A new national program aimed at helping people with overwhelming mortgage debt is only going to give relief to 1.1 percent of those borrowers in the Chicago area, according to a new RealtyTrac study.
RealtyTrac said 6,137 mortgages here are “seriously underwater” and eligible to have some of their principal forgiven through the program, which was announced by the Federal Housing Finance Agency in April.
Although some housing market experts have said principal reductions are necessary to help troubled areas bounce back from the housing market crash, Daren Blomquist, senior vice president of RealtyTrac, said relief provided by the program is merely “a drop in the bucket.”
In the Chicago area, 215,863 homeowners are seriously underwater on their mortgages but don’t qualify for relief because they are living in their homes and making mortgage payments, he said. The relief applies only to mortgages owned or guaranteed by Fannie Mae and Freddie Mac. Loans also had to be at least 90 days delinquent on March 1 with balances of $250,000 or less.
Few homeowners will get relief nationally as well. Out of 6.7 million seriously underwater properties in the U.S. during the first quarter of this year, only 33,622 would qualify for help, according to RealtyTrac.
The firm defines seriously underwater as borrowers who owe at least 25 percent more on their mortgages than their homes are worth. RealtyTrac made the estimates using public records of sales near troubled homes and actual mortgages.
The Chicago area has the largest number of borrowers underwater in the nation and the largest number who qualified for relief, said Blomquist. Many other areas have had homes appreciate more in value since the housing crash that began in 2007. As homes appreciate in value, borrowers end up with more equity in their homes in proportion to the loan they need to repay. So they are no longer underwater, or are less underwater.
Blomquist said “lingering foreclosures” in the Chicago area “have held housing values down.”
Since early 2013, the median home price has been climbing in the Chicago area, but slower than the national average, he said. The average gain in the Chicago area has been 7 percent a quarter, but many hard-hit cities have had double-digit gains in prices. Orlando, Fla., for example, has seen a 13 percent increases in prices.
According to RealtyTrac, Chicago area homes remain priced, on average, 25 percent below the July 2007 peak.
Illinois is one of the states with the highest share of loans that qualify for the principal reduction program. Only New Jersey has a higher proportion of severely troubled loans. Also high are Florida, Pennsylvania, Ohio, New York, Massachusetts and Nevada, according to RealtyTrac.
Nevada has the highest share of properties underwater: 22.6 percent. Illinois is next with 22.3 percent. Then comes Ohio, 20.8 percent; Florida, 18.8 percent; and Michigan, 17.7 percent.
Blomquist said areas with the fewest underwater properties tend to have strong job markets. As people move in, demand of homes and prices rise.
Metro areas with the lowest share of properties underwater are: San Jose, Calif.; San Francisco; Austin, Texas; Portland, Ore.; and Denver.
Source: Chicago Tribune