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The end of COVID-19 homeowner protections is unlikely to bring a wave of foreclosures, but some Chicago property owners could be hit harder

Sarah Freishtat, Chicago Tribune on

Published in Business News

“The concern really is the equity not being where it is in other states, not having recovered as much housing equity since the (2008) recession,” he said.

An uptick in foreclosures could be felt most in neighborhoods on the South and West sides of Chicago, said Matthews, at Neighborhood Housing Services. That’s where families have taken a harder financial hit because of the pandemic, she said.

Two- to four-flats, where tenants have faced challenges paying rent, are also at risk. Owners often live in the buildings, and foreclosure could mean the loss of both owner and tenant homes and of an affordable rental unit, said Diane Limas, a volunteer and board member for Communities United.

“We’re concerned for any family going through foreclosure, but our big concern is for the two- to four-flat, ma and pa homeowner that only gets money from one apartment to pay their mortgage, to pay their property taxes, to do repairs on the building,” she said. “And now, all of a sudden, there’s no money coming in.”

State and local rental assistance programs can help, Limas said. Communities United is part of the Chicago Flats Initiative, which aims to preserve the buildings and is knocking on doors to provide information about rental and homeowner assistance.

But not all tenants might receive rental assistance, and two- to four-flats owners looking to sell during COVID-19 challenges could open the door to investors, said Tanya Woods, executive director of the legal aid organization Westside Justice Center. That has her worried about local wealth leaving communities, and the potential for future gentrification.

 

A crisis could also be lurking down the line for other homeowners, she said. The way borrowers make up payments deferred during forbearance varies by loan, but some mortgages could skyrocket when payments come due in coming years or at the end of forbearance programs, leading to foreclosures down the line.

That has been one challenge for Diamantes.

Diamantes entered a COVID-19 forbearance program at the end of June 2020. She had missed one payment more than six months earlier when she never received notice that a new servicer had taken over her mortgage. Her later attempts to make payments were rejected and, after months of challenges with the new servicer, she was several months behind on her mortgage, she and her attorney, Seth McCormick, said.

The new company, Shellpoint, told Diamantes her home was referred to a foreclosure attorney in March 2020, according to a letter provided by McCormick, