Chicago Lawn Neighborhood Serves as Example of Growing Foreclosure Crisis

Dec. 18, 2008

Story by John McCarron

It was the red dots-scores of little red specks sprinkled across a map of just one neighborhood on Chicago’s southwest side-that spoke the loudest.

Several high-powered experts spoke Dec. 4 in Chicago at a field hearing of the Senate Appropriations Subcommittee on Financial Services. But Sen. Richard J. Durbin (D-Ill.), who chairs the subcommittee, and as assistant majority leader figures to play a key supporting role in the upcoming Obama administration, seemed just as impressed by the testimony of the dots.

“The red dots on this chart are for just one single ZIP code,” Durbin explained to those gathered in the ceremonial courtroom of the Dirksen Federal Building. “You can see there’s barely a block on which there haven’t been any foreclosures this year.

“This is a cancer or a blight that’s going from home to home, neighborhood to neighborhood,” said Durbin, nodding toward two oversized maps mounted on easels, “that will really threaten us if we don’t do something quickly.”

The dot maps were created by David McDowell of the Southwest Organizing Project (SWOP).

“It’s a way to get across the impact of what’s happening in our neighborhood,” McDowell said later in an interview. “It shows this is about something larger, not just individuals with a problem, but the fabric of our neighborhood.”

Subscription services such as RealtyTrac.com will tell you there are 2,342 properties within the Chicago Lawn ZIP code currently in pre-foreclosure or already repossessed by lenders. But when McDowell and SWOP merged all those addresses using Microsoft mapping software, a whole different picture emerged – a scary picture of a neighborhood on the brink.

SWOP and its sister organization, Greater Southwest Development Corp. (GSDC), developed the maps as part of an anti-foreclosure program funded by the MacArthur Foundation. A second MacArthur grant to LISC/Chicago funds the New Communities Program (NCP) Foreclosure Response Fund, which is helping NCP’s neighborhood partners reach out to those in danger of losing their homes.

More than two-thirds of families who miss three or more mortgage payments, thereby triggering foreclosure action by lenders, never seek outside help or respond to legal notifications. Many end up losing not just their home, but their credit rating and their neighborhood.

But getting families to seek professional mortgage counseling is only half the battle. Durbin’s subcommittee is exploring ways to prod lenders into modifying the terms of loans so owners can catch up on payments and save their homes. Moreover, many economists warn that until this foreclosure tsunami is reversed, there will be no recovery of the housing market and, consequently, no recovery of the broader economy

Bruce Gottschall, executive director of Neighborhood Housing Services of Chicago, testified that ways must be found “to compel mortgage holders to offer proactive, standardized loan modifications to large numbers of mortgagees in a systematic manner.”

Gottschall suggested that the $700 billion now earmarked by Congress to bail out cash-starved banks, insurers and investment houses ought to carry a requirement that loan modifications-reductions of both interest rates and principal amounts-be made available to struggling families.

As it is now, said Gottschall, who fields the largest staff of mortgage counselors in Chicago, lenders and their servicing agents tend to be hard to reach and, once contacted, unable or unwilling to modify loan terms.

Durbin seconded Gottschall’s remarks, as well as those of Illinois Attorney General Lisa Madigan, who testified about a loan modification settlement her office has reached with Countrywide Financial, once the nation’s largest home lenders but now a subsidiary Bank of America.

“The most immediate need at this moment,” Madigan said toward the end of the hearing, “is to help homeowners stay in their homes and stabilize our communities.”

It was eloquent summary, underscoring the silence of the red dots.

Gordon Walek contributed to this report