More Housing Market Problems in Chicago
By Kevin Robinson in News on Sep 18, 2007 1:50PM
In a report published Monday, the Chicago Reporter found that Chicago is the the nation's capital for "high-cost" home loans. The study, looking at three years' worth of federal home-loan data, showed that in 2006, "the Chicago-Naperville-Joliet metropolitan statistical area, which includes Cook, DeKalb, DuPage, Grundy, Kane, Kendall, McHenry and Will counties" led the nation, with 88,315 “high-cost” mortgages. "High-cost" mortgages are defined as first-lien home loans that are at least three percentage points above the US Treasury standard. Making the report even more shocking is that these loans affect African-American and Latino homeowners disproportionately compared to white home owners; three of every five loans to African-Americans and two of every five mortgages to Latinos were high-cost loans.
While the study seemed to indicate that African-American and Latino home buyers were being steered into high-cost loans by subprime lenders, it isn't entirely clear that any laws were broken. Nevertheless, Illinois Attorney General Lisa Madigan told the Reporter that she would look into the date presented to see if questionable lending practices might have violated fair-lending or civil rights laws.
Our source at the Illinois Department of Revenue tells us that inventory in the housing market is up significantly from a similar period two years ago, and that the numbers are expected to climb. And the shakeout isn't over yet; among states in the region, Michigan and Ohio haven't yet hit their peak in housing inventories. As fears of a recession grow and the mortgage slowdown continues to decrease housing sales in Chicago, government is getting involved. The Department of Housing and Urban Development is announcing a plan aimed at helping home buyers that are at risk of going into default on their loans, and avoiding foreclosure. Congress is also considering an overhaul of the Federal Housing Authority's requirements for backing loans. And the Federal Reserve Bank is expected to cut the federal funds rate. Besides institutional reactions to market jitters, the issue is becoming politicized with national elections on the horizon. In a speech to the NASDAQ yesterday, Barack Obama criticized Wall Street for putting business priorities ahead of the national interest, citing the subprime lending market in particular as an example of business values that have threatened the well being of the economy.
Image via swanksalot.