The cure to zombie foreclosures
Undead properties plague Cook County Illinois
From 2008 to 2010, 8.7% of foreclosures filed in Cook County, Illinois, were zombie foreclosures, accruing to more than 5,800 zombie properties in the city of Chicago. But this is just the beginning.
According to a recent report from the Woodstock Institute, if the trend continues, 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 will make it harder for Cook County to recover fully from the housing crisis, especially in the neighborhoods where they are concentrated,” Spencer Cowan, vice president of Woodstock Institute, said.
“Zombies introduce an element of uncertainty that poses barriers to returning homes to productive use or finding creative ways to deal with blighted properties,” Cowan said.
When the foreclosure crisis hit Cook County, it reported 217,035 foreclosure filings and 89,327 properties sold at auction between 2008 and 2012.
And the county felt each one.
Since a zombie property is a foreclosure that has not been resolved for more than three years, usually because neither the borrower nor servicer has a strong incentive to assume responsibility, the houses are likely to be poorly maintained or blighted, which in turn threatens the stability of surrounding communities.
In addition, zombie properties are disproportionately concentrated in lower-income communities.
Properties in census tracts in the three lowest income quintiles (bottom 60% of income) are more than 10% more likely to become zombie properties than are properties in census tracts in the top two highest income quintiles, the report found.
Furthermore, the bottom two income quintiles (bottom 40% of income) contain 57.5% of zombie properties, while only 22.5% of zombie properties are in the top two income quintiles.
As a result, servicers may be more likely to maintain properties still in the foreclosure process in neighborhoods that are in predominantly affluent areas compared with properties in neighborhoods that are predominately poor.
But these less-well-off neighborhoods are not doomed.
The Woodstock Institute noted a few ways to mitigate risks, including requiring servicers to notify borrowers, local governments and courts when they decided to stop pursuing foreclosures.
“The community must address the potential threat that a zombie property poses by having some party accept responsibility for maintaining the property and returning it to productive use,” the report said.
More on how to mitigate risk can be found here.