WOODSTOCK INSTITUTE | FEBRUARY 2011 American Planning Association February 22, 2011 The Current Foreclosure Crisis – Trends and Roadblocks to Recovery Geoff Smith | Senior Vice President Woodstock Institute | Chicago, Illinois |

Woodstock Institute Chicago-based non-profit research and policy organization working locally, nationally, and internationally to promote economic development in lower-income communities and communities of color Work with financial institutions, community organizations, foundations, government agencies, and others. Areas of expertise include CRA and fair lending policies, financial and insurance services, small business lending, community development financial institutions, and economic development strategies. Key program area: Housing Policy and Practice Mortgage Lending Foreclosures WOODSTOCK INSTITUTE | MONTH YEAR

Mortgage Lending: Growth of Subprime Lending WOODSTOCK INSTITUTE | FEBRUARY 2011

Mortgage Lending: Subprime Mortgages Target Borrowers of Color WOODSTOCK INSTITUTE | FEBRUARY 2011

Mortgage Lending: Subprime Mortgages Concentrated in Communities of Color WOODSTOCK INSTITUTE | FEBRUARY 2011

Regional Quarterly Trends in Foreclosure Filings, 2005 to 2010 WOODSTOCK INSTITUTE | FEBRUARY 2011

Patterns of Regional Growth in New Foreclosure Filing Activity, 2010 Chicago Six County Area – ,986 residential properties with a foreclosure filings 14.1% increase from 2009 Regional Growth Patterns – 2010 McHenry County – 33% increase Will County – 21.4% increase Cook County – 10.6% increase Suburban Cook – 18.3% increase – Northwest Cook – 24.5% increase Chicago – 3% increase – Loop – 53.7% increase – Englewood – 20.3% decline – Grand Boulevard – 9.2% decline WOODSTOCK INSTITUTE | FEBRUARY 2011

Emerging Issues – Condo Foreclosures in the Suburbs Condo foreclosures continue to rise, expand to suburbs in 1H 2010 Increase from 1-3Q 2009: Region – 42.5% City of Chicago – 34.9% Share of total new foreclosure filings in 1-3Q 2010: Region % City of Chicago – 26.6% In certain suburban regions, a substantial share of newly filed foreclosures are on condos Northwest Cook – 43.1% of all new FC filings 64.8% increase from 1-3Q 2010 North Cook – 29.9% 57.9% increase Southwest Cook – 23.4% 59.4% increase DuPage County – 22.3% 31.7% increase WOODSTOCK INSTITUTE | FEBRUARY 2011

Accumulation of Foreclosure Activity in Communities of Color, 2006 to 1H 2010 WOODSTOCK INSTITUTE | FEBRUARY 2011

WOODSTOCK INSTITUTE | OCTOBER 2010

Patterns of Regional Growth in Completed Foreclosure Auction Activity, 2009 to 2010 Chicago Six County Area – ,981 residential properties completed foreclosure process 95.3% entered REO status 25.2% increase in completed auctions from 2009 Regional Growth Patterns – 2009 to 2010 Will County – 24.8% increase Cook County – 27.8% increase Suburban Cook – 37.4% increase – Northwest Cook – 66.1% increase – Southwest Cook – 41.9% increase Chicago – 19.9% increase WOODSTOCK INSTITUTE | FEBRUARY 2011

Impacts of Foreclosure Homeowner Loss of shelter Loss of assets Displacement Damaged credit Family Stress Communities Blight Neighborhood instability Increases in violent crime Decreases in property values Increased costs for municipalities and decreased revenues to manage those costs and to improve neighborhoods WOODSTOCK INSTITUTE | FEBRUARY 2011

Concentration of Unsold Properties in Communities of Color Disparate Impact of Lender-Owned Properties Unsold REO Properties 64% are concentrated in highly African American communities Absorption Rate It will take 25% longer for REO properties in highly African American communities to be absorbed into the market. Value Declines Highly African-American communities saw declines of 35.1%, while primarily white communities saw declines of 17 percent. WOODSTOCK INSTITUTE | FEBRUARY 2011

