Helen Love closes her eyes to remember how West Gladys Street looked when she first moved to her Austin block with her husband and children in 1968. She thought she had stumbled upon heaven. For decades, she described the homes not just by their brick color or house number, but by the names of their owners.
Today, many neighbors have either died or moved away, and thin plywood boards are nailed over the windows of 11 houses within eyeshot of her home. Among them is a wood-frame house that hugs the edge of her property. During two recent summers, the 65-year-old dragged her swollen, aching knees next door to trim back the weeds and grass. Her friend, and fellow retiree, Katherine White, mounted locks on the doors, and Love nailed plywood over the windows. But squatters ripped them down in days and stole anything valuable.
In 2008, the city devised a way to keep neighborhoods from turning into junkyards as the nation’s foreclosure crisis roared on. The city passed an ordinance forcing owners of vacant properties—mostly financial institutions—to register them with the city. That way, the city could inspect the properties to make sure they weren’t falling into disrepair.
But an analysis by The Chicago Reporter found that many financial institutions aren’t registering the properties. The Reporter analyzed records of 11,500 single-family properties that have been reclaimed by lenders since 2008 and have likely been vacant since that time. Our analysis found:
- At least 50 percent of these bank-owned homes were never registered.
- The city lost at least $2.2 million in revenue from fees lenders skirted by not registering the homes; just about one-third of all bank-owned properties.
- A handful of lenders are responsible for not paying the bulk of what’s owed.
When lenders don’t register their properties, taxpayers lose out on millions in revenue from fees but also shoulder the cost to secure the properties. In the past year, the city’s buildings department has spent roughly $13 million in taxpayers’ dollars to board up and knock down vacant buildings that had been foreclosed on, said Richard Monocchio, the city’s buildings department commissioner. With thousands more cases still tied up in court, the number of vacant properties could grow.
And yet, banks that are lenders have continued to receive city business, a point of contention for some officials. In a single bond deal in 2010, Bank of America Corp. collected $5.3 million in underwriting fees from the city when it structured a $1 billion issue to finance bonds to cover capital projects, including work at O’Hare International Airport, a Bloomberg investigation found.
The Reporter found that nearly 76 percent of Bank of America’s single-family properties were not registered, meaning the financial institution owed at least $103,000 to the city. “It’s like being a scofflaw,” said 3rd Ward Alderman Pat Dowell, from the city’s South Side. “Individual scofflaws that don’t pay taxes or parking tickets can’t do business with the city. Banks should be treated the same way.”
Lenders dispute they’re responsible for paying some of the fees because they say they don’t own all of the properties. JPMorgan Chase, for example, says that while it may have been listed as the noteholder on hundreds of mortgage deeds, in many cases the bank is merely hired by the owner as a servicer—an entity hired to maintain the property. “It’s our policy to register homes with the city if we become the owner,” said spokesman Tom Kelly.
Meanwhile, US Bank—which is named as the trustee on many of the properties analyzed—says that it’s up to the servicers to register properties. “For trust-owned properties the servicer of the mortgage loan is responsible for registering the properties in accordance with applicable city ordinances,” said spokeswoman Lisa Clark in an email. By her count, US Bank only has 30 “corporate-owned properties” on its books.
Bank of America says that its policy is to “immediately register a vacant property once it takes title after the judicial sale is completed.”
The city first adopted the vacant buildings ordinance in the spring of 2008. The law set some standards for securing empty houses. Under the measure, property owners are required to register properties within 30 days of becoming vacant. The registration comes with a $250 fee, which has to be renewed and paid every six months. Liability insurance is also required. And when buildings are in violation, owners must bring the properties up to code, replace plywood with secure doors and windows or install electronic security systems.
But the city has been lax on enforcement. Nearly 5,900 bank-owned single-family homes have never been registered—that’s more than half of the city’s vacant homes, not including condominiums or town homes that have likely been vacant at least once since April 2008. The biggest violators are a handful of major lenders, according to the analysis of property transfer, city and bank-owned property data. US Bank, JPMorgan Chase and Bank of America are among the top lenders with outstanding fees.
Combined, 10 lenders throughout the entire city owe $1.4 million, roughly 66 percent of all lender delinquencies.
But city officials say they aren’t letting the banks slide. The city issued 996 citations to all property owners failing to register vacant properties last year. And the owners of more than 1,700 buildings were also hauled into housing court, Monocchio said. How many of those citations or cases were directed at lenders is not known because the city isn’t tracking them individually.
