Chicago Foreclosure Trends – March 2015

Chicago Foreclosure Trends – March 2015

Nationally, foreclosure trends have declined significantly.  However, in some states, foreclosure activity continues to be a problem.  It appears that problems remain primarily in those states with a judicial foreclosure process.  Illinois is one of those states.
Foreclosure trend levels for Illinois have improved.  Since 2012, foreclosure trend levels have consistently declined month by month.  However, in March 2015, there was a sharp spike in new foreclosure filings in the city of Chicago.  In March, the number of properties that received a foreclosure filing in Chicago, IL was 200% higher than the previous month and 74% higher than the same time last year.

According to RealtyTrac, the spike in foreclosure activity is not because of increased new mortgage defaults (those actually had a slight decline) but because of a clearing of the backlog in foreclosure cases.  Some of the most stubborn foreclosures are being flushed out of the foreclosure pipeline which has resulted in a dramatic increase in foreclosure auctions and judicial sales.  Hopefully, these homes will soon make their way to the market to increase the available inventory.  Note that although the bulk of increased activity is in Chicago, increases were also seen in nearby communities like Schaumburg, Aurora, Palatine, Cicero and Elgin. The backlog is most problematic for prices at lower end of the spectrum.
One good thing about this increase in auctions and judicial sales is that title to these homes are transferring out of the hands of homeowners.  One problem in Chicago is the presence of “zombie” foreclosures where homes remain stuck in the foreclosure pipeline because banks don’t complete the process of taking title to the home.  Many times, the owner has been in the foreclosure process for years and has little incentive to maintain the home or ends up abandoning the home.  However, it should be noted that as long as owner is still listed on title, they are subject to liabilities attached to the home.  These include:

  • the tax collector may come looking to collect back property taxes
  • an HOA may file a lawsuit to recover unpaid assessments
  • you could be threatened with fines for not complying with housing codes and ordinances (and even face jail time in some instances if you don’t meet repair deadlines), or
  • the local government may send you a bill for yard maintenance, repairs, trash removal, and/or graffiti scrubbing.

For these “zombie” homeowners, the clearing of the foreclosure backlog is good news indeed.  For buyers, this may also result in a welcome increase to a market needing more homes for sale.

Millie C. Lumpkin, Broker