Foreclosures at highest in past 8 years
Foreclosures at highest in past 8 years
By Becky Yerak
Copyright © 2007, Chicago Tribune
Published March 29, 2007
Nearly 29,000 foreclosures were filed in the six-county Chicago region in 2006, a one-year jump of 36 percent and the highest level in at least eight years, amid a meltdown in the subprime lending market and the growing use of adjustable rate mortgages, according to a study released Wednesday by a Chicago-based housing policy group.
"The popularity of these complicated and risky products, combined with loose mortgage underwriting standards that often include no documentation of borrower income, have driven foreclosures to record highs" in the region and the city, said Geoff Smith, research director for the non-profit Woodstock Institute.
The 28,997 foreclosures in Cook, DuPage, Kane, Lake, McHenry and Will Counties in 2006 surpassed the previous eight-year peak of 25,882, set in 2002, and is up from 17,705 in 1999. The institute's report did not include pre-1999 figures, but Smith estimates that with rising rates of mortgage lending, the latest number is likely a record.
Much of the blame for the foreclosure spike, up from 21,300 in 2005, was pinned on the ongoing crisis in the subprime lending market and to the growing popularity of ARMs, which can offer low initial monthly payments but reset to higher levels after a few years. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments.
The share of mortgage originations that are so-called option ARMs rose from 8.4 percent in 2005 to 12.3 percent through May 2006, the report said. Such loans allow borrowers to choose whatever monthly payment they wish, even if it means paying back less than the loan's interest rate.
Cook County had a total of 19,522 foreclosures, up 35 percent from 14,506 in 2005 and up from its previous peak of 18,162 in 2002.
But the pain was widespread, as all counties in the region saw double-digit increases in foreclosures.
DuPage and Lake Counties, generally considered to be affluent, saw the number of foreclosures climb by 46 percent and 36 percent, respectively, to 1,886 and 2,219.
"Adjustable rate mortgages and no-interest mortgages have also gotten affluent people in trouble," said Jeff Metcalf, chief executive of Kaneville-based Record Information Services Inc., which tracks foreclosures. He looked at the summary of Woodstock's report.
"Interest rates were so low for so long," Metcalf said. "Something had to give."
Meanwhile, the higher-growth counties of Will, McHenry and Kane saw foreclosure rates jump by 45 percent, 25 percent and 38 percent, respectively, to 2,742, 1,014 and 1,614.
Overall, the City of Chicago had 18.4 foreclosures per 1,000 mortgageable properties, the Woodstock report found. Within the city, however, there was substantial variation in foreclosure levels by neighborhood.
There was some good mortgage news Wednesday.
Federal Reserve Chairman Ben Bernanke said the growing troubles in the subprime mortgage market, which makes loans to people with poor credit or low incomes, does not appear to be spreading to the overall economy.
"At this juncture ... the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," he said, according to The Associated Press.
Bernanke told lawmakers he is open to working with them on ways to address problems with lenders and borrowers.
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byerak@tribune.com
By Becky Yerak
Copyright © 2007, Chicago Tribune
Published March 29, 2007
Nearly 29,000 foreclosures were filed in the six-county Chicago region in 2006, a one-year jump of 36 percent and the highest level in at least eight years, amid a meltdown in the subprime lending market and the growing use of adjustable rate mortgages, according to a study released Wednesday by a Chicago-based housing policy group.
"The popularity of these complicated and risky products, combined with loose mortgage underwriting standards that often include no documentation of borrower income, have driven foreclosures to record highs" in the region and the city, said Geoff Smith, research director for the non-profit Woodstock Institute.
The 28,997 foreclosures in Cook, DuPage, Kane, Lake, McHenry and Will Counties in 2006 surpassed the previous eight-year peak of 25,882, set in 2002, and is up from 17,705 in 1999. The institute's report did not include pre-1999 figures, but Smith estimates that with rising rates of mortgage lending, the latest number is likely a record.
Much of the blame for the foreclosure spike, up from 21,300 in 2005, was pinned on the ongoing crisis in the subprime lending market and to the growing popularity of ARMs, which can offer low initial monthly payments but reset to higher levels after a few years. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments.
The share of mortgage originations that are so-called option ARMs rose from 8.4 percent in 2005 to 12.3 percent through May 2006, the report said. Such loans allow borrowers to choose whatever monthly payment they wish, even if it means paying back less than the loan's interest rate.
Cook County had a total of 19,522 foreclosures, up 35 percent from 14,506 in 2005 and up from its previous peak of 18,162 in 2002.
But the pain was widespread, as all counties in the region saw double-digit increases in foreclosures.
DuPage and Lake Counties, generally considered to be affluent, saw the number of foreclosures climb by 46 percent and 36 percent, respectively, to 1,886 and 2,219.
"Adjustable rate mortgages and no-interest mortgages have also gotten affluent people in trouble," said Jeff Metcalf, chief executive of Kaneville-based Record Information Services Inc., which tracks foreclosures. He looked at the summary of Woodstock's report.
"Interest rates were so low for so long," Metcalf said. "Something had to give."
Meanwhile, the higher-growth counties of Will, McHenry and Kane saw foreclosure rates jump by 45 percent, 25 percent and 38 percent, respectively, to 2,742, 1,014 and 1,614.
Overall, the City of Chicago had 18.4 foreclosures per 1,000 mortgageable properties, the Woodstock report found. Within the city, however, there was substantial variation in foreclosure levels by neighborhood.
There was some good mortgage news Wednesday.
Federal Reserve Chairman Ben Bernanke said the growing troubles in the subprime mortgage market, which makes loans to people with poor credit or low incomes, does not appear to be spreading to the overall economy.
"At this juncture ... the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," he said, according to The Associated Press.
Bernanke told lawmakers he is open to working with them on ways to address problems with lenders and borrowers.
----------
byerak@tribune.com
posted by Carlos T Mock @ 7:55 AM
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