In sheer numbers, Love’s Austin community isn’t the worst hit when it comes to vacancies. It ranks fourth in Chicago for vacant residential properties, according to the U.S. Department of Housing and Urban Development.
The community hit hardest in the sheer number of vacancies is South Shore; Riverdale properties stayed vacant the longest, according to an analysis of HUD data. By 2010, the homes in Riverdale were sitting vacant for an average of 3.3 years as of the third quarter, up 13.8 percent from 2.9 years at the same time in 2009. Englewood, Fuller Park and Avondale saw the largest growth in vacancy rates, as well. By contrast, the Near South Side community, which encircles the South end of the Loop, had the lowest average—six months—in the third quarter of 2010.
The more that time passes, the harder it is to refurbish properties, said Geoff Smith, senior vice president with the nonprofit Woodstock Institute, a research organization that specializes in housing policy. “You’ve got places that are so devastated by the foreclosure crisis that you don’t know what to do next,” Smith said.
And the problem could get worse. In 2010, there were 23,364 foreclosure filings in Chicago, many of which are likely pending in the courts, according to Woodstock.
For those properties that have already worked their way through the court system, the trail of property transactions is tough to follow, making it difficult to determine who’s responsible for vacant properties. Banks, one of the many types of lenders, bought many of the mortgages from companies that initiated subprime loans. In many cases, banks rely on servicers, which are responsible for tending to the repossessed properties.
But as the Reporter’s analysis shows, that’s not happening. “It’s easy for banks to hold properties because it’s not expensive,” says Adam Gross, a lawyer with the nonprofit Business People and Professionals for the Public Interest. “And they can choose not to maintain them because [the consequence] is not terribly costly.” Fines to lenders can reach up to $2,500 per offense, but the city usually collects only after hauling a property owner into court.
Alderman Dowell has been trying to enforce accountability by attempting to amend the city’s registration requirements. She wants to make it less attractive for lenders to indefinitely keep large numbers of vacant properties in their portfolios. Under Dowell’s proposal, companies that hold the notes on five or more vacant buildings would see their registration fees jump from $250 to $1,250 per property. By the Reporter’s count, lenders who are delinquent for at least five single-family homes would currently owe the city at least $9.9 million if the amendment were already on the books. Fines for failing to comply with the stricter registration requirements could net millions more.
Behind the scenes, the Daley administration hasn’t exactly lined up as a fervent supporter of Dowell’s rewrite, which initially came before the council in July. City lawyers have raised internal questions over whether a key provision in the ordinance—which would make lenders, including banks, culpable for maintenance from the time the property becomes vacant—would hold up to a legal challenge. Mayor-elect Rahm Emanuel declined to comment for the story.
Dowell’s measure has been held in committee since last summer, but she maintains that it has not been shelved.
Back on Love’s street, four of the five vacant, single-family homes are currently owned by lenders, and one has been vacant and unregistered for nearly three years, the Reporter found. Two of those houses are currently on the market, but they’ve lost so much value that it’s not clear who would buy them, neighbors say.
“We have blocks that are empty,” said Elce Redmond, a community organizer with the nonprofit South Austin Coalition. Redmond makes the rounds each week mentally mapping out the neighborhood’s vacant buildings, taking note of the growing number that are buckling under neglect.
The scavengers on Gladys Street have stripped anything from the buildings that might fetch a dollar. They ripped through the drywall of the two-story house just to the east of Love’s house, fishing for pipes that could be sold at the scrap yard. Radiators disappeared. Fences that once ringed backyards have been clipped down. Someone even jimmied the bathtub out of the first-floor bathroom of the house next door.
In some of the beleaguered buildings, squatters are the only signs of life. And they’ve grown increasingly comfortable under the absence of the owners. A man swung by Love’s house one day looking for an extension cord to run electricity from her house, through the gangway and into the vacant house next door.
“I said, ‘Man, I don’t supply nobody with electricity,’” Love said with a dry chuckle. In a neighborly gesture, though, she let him warm a bowl of pinto beans in her microwave instead.
In January, the house that sat next to Love’s house was razed by the city. People in the neighborhood gathered to watch it come down. Love breathed a sigh of relief. She wanted to see the building demolished, “before I see it … do some damage to mine.”
Contributing: Samantha Winslow and Philip Jacobson.