Chicago-area foreclosures in August up 66% over same time last year

Despite good news on foreclosures in one suburban county, unemployment and remnants of the recession are still pummeling homeowners statewide, especially in the Chicago suburbs, where foreclosures continue to increase by as much as two-thirds, according to a report released today by RealtyTrac Inc.

The Irvine, Calif.-based research firm said Cook County, including Chicago and area suburbs, showed a dramatic 66 percent increase in foreclosures in August, compared to August 2009. Other counties with double-digit increases were McHenry with 14 percent and Will with 18 percent.

Kane County was the only area in the region to show a rare decline in foreclosures - though the nearly 9 percent drop for the period was significant.

"As the ARM (adjustable rate mortgage) products come due and people cannot refinance out of them, they are seeing their payments go up and there is not much they can do, because their credit, jobs or market value of their house prevents them from refinancing out," said Marve Stockert, executive director of Lombard-based Illinois Association of Mortgage Professionals.

"I hate to be so down, but it is reality. People are going to have problems until the market values improve so they can sell or refinance. Then we have to hope for rates to be at these low levels."

There was some encouraging news for DuPage and Lake counties, which experienced month-to-month declines in foreclosures of 22 percent and 26 percent, but those figures reflected activity comparing July to August rather than the same period of 2009, where both counties showed foreclosure increases.

"This says to me that the main driver of month-to-month changes are the lenders themselves, how aggressive they are in pursuing borrowers in default or discounting properties once they end up in bank hands," said Phil Ashton, assistant professor of urban planning and policy at the University of Illinois Chicago. "As the foreclosure problem has shifted from being a subprime to a prime mortgage phenomenon, big prime mortgage-market institutions, like Fannie Mae and Freddie Mac, have become pacesetters for regional activity in both these areas."

RealtyTrac said Illinois was No. 9 nationwide with about 16,800 total filings, a nearly 29 percent increase, while nationwide figures showed about 338,800 filings, a 5.5 percent decrease in August, compared to a year ago. The total number of filings include default notices, scheduled auctions and bank repossessions.

Illinois, along with Michigan, California, Florida, Nevada and others with high unemployment rates, continue to be in the Top 10 with the most foreclosure filings.

Foreclosures don't seem to be letting up anytime soon and continue to force homeowners to make difficult decisions, experts said.

"We have terrible foreclosure laws, not enough recourse," said Diane Swonk, chief economist and senior managing partner with Mesirow Financial in Chicago. "A friend recently told me that the judge in her divorce case advised her to allow her home to go into foreclosure because foreclosure takes so long in the Illinois that she could save money and pay her lawyers rather than endure a short sale."