Woodstock Institute report finds that unresolved foreclosures concentrated in low-income communities, racially homogenous communities
CHICAGO – January 27, 2014 – (RealEstateRama) — A new report from Woodstock Institute estimates that there are more than 11,700 zombie properties in Cook County, including more than 5,800 in the City of Chicago. A property becomes a zombie when a mortgage servicer files for foreclosure and then does not complete the process and take ownership of the property or resolve the foreclosure by other means. For its report, Woodstock defines a zombie property as a foreclosure that has not been resolved for more than three years. Because neither the borrower nor servicer has clear control of the property, neither has a strong incentive to assume responsibility for the property. Zombie properties, therefore, are likely to be poorly maintained or blighted, which threatens the stability of surrounding communities.
“Zombie properties will make it harder for Cook County to recover fully from the housing crisis, especially in the neighborhoods where they are concentrated” says Spencer Cowan, vice president of Woodstock Institute. “Zombies introduce an element of uncertainty that poses barriers to returning homes to productive use or finding creative ways to deal with blighted properties.”
Unresolved Foreclosures: Patterns of Zombie Properties in Cook County, which matched a sample of 500 foreclosure filings in Cook County from 2008 to 2010 that did not result in the property being sold at auction in at least three years with records from the Cook County Circuit Court and Recorder of Deeds to determine the resolution of foreclosures, found that:
- Almost 60 percent of foreclosures filed between 2008 and 2010 in Cook County were not sold at a foreclosure auction in at least three years. Of the 134,043 foreclosures filed in Cook County between 2008 and 2010, 56,009 (41.8 percent) were sold at auction between 2009 and 2012, while 78,034 (58.2 percent) were not sold at auction within that period. If the property was not sold at auction, the report found four categories of outcome: the borrower could keep the home (cure the default, loan modification, lien release, case dismissed); the home could be transferred to another owner (auction, deed in lieu, sale); the case could be dismissed and a new foreclosure filed; or no resolution (zombie property).
- Properties with foreclosure filings in high minority census tracts were more likely to be sold at auction than properties in low minority census tracts. A property in foreclosure in a census tract that was 80 percent or more minority was about 11 percent more likely to be sold at auction than a property in foreclosure in a census tract that was less than 20 percent minority.
- Approximately 8.7 percent (more than 11,700 properties) of foreclosures filed between 2008 and 2010 in Cook County became zombie properties. Zombie properties are properties with a foreclosure filing that has not been resolved after more than three years. Woodstock Institute estimates that there are more than 5,800 zombie properties in the City of Chicago.
- If trends continue for foreclosures filed in 2011 and 2012, Woodstock Institute estimates that there will be an additional 7,200 zombie properties in Cook County, including nearly 3,200 in the City of Chicago, by 2015.
- Zombie properties are disproportionately concentrated in lower-income communities. Properties in census tracts in the three lowest income quintiles (bottom 60 percent of income) are more than ten percent more likely to become zombie properties than are properties in census tracts in the top two highest income quintiles. The bottom two income quintiles (bottom 40 percent of income) contain 57.5 percent of zombie properties, while only 22.5 percent of zombie properties are in the top two income quintiles.
- Zombie properties are more likely to occur in racially homogenous communities.Properties entering foreclosure in census tracts that are 80 percent or more minority are 18 percent more likely to become zombie properties than average, while properties entering foreclosure in census tracts that are 80 percent or more white are four percent more likely to become zombie properties than average.
- Eleven Chicago community areas have 15 or more zombie properties per 1,000 properties eligible for conventional mortgages. The community areas with the highest rates of zombie properties are Washington Park (27.42 per 1,000 mortgageable properties), Grand Boulevard (22.03), Woodlawn (19.98), Englewood (17.9), and East Garfield Park (17.35).
The report concludes with policy recommendations to reduce the negative impact of zombie properties on communities in Cook County, including: mortgage servicers should notify borrowers, local governments, and courts when they decide to stop pursuing a foreclosure; mortgage servicers should coordinate with local governments, nonprofits, and land banks to return zombie properties to productive use; the monitor for the National Mortgage Settlement should vigorously enforce its anti-blight provisions; and municipalities should explore creative ways to expand their code enforcement capacity.