Community Responses to Foreclosure Crisis

A single house on Normal Street captures housing challenges in Chicago. Oversized in a traditionally Irish neighborhood, it was listed for sale for two years. In 2010 the property was denied to a black family after they had agreed on a $1.8 million sale price. The federal government filed a discrimination suit against the owners, which is ongoing. When relisted later that year, records indicated the property was in foreclosure. (Image and reporting: Eric Allix Rogers CC-by-nc-sa)

By Curtis Black

The long, drawn-out foreclosure crisis continues to hamper the nation’s economic recovery – and continues to drag down Chicago communities as it spreads to more affluent areas of the city.

The author

Curtis Black covers community organizations and nonprofits at Newstips for Community Media Workshop. His reporting and analysis has appeared in the Chicago Tribune, Chicago Defender, Chicago Reader, Time Magazine, In These Times, and the Huffington Post.

Community organizations have pressed the issue on every front, from targeting banks on behalf of individual homeowners – and occupying foreclosed properties – to passing state laws and city ordinances, to pressing the Obama administration for more forceful action. The foreclosures keep coming.

Chicago has been particularly hard-hit. The metropolitan area had the second highest foreclosure rate in the nation last year. The city has seen 100,000 foreclosures since 2006.

Though it’s increasingly affecting more affluent neighborhoods and homeowners with conventional mortgages, the crisis has impacted low-income minority communities where predatory subprime lending was concentrated hardest, according to the Woodstock Institute. In neighborhoods like Englewood and Austin, block after block has multiple vacant foreclosed properties, attracting crime and putting neighboring homes at risk of default by driving down values.

Part of the problem, identified by Woodstock: a set of “red-flag” vacant properties, potentially quite large, where lenders have abandoned the legal process of foreclosure midstream, reluctant to take on the responsibilities of ownership.

Vacant properties

The Foreclosure Convening, a coalition of community groups, has won vacant property ordinances from the city and county, requiring mortgage servicers to maintain properties abandoned during the often drawn-out foreclosure process.

The city is currently defending a lawsuit by the Federal Home Finance Authority (FHFA) challenging the ordinance, arguing the agency isn’t bound by local laws.Local groups expressed outrage when it was filed.

The FHFA is also the target of a much larger concern. Through its control over government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac, the agency is blocking loan modifications that write down principal for homeowners who owe more than their homes are worth.

With nearly a quarter of the city’s homeowners underwater, principal reduction is a crucial missing ingredient in the response to the crisis, community advocates have argued: negative equity drains homeowners’ wealth and puts them at greater risk of default.

Woodstock has called on Edward DeMarco, FHFA’s acting director, to change his policy or step down; it’s likely Chicago activists in Washington DC with National Peoples Action (May 19-21) will target FHFA on this issue.

Ultimately it’s President Obama’s call, and a change at FHFA would help counter the perception that his administration’s approach to the crisis – characterized by voluntary programs for lenders — has reflected greater concern over the stability of big banks than of American families and communities. Thousands of homeowners can tell stories of being jerked around by lenders going through the motions of federal foreclosure prevention programs while “dual-tracking” foreclosures.

The robo-signing settlement early this year by state attorney generals and federal agencies with five big banks includes the first significant step toward requiring principal reduction.  That settlement was stronger than expected, probably due to pressure from groups like NPA and the local network IIRON, which includes Northside POWER and Southsiders Organized for Unity and Liberation.

Ahead of the curve

It’s worth recalling that, while regulators and economists were surprised by the housing crash, community organizers were warning of the dangers of predatory lending years ahead of the curve.

Southwest Organizing Project (SWOP) has worked on the issue since long before the crisis, targeting the predatory lending  with a variety of strategies. When foreclosures began mounting, they partnered with Bank of America to streamline loan modifications, but the bank didn’t follow through, says organizer David McDowell. Now, seeking to arrest the downward spiral, the group works with its member churches to find potential homebuyers for vacant homes.

SWOP and nine other community groups are part of the Foreclosure Convening, formed to do outreach to threatened households for the Cook County Foreclosure Mediation Program, an attempt to encourage banks to be responsive to loan mod requests.

Action Now does outreach for the program in Englewood and Lawndale and has taken an activist approach, marching on banks to support individual homeowners’s cases and more recently to protest neglect of vacant properties they control. This year the group has picketed scrap metal yards that buy material stolen from vacant buildings and held a vigil for a 13-year-old girl raped in the gangway between two vacant buildings.

Half of all foreclosures involve rental buildings, and Albany Park Neighborhood CouncilLogan Square Neighborhood Association, and Metropolitan Tenants Organization are working with tenants of multi-unit buildings in foreclosure. (According to a recent report, banks routinely violate the legal rights of tenants in foreclosed buildings.)

These groups won state legislation giving requiring advance notice to tenants, and are now backing a city ordinance that would require banks to continue renting to tenants in foreclosed buildings.

The South Austin Coalition is using an old tactic in a new scenario: a rent strike in a foreclosed apartment building on the West Side, demanding basic repairs. And groups including Communities United Against Foreclosures and Evictions, the Chicago Anti-Eviction Campaign, and Liberate the South Side, are using another old tactic: occupation. They encourage homeowners to stay put in the face of foreclosure, with public statements describing how they’ve been ignored and abused by lenders.

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