The President, Congress, the Mayor and his departmental commissioners got this one right: Neighborhoods need help. Throughout the city, communities are feeling the sting of foreclosures, and REALTORS® will face difficult transactions in those communities unless something is done now. Thankfully, help is on the way.
In July of 2008, Congress enacted HR 3221—the Housing and Economic Recovery Act of 2008, which appropriated $3.92 billion to be distributed to states, cities and counties. HUD was ordered to move fast; with only 60 days to come up with guidelines and a similarly short amount of time for states, cities and counties had to determine action plans.
Under this act, the City of Chicago and Mercy Portfolio Services (MPS) intend to spend or obligate $55.2 million over the next 18 months to stabilize neighborhoods within 25 community areas within the City of Chicago. The success of the City of Chicago’s Neighborhood Stabilization Program will rely on partnerships between the City of Chicago, MPS, not-for-profit organizations, lenders, developers and REALTORS®.
Using data from several organizations, including the Chicago Association of REALTORS®, the community areas were chosen based on three main factors:
1) Greatest percentage of home foreclosures;
2) Highest percentage of homes financed by subprime mortgage related loans; and
3) Those communities most likely to face a significant rise in the rate of home foreclosures.
In 2008, 98% of foreclosures at auction reverted back to the real estate-owned (REO) portfolios—compared with 64% in 2005. We find over time that investors aren’t buying, and properties are likely vacant. There is also a significant value to those REO properties; at foreclosure auction in 2007, the value of these properties alone was $1.2 billion.
More importantly, foreclosures are threatening investments that have been made over the past two decades in many of the 25 community areas. Intervention is critical to protect these investments (which include schools, police stations, job centers and retail developments) and make a measureable impact. So, with a $1.2 billion pool, will $55.2 million make a difference? Our sense is a definite yes, but only if it’s targeted correctly and balanced between single family and small multi-unit properties.
Want to get involved?
Mercy Portfolio Services will release a Request for Proposals (RFP) for licensed real estate professionals to help them facilitate the acquisition of foreclosed properties in targeted Chicago neighborhoods. The deadline for the RFP is this Friday, May 1, 2009. Copies of the RFP can be found by clicking here. Also, read more about the Neighborhood Stabilization Program—and C.A.R.’s involvement—in the June/July issue of Chicago REALTOR.