Communities of Color Hardest Hit by Vacant Properties WOODSTOCK INSTITUTE | FEBRUARY 2011 Vacant Properties Associated with Foreclosure Vacant Properties 18,320 properties identified as vacant or potentially vacant by the City of Chicago Nearly 70% of all vacant properties on the Chicago Vacant Buildings Index are associated with a foreclosure Red Flag Properties 1,896 properties on the Index are “red flag” properties, many of which may be lender walkaways 71% of red flag properties are located in highly African American communities, compared to only 6.5% in predominately white communities Impact Destabilize communities Burden to municipalities

Roadblocks to Recovery Weakness in Impacted Local Real Estate Markets Accumulation of vacant properties A foreclosure reduces a property’s value by 27 percent, on average A foreclosure reduces surrounding property values by.9 percent Inventory absorption Underwater Homeowners 19.7 percent of Illinois mortgages underwater in 2Q 2010 Other Barriers Foreclosure process and disposition of foreclosed properties Disproportionately high unemployment Credit Pullback Disproportionate lending declines 68.8 percent decline in home purchase lending in 2008 in region’s African American communities, compared to 54 percent regionally – 44 percent decline in predominately white communities Tighter underwriting and uncertain appraisals Credit scores and income issues WOODSTOCK INSTITUTE | FEBRUARY 2011

Zip Codes with Highest and Lowest Credit Scores in the Chicago Region – June 30, 2009 Zip CodeArea NameAverage740+Less than Chicago - Englewood %52.6% 60636Chicago - W. Englewood %49.6% Chicago - W. Garfield Park/E. Garfield Park %49.1% 60827Riverdale %47.2% 60644Chicago - Austin %46.3% 60043Kenilworth %0.0% 60558Western Springs %3.4% 60022Glencoe %2.6% 60091Wilmette %2.3% 60010Barrington %4.0% WOODSTOCK INSTITUTE | FEBRUARY 2011

Impact of Low Credit Scores – Access to Refinance Lending Change in Chicago Area Conventional Refinance Originations, 2008 to 2009 WOODSTOCK INSTITUTE | FEBRUARY 2011

Interventions: Helping Homeowners Home Affordable Modification Program (HAMP) Projected to help 3-4 million Fell short of goals, actually has helped a little more than.5 million helped Challenges addressing emerging roadblocks Limited mortgage servicer accountability Proprietary modification Servicers completed 696,992 proprietary modifications from 3Q 2009 to 3Q 2010 Lower monthly payments are not guaranteed as in HAMP Limited oversight and transparency Higher redefault rates (after six months % for proprietary mods, 10.8% for HAMP mods) Court mortgage foreclosure mediation programs: Philadelphia Facilitates communication between borrower and lender 30 percent of homeowners who participated in Philadelphia were able to reach a settlement Foreclosure counseling 45 percent of homeowners who complete counseling are able to stay in their homes Serious gaps in counseling capacity in areas of high foreclosure activity WOODSTOCK INSTITUTE | FEBRUARY 2011

Interventions: Helping Communities and Looking to the Future Neighborhood Stabilization Program (NSP) Illinois has received $362.8 million in NSP funds from three rounds of funding Challenges: competing with investor purchases Weak demand in re-sale market Municipal response to vacant properties Early warning databases, vacant property registry, liens and land banking Increased servicer accountability around vacant properties Boston Community Capital SUN program Uses borrowed funds to purchases REO properties, sells back properties to original owners CRA Modernization Ensures access to credit Updates CRA to reflect practices of the current financial landscape Financial Reform Foreclosure crisis has roots in discriminatory lending practices Financial reform keeps bad products out of neighborhoods WOODSTOCK INSTITUTE | FEBRUARY 2011

American Planning Association February 22, 2011 The Current Foreclosure Crisis – Trends and Roadblocks to Recovery Geoff Smith | Senior Vice President Woodstock Institute | Chicago, Illinois | WOODSTOCK INSTITUTE | FEBRUARY 2011