Abandoned foreclosures: Chicago's lost homes

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We all know that there are a ton of foreclosures in Chicago. How many? More than 45,000 in the city's metro area in 2010. But there's a slice of those, and not a small one, that falls into a different category. They're almost like ghost homes - not really among the living or the dead.

Abandoned foreclosures are beginning to appear more and more across the city. These vacant homes have been deserted by two groups of people - the families who inhabited them, and the bankers who claimed them. And while they rest in the nether world between being lived in and being resold, they fall into terrible disrepair, attracting squatters and criminal activity - an eyesore in the neighborhood until they're finally condemned.

How did they get this way? Abandoned foreclosures are a true casualty of the housing market. And unless we find a solution, these house-zombies will start eating our neighborhoods alive.
The Woodstock Institute recenlty released a study on abandoned foreclosures in Chicago, telling us what's going on and where it's happening.

There are two major entities to deal with in any foreclosures - the mortgage servicer and the lender. The lender actually owns the property, but it's the servicer who a homeowner deals with most of the time. The servicer collects the mortgage payments, negotiates loan modifications and proceeds with a foreclosure if necessary. If the property is foreclosed on, it's the servicer who's responsible for keeping up that property and making sure it doesn't become derelict.

If the property sells, the servicer gets the money they spent on upkeep back. But sometimes, a servicer might realize that they're going to spend a lot of money on upkeep, and they might never get it back. That house might be in terrible condition or in a neighborhood with a bad real estate market. And when they realize this, they're not about to put another dime into the property. Instead, they "charge off" the property, or take it as a loss on their balance sheet.

And once they charge it off, they're no longer responsible for completing the foreclosure process and maintaining the property. Most likely, it's not being lived in, but the foreclosure was never completed. It's in limbo. Nobody cares about it because it's not worth enough money for anyone to care.

Except if you live next door. Or you have one of these homes in your police beat. Maybe your kids walk home from school past these abandoned homes, making you worry a little bit.

What happens to these places? Well, eventually, they become so horribly neglected that they are condemned. Eventually.

Certain communities, of course, are seeing more abandoned foreclosures than others. The South and West sides are riddled with these "red-flag" properties that the Woodstock Institute has identified - properties that have been in foreclosure more than a year, but there's been no outcome reached while they're sitting vacant. Take a look at their map of these homes:

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So, what do we do about these ghost homes? The Woodstock institute prescribes a variety of solutions, including loan modifications that keep homeowners in their home, more pressure on servicers to maintain property, and better data coordination between places like the postal service and city governments to keep track of where these abandoned foreclosures are.

I'm sure all of these solutions would help, but I couldn't help but think of Mark Guerette, a Florida man who started fixing up these abandoned foreclosures and renting them out to needy families at decent prices. I don't know about you, but I'm tired of reading about foreclosures in the news. I'm tired of seeing them on my block. I've grown quite skeptical that the government in any form is going to step up and really do something meaningful to help.

When it comes to bringing ghost homes back to life, I'm starting to wonder if do-it-yourself solutions may be the only thing that makes practical sense. If only it weren't illegal.

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