Chicago Area Foreclosures are Up 30% in 2013

IMG_0988rChicago Area Foreclosures are Up 30% in 2013.  In a recent article by the Chicago Tribune (Chicago Tribune, January 31, 2013), foreclosures were listed as being up 30% in 2012.  This is consistent with prediction for foreclosure activity way back 2009 when I attended and October, 2009 ABI Seminar at the Standard Club.  Clearly, we were shocked in 2009 that foreclosures were predicted to get worse, but it makes sense.  A large portion of our mortgaged housing stock was underwater in 2009 and more of it was underwater in 2012 as housing pricing had not really rebounded but instead fallen.  One of the reasons for the “real” housing price decline is that our housing stock as become “illiquid” as a home may be appraised for $400,000 but no one who would purchase the home can get a loan to purchase it.  Therefore causing a “gap” between the demand and supply curves.

Why is foreclosure so attractive to lenders – quite simply recovering of money NOW.  On average a bank recovers more than 1/3 of the loan principal in a foreclosure.  Then the bank applies to either the private mortgage insurer or the Federal Government to cover the rests – have you ever heard of Fannie Mae – that’s what they do – pay out on losses.

Chicago Area Foreclosures are Up 30% in 2013.  Home Loan Modifications are Pure Profit for Lenders and Foreclosures are a nearly 70% recovery for lenders.   When a bank offers you a home loan modification they are not doing so to “help” you.  Instead it is a nifty way to make more money off of you.  Keep in mind that a bank that offers you a home loan mortgage at 6% is currently paying only 0.5% or less for the money they borrow from Federal Funds to cover this loan.  Therefore, if a bank offers a 5 years interest rate break to 2% – they still make 1.5% off of you and they increase their chances for full repayment by giving you five years to have the value of your home rise and also have you either keep your employment, get better employment or get a job (if you are unemployed).

In conclusion, Congress and the Senate should get together and allow borrowers to restructure their loans through Chapter 13 Bankruptcy which is a comprehensive reorganization where everyone is paid fairly, comprehensively and people are not uprooted out of their homes and communities.

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