Housing and Community Development

Stateline Midwest ~ November 2012

Illinois Sen. Jacqueline Collins remembers when her legislative district on Chicago’s South Side had plenty of grocery stores and family restaurants.

But today, she sees a very different picture. She says she counts “too many” fast-food outlets. And in the Auburn-Gresham neighborhood, for example, she counts just two full-service, sit-down restaurants.

States - excluding Oklahoma - received $2.5 billion as a part of the $25 billion National Mortgage Settlement with the country’s five largest loan servicers. Most of the money is intended for homeowner relief and programs aimed at preventing future foreclosure abuse. Some states, however, are using the settlement money to offset existing costs rather than creating new programs to aid homeowners.

Since the Great Recession, states have been hit hard by high foreclosure rates and those higher rates continue to hamper economic recovery. But those rates have varied significantly over the past several years, depending upon which state you are discussing. For example, more than 6 percent of Nevada housing units (one in 16) had at least one foreclosure filing in 2011, giving it the nation’s highest state foreclosure rate for the fifth consecutive year. Arizona and California are also still seeing extremely high rates, despite a significant drop in foreclosure activity over 2010. On the other end of the spectrum, foreclosures in North Dakota are much less common: just one in 39,687 units were in the foreclosure process in April. Check the map from RealtyTrac below to see the most recent foreclosure rates for your state. 

The National Mortgage Settlement is a landmark joint state-federal settlement with the country's five largest loan servicers – Ally/GMAC, Bank of America, Citi, JPMorgan Chase, Wells Fargo. The settlement will provide as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. The states have received $2.5 billion as a direct payment to "purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, [and] to enhance law enforcement efforts to prevent and prosecute financial fraud."Description: Unknown Object

The housing market boom and bust created major affordability problems for current and potential homeowners that rippled out into the rental market and beyond. And while those in the lowest income brackets continue to be the most profoundly affected by the shortage in affordable housing, those in the middle-income brackets also are being squeezed. Affordability problems have impacts beyond the housing market – including reducing the tax base and eroding consumer spending and confidence – and can impact a company’s decision to locate in a particular area. 

A recent settlement between 49 states, the federal government and the nation’s largest mortgage lenders is designed to mitigate some of the damage from foreclosures and to help those struggling with underwater or delinquent mortgages. The banks involved are Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. Only Oklahoma did not agree to the settlement.

On February 1, 2012, the House passed H.R.3567, also known as the the Welfare Integrity Now for Children and Families Act, or what has been dubbed by the media as the "Strip Club Bill". The idea behind the measure is to implement policies to prevent assistance under the Temporary Assistance for Needy Families (TANF) program, often referred to as “welfare” benefits, from being used in strip clubs, casinos, and liquor stores. However, if passed, the implementation of these new regulations would fall entirely on the backs of states.  

A settlement between U.S. states and the nation’s largest mortgage lenders over foreclosure abuses is a go as every state but one—Oklahoma—has signed on to the deal. The settlement is described by U.S. Attorney General Eric Holder as the “largest joint federal-state civil settlement in the history of this nation."  The settlement is between 49 state attorneys general, the Justice Department, the U.S. Department of Housing and five major banks. The exact value of the settlement is unclear, but could range from $26 billion to upwards of $39 billion. 

Hawaii state Rep. Robert N. Herkes noted in August, 2011 in a memo about Hawaii Act 48 of 2011, “The country is in a foreclosure crisis. As the economy continues to lag, the unemployment rate remains high and family incomes are significantly reduced. We can therefore expect little to no abatement of the foreclosure rate on residential homes. Repossessed homes are uninhabited and fall into disrepair. Property values decline. Neighborhoods and businesses suffer. The housing market, a chief driver of the economy, remains bleak. Foreclosures are breeding more foreclosures.” Likewise, USA Today reports “Massachusetts has filed the first major lawsuit over so-called “robo-signing” foreclosure processing” --- just one of many unfortunate practices that contributed to the crisis.  

Here is legislation reviewed by the CSG Committee on Suggested State Legislation about mortgage foreclosures, mortgage foreclosure consultants, mortgage fraud, mortgage licensing, timeshare foreclosures, and foreclosing on mortgages held by military service members.  

Rates of foreclosure are at levels not seen the 1930s, and some communities in the Midwest have been particularly hard hit by a rise in the number of blighted properties. States are responding with new measures and investigations designed to help troubled communities and homeowners.