Elgin feeling effects of rise in foreclosures

Illinois Foreclosure & and Real Estate News

ELGIN -- The lasting effects of the national housing slump can be seen on the front doors of an increasing number of local homes.

Nationwide, U.S. Treasury Secretary Henry Paulson Jr. estimates that there will be 1 million foreclosures this year, about 620,000 of them classified as subprime borrowers.

Locally, the picture has not deteriorated that rapidly but is dramatic and getting worse; in just a 20-day period in September, the number of foreclosed properties in Elgin increased 15 percent to 153.

Of that number, neighborhoods in the southwest and northeast sides of the city showed the highest concentration of foreclosed homes.

On one street alone -- Wilcox Avenue on the city's southwest side -- six homes in a span of four blocks have been foreclosed upon. On Moseley Street, a few blocks east, are four more.

"I think about the impact that situation might have in the city in terms of having neighborhoods where a foreclosed house is going to be some kind of eyesore for the neighborhood," said Elgin City Councilman Juan Figueroa, a branch manager at Capital Banc Mortgage, 25 S. Grove Ave. "It's definitely a situation that you think about: the economic impact, the image and those things that affect the quality of life in the neighborhood.

"It's a situation you don't want to see your city or your community go through, but it's happening."

According to data compiled by an area marketing researcher, Kaneville-based Records Information Services Inc., Elgin has had 516 foreclosures from the beginning of the year until the end of September, a 42 percent rise from last year's number of 363 over the same period.

Like many people nationwide, residents who purchased homes using subprime -- or second-chance -- mortgages have served as the catalyst for the area's foreclosure rise.

"I have at least one or two cases every week of someone who is unable to make (mortgage) payments and they're thinking just to let it go, and to allow the bank to take over the house because they can't afford the payments," Figueroa said. "Some of them are just two or three months behind."

As an industry, subprime mortgages became popular in the late 1990s. Figueroa said he started to see an increased number a little after 2004.

"There was a lot of alternatives given to borrowers that, in other circumstances, would not be able to qualify for a mortgage," he said. "Basically, it was a solution to people who didn't have the money for a down payment or great credit."

Controversy surrounding subprime lending has been with its potential volatility -- a combination of loans with dramatically adjustable rates mixed with borrowers who are unable to qualify for more traditional mortgages due to poor or limited credit histories.

It has left an increasing number of homeowners stuck with a monthly mortgage payment that has, in some cases, nearly doubled from what they were paying the previous month.

"To be in a position where you can't pay your mortgage is very stressful. It's very hard on families and also hard on neighborhoods," said Christen Wiggins, a director at the nonprofit organization Neighborhood Housing Services in Chicago.

She said it was estimated that for every house foreclosed in Chicago, the value of the surrounding homes have dropped by around 1 percent.

"If you are living on a block that has a lot of foreclosures, you're seeing your own property values go down," she added. "And that's very stressful for families who have been doing all the things the right way and diligent about paying their mortgage to see their neighborhood decline and it's very much outside of their control."

It is a problem that Elgin's South West Area Neighbors President Charlene Eckols said she can relate to, and one in which her fellow members have tried to address, the moment a new foreclosure occurs.

"Last month, we had code enforcement come and we submitted 35 pictures of houses in our neighborhood we thought were in violation," she said. "We've taken a proactive approach when the houses are vacant."

She added that regular communication with city representatives has helped to lessen the potential negative impact a vacant home can have within a neighborhood.

"People get active in a community after something bad happens," Eckols said. "They really need to step up and talk more with city officials.

"They really want to help if you just ask."

But according to Peter E. Swaufield, chief financial officer for the Realtors Association of the Fox Valley, the area's foreclosure numbers have remained small in contrast to the current rates throughout the country, estimating Illinois averaged around one foreclosure for every 930 homes, compared with one out of every 693 homes nationwide.

"On a national scale, we are nowhere near the problem of some areas," he said. "If you go along the auto belt -- Michigan, Indiana, Ohio -- where you find most of the auto-related businesses, those areas are strongly hit by foreclosures."

But the problem is only expected to worsen. In the next 18 months alone, Paulson said, 2 million subprime mortgages will reset to higher rates.

For more information on Illinois foreclosures and related articles, please visit the Illinois Foreclosure home page.

Article Source http://www.suburbanchicagonews.com/couriernews/news/614165,3_1_EL22_A1HOUSING_S1.article