Plano and expect more to come

Good economic news seems remote in towns such as Plano. Plano sits at the western end of Kendall County, where metropolitan Chicago blends into rural Illinois. Ten years ago the area's flat prairie land was covered in corn and soybean fields.  However, between 2000 and 2007 Kendall became the fastest-growing county in the US, as people moved in search of more affordable property in "bedroom communities". Dozens of developments such as Lakewood Springs were built and the county's population doubled to about 100,000. In Plano the growth was even faster, doubling in the past five years alone.

That housing boom has turned to bust. Kendall County now has the highest foreclosure rate in Illinois, with one in every 26 households receiving a foreclosure filing in the first six months of the year - three times higher than the state average and well above the national average of one in every 84 homes.

That underlines the changing nature of the US mortgage crisis. When the housing bubble burst about two years ago, some of the worst-affected areas of Chicago were poor urban neighborhoods, such as some areas of the south side. In the past year the far suburbs - overwhelmingly middle-class - have become the new face of foreclosure.

The shift reflects a move away from a "subprime" problem: one in three of the US's new foreclosures between April and June were from prime, fixed-rate loans, up from one in five a year earlier, says the Mortgage Bankers Association.

Lakewood Springs exemplifies the problem. A total of 34 homes in the neighborhood have been repossessed, with another two homeowners filing for bankruptcy. But Cole Taylor, a Chicago-area bank, has also foreclosed on its loan to the project's developers, resulting in its taking over another 23 properties directly from them.

Mr. Hausler has been working with Cole Taylor to make sure the lawns are mowed on the foreclosed properties. But there are few signs of potential buyers returning to the development.

In the years after the second world war, Plano proudly called itself "the biggest little industrial city in the world". The town remains largely blue-collar, but manufacturing jobs are hard to come by. One of the biggest local employers is Caterpillar, which makes earth-moving equipment at a plant in eastern Kendall. The company has cut more than 1,400 jobs at the factory this year - about half of its workforce.

Homeowner protection act

In April the state of Illinois passed a Homeowner Protection Act, which blocks foreclosures in the first 30 days of delinquency, requires lenders to inform borrowers they have another 30 days to seek counseling and gives them a further 30-day grace period to work with a housing counselor.

Geoff Smith of the Woodstock Institute, a think tank in Chicago, says that combined with the federal government's Home Affordable Loan Modification Program the Illinois initiative has helped, although he notes the US Treasury reported in August that only 9 per cent of eligible US borrowers were receiving loan modifications. "That's a big concern," he says. "The state has done a little bit to try to slow down the foreclosure process, but the mortgage servicers haven't been modifying enough loans to make a big difference. There needs to be more pressure on lenders."

Back in Kendall County not all is gloom. Sales of existing homes rose 19.7 per cent in July from last year, the fastest growth in the Chicago metropolitan area according to the Illinois Association of Realtors.

But Valerie Burd, mayor of Yorkville, a town near Plano - who has held two foreclosure workshops to advise residents - expects more foreclosures. Unemployment is still rising and her constituents tell her mortgage providers are still unwilling to lend money. "We lagged behind the rest of the country," she says. "We were somewhat insulated here but now - well, now it's definitely hit us."

Author: Hal Weitzman