More Banks Walking Away from Homes, Adding to Housing Crisis

Research shows 1,896 red flag homes in Chicago appear to have been abandoned during foreclosure process

A new type of property is adding to neighborhood blight: the bank walkaway.

Research to be released Thursday, the first of its kind locally, identifies 1,896 “red flag” homes in Chicago — most of them are in distressed African-American neighborhoods — that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found.

Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.

“The steward relationship between the servicer and the property is broken, particularly in these hard-hit communities,” said Geoff Smith, senior vice president of Woodstock, a Chicago-based research and advocacy group. “The role of the servicer is to be the person in charge of that property’s disposition. You’re seeing situations where servicers are not living up to that standard.”

City neighborhoods where 80 percent of the population is African-American account for 71.1 percent of red-flag properties, according to Woodstock.

In some cases, lenders might be skirting city rules for property upkeep even after they repossessed properties.

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