in Urban and Regional Planning from UIUC.

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