The stretch of Honore between Marquette Road and 68th Street in West Englewood has all the markings of a disinvested neighborhood: it's dotted with vacant, weedy lots and boarded-up homes with overgrown lawns strewn with garbage. On a recent trip to this block, Woodstock Institute's Senior Vice President, Geoff Smith, thought that the area "is severely distressed and faces serious challenges to recovery," noting that you could see through some houses from the street--a marked decline from the relative stability of the years before the foreclosure crisis, when many of the vacant homes were still inhabited and better tended. Some of these challenges to recovery involve the different paths these homes took to get to where they are today.
All vacant homes place burdens on their communities: they can serve as magnets for crime and blight and act as a damper on surrounding property values. The foreclosure crisis has added substantially to the number of communities suffering from the impacts of vacant homes. Our latest report investigates two types of vacant homes whose ranks have grown over the course of the foreclosure crisis. One type is what we call a "red flag" home. These are vacant homes where a loan servicer (who stewards a property through the foreclosure process) has started the foreclosure process but decided not to follow through with completing the process and taking ownership of the home. These types of vacant properties lack clear ownership and could be in extreme states of disrepair. The other type of property we look at is one that has completed the foreclosure process and is currently lender-owned and, therefore, probably vacant, but whose servicers have not registered them with the City of Chicago as required by the City's vacant building ordinance.
A loan servicer might decide to walk away from the foreclosure process if it decides that the costs associated with taking ownership of a property, maintaining it, and marketing it for resale are more than it could ever hope to make back once the property is sold. This poses a real problem to communities where the homeowner, who is still responsible for the home's maintenance on paper, has left the home already and the property is vacant. Since the foreclosure process is never completed, it takes some time for local governments to be alerted to the fact that the home has become vacant and it becomes difficult to reach a party responsible for its maintenance. At this point, the home has had a long period of time to sink into disrepair, requiring even more resources to return it to a well-maintained state. Among the thirteen vacant homes at Marquette and Honore, at least five fit this "red flag" profile, and homes on countless blocks throughout the City fit this profile, too.
Another class of vacant homes that poses risks to neighborhoods are homes owned by lenders and are likely vacant, but haven't been registered with the City of Chicago as required by ordinance. These homes likely are not secured and maintained to the standards required by the City and are possibly not secured up to code. Additionally, noncompliance with vacant property ordinances can make it more difficult for municipalities to track down an owner should an issue with the property arise.
Our report found that there are thousands of these two kinds of vacant homes in Chicago, potentially posing a major risk to their neighborhoods. Our researchers identified nearly 2,000 "red flag" homes and over 2,500 unregistered, likely vacant, lender-owned homes. Red flag homes alone could end up costing taxpayers more than an estimated $36 million. The top mortgage servicers and trustees associated with these likely abandoned foreclosures in the City of Chicago include Bank of America (314 properties), Wells Fargo (234), U.S. Bank (185), Deutsche Bank (178), and JP Morgan Chase (165).
Distressingly, these troubled homes are largely concentrated in Chicago's communities of color--even more so than typical foreclosures or all kinds of vacant properties. African-American communities such as West Englewood are 11 times more likely to have a red flag home, while they are 3 times more likely to have a foreclosed property and 6 times more likely to have a vacant building, than are white communities.
If local governments and regulatory agencies are unable to hold servicers accountable for decisions they make that destabilize communities through foreclosure-related vacancy, the impacts of the foreclosure crisis in neighborhoods like West Englewood will only continue to worsen. We recommend a number of solutions to stop troubled homes from weighing down their neighborhoods, including: servicers should proactively pursue solutions such as sustainable loan modifications that let borrowers stay in their homes; regulators must ensure that loan servicers are implementing strategies to limit the vacant properties' damage; local governments should be given more authority to ensure that mortgage servicers maintain vacant properties; and data should be better coordinated among different levels of government to allow for better enforcement and identification of problem areas.