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Photo from connect mls(AP) — The number of Illinois households on the verge of losing their homes soared by more than 29 percent in the first half of the year, an increase twice as big as the national jump.
The mushrooming foreclosure crisis affected more than 1.5 million homes in the U.S. in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.
Just under 69,000 homes in Illinois saw a foreclosure filing in the first half, up 29.5 percent from the first half of 2008 and 19.2 percent compared with the second half of 2008.
The data show that despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.
"Despite all the efforts to date, we clearly haven't got a handle on how to address the situation," said Rick Sharga, RealtyTrac's senior vice president for marketing.
Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said. June filings in Illinois rose 32.4 percent from June 2008 but were down 1.3 percent from May, according to RealtyTrac data.
More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm's report. That works out to one in every 380 U.S. homes.
In Illinois, 10,796 households got a foreclosure-related notice last month, or one in every 486.
It was the fourth straight month in which more than 300,000 households received a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in the U.S. in June, up from about 65,000 a month earlier.
On a state-by-state basis, Nevada had the nation's highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado. Ohio ranked 12th, with filings going to a little more than 1 percent of households.
The Obama administration in March launched a $50-billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it's off to a slow start.
As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to $18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn't having much of an impact.
"The plan isn't going well, at least not yet," said Mark Zandi, chief economist at Moody's Economy.com. "It's a creative plan with lots of incentives, but it's very complex."
In testimony prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren't in the three-month trial phase yet.
"We have achieved this level of success by devoting substantial resources to this effort," Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.
"They've been slow to make sure they understand it and put all the processes and people in place," said Joel Lewis, vice president of financial services at Convergys Corp., which runs call centers for the financial industry and other companies.
A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to "devote substantially more resources to this program for it to fully succeed." They also summoned mortgage executives to a July 28 meeting with top government officials.
Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Bill Kelvie, chairman of Overture Technologies in Bethesda, Md.
"They need to automate the process, and they need better technology, and they need to do this quickly," he said.
It's the middle of July, and home sellers are starting to feel the pressure.
Elmwood Park resident Dan Gongola is among them.
A month ago, he listed his gutted and rehabbed five-bedroom, four-bath octagonal bungalow for $549,900, almost $25,000 higher than his real estate agent advised.
"I said maybe I'd get lucky," he said.
On July 2, with few showings to speak of, he chopped the price far below his agent's original suggestion. The new price tag of $485,000 is a reduction of almost 12 percent from the list price.
Real estate agents have been advising sellers for months that they were going to have to let go of a good chunk, if not all, of the appreciation their homes enjoyed during the past five years. Now it appears that a confluence of factors -- fluctuating mortgage rates, sales comparisons that include bargain-price bank foreclosures, lingering job insecurity, a real estate market headed into its August lull and a first-time buyer's tax credit that expires Dec. 1 -- are giving their argument more credence. And sellers like Gongola are taking their advice.
As of Thursday, 31 percent of Chicago-area homes listed for sale had at least one price cut, compared with 29 percent of listings in June and 26 percent of listings in April, according to Trulia Inc., a San Francisco-based provider of real estate data. Nationally, 24 percent of homes on the market have had at least one price cut.
Drill deeper into the data, though, and that 31 percent local average is healthy compared with what's going on in some neighborhoods. In the East Loop near Millennium Park, prices have been cut at least once on 43 percent of the listings, with an average reduction of 6.6 percent. In the sections of Lincoln Park and Logan Square that make up the 60614 ZIP code, 35 percent of the listings have price cuts, with an average reduction of 8.2 percent. In Elmwood Park, sellers have slashed, by an average of 9.6 percent, prices on 40 percent of the listings.
"Sellers say, 'I'm not going to give it way,' " said Randy McGhee, an agent at Koenig & Strey GMAC Real Estate. "If you want to sell, you will be giving it up for what you paid for it or less in the last four years. If you want to sell it and you're thinking of a reduction, don't wait until September. Do it now."
In some areas of Chicago, the issue is condos that were bought by investors who are trying to shed them at a loss. They are advertised as short sales, a private transaction in which an owner, with lender approval, sells the property for less than the amount owed on the mortgage.
"My last three buyers and a current one only want to see foreclosures and short sales because they believe that's where the deals are," said Kimberly Oehmke, an agent with @Properties.
"It's hurting the person who has a great property and isn't in the short sale-foreclosure predicament," she said. "Anybody that is not a short sale, we just beg our clients to rent it out, just hold on until next year."
Foreclosures, meanwhile, continue to roil the market, being scooped up more quickly and cheaply than traditional listings.
In the past 90 days, 43 percent of home sales in Cook County have been bank-owned foreclosures, according to data from Clear Capital, a Truckee, Calif.-based provider of real estate valuation data to investors. Nationally, 35 percent of sales were foreclosures.
They've sold faster, too, with an average local marketing time of 53 days for a foreclosure compared with 73 days for a traditional sale.
The impact of foreclosures is partly to blame for local home values sinking in April to the same level they were at in mid-2002, according to the S&P/Case-Shiller Home Price index released late last month.
In Elmwood Park, Gongola's real estate agent, Sally Haynes of ERA Realife Realty, blames much of his troubles on foreclosures and the too-high original home price; in a better market the home might sell for slightly over $500,000. She was surprised, pleasantly, when he opted to make the dramatic cut.
"I know it's worth more than that, but with the market the way it is right now, I have to go with what's comparable in the neighborhood," Gongola said.
"That's why I did the big reduction," he said. "Let's not play games here. I wasn't going to lower it $10,000, and then in another month another $10,000. People will [now] say, 'Hey, this guy dropped $70K, we should go look at this.' "
Haynes has had the same difficult conversation with sellers in other neighborhoods who are eager to grab hold of any market uptick.
"I'm seeing the same thing in Des Plaines and Portage Park," Haynes said, noting that her pool of buyers has increased significantly in the past three months. "They are looking for a deal."
