The Foreclosure Report

Illinois Pre-Foreclosures Up 32% In First Quarter

The Chicago tribune reports on defaults in Illinois. "Foreclosures on home mortgages are on the way up. In Illinois during the first three months of 2006 nearly 13,700 properties entered foreclosure, up 32 percent from the fourth quarter of 2005. There are many reasons for the growing number of defaults, and there are suggestions that the foreclosure trend may soon worsen."

"A growing number of homeowners are relying on adjustable-rate mortgages, catching some people by surprise when their monthly payment rises. Significantly, some of those ARMs were offered with an initial three-year to five-year period in which the rate was fixed. At the end of that period the mortgages will be reset at prevailing rates, potentially upending borrowers as interest rates have been rising. For many such people that moment is approaching."

"'The increases we've been seeing in foreclosures don't even reflect the worst-case scenario that could happen when the $2.7 trillion in adjustable-rate mortgages are reset over the next 18 months,' said Rick Sharga."

"Another factor is the impact of rising property values. And in some cases people stretched to qualify for a mortgage only to be undone by higher utility and gasoline costs. 'During the refinancing boom people found themselves qualified for homes they might not have qualified for if the interest rates were higher,' said Jeff Metcalf, CEO of a Kaneville, Ill.-based collector of market data."

"In the eight-county area around Chicago the rise in foreclosure rates is expected to range from 51 percent in Will County to 23 percent in McHenry County, Metcalf forecasts."

"There were 6,451 foreclosure notices filed in the state in April. That number was strikingly higher than in any month since the beginning of last year. William Gooch, CEO of Community Bank of Elmhurst, said he suspects that lending policies are playing a role in the foreclosure trend. Some financial institutions, competing fiercely for business, are making mortgages available to marginal borrowers."

"'People think they have to loosen their restrictions, their guidelines, their policies,' Gooch said. Mortgage brokers, he added, seem to be 'springing up like dandelions.'"

"Also, many people have tapped into the equity in their homes, a practice that can haunt them when a financial emergency strikes. 'If people have no equity in their property, they have few alternatives if they lose their job, or have a health issue or other problem that makes it impossible to make their payments,' said Jane Garvey, president of the Chicago Creative Investors Association. 'When they fall behind on their payments they end up in foreclosure.'"

For Chicago six county area, First-quarter 2006 change from fourth-quarter 2005.

COOK +16.4
DUPAGE +1.1
KANE +15.2%
LAKE +49.7%
MCHENRY +41.4%
WILL +109.6%

posted by Ben Jones @ 12:54 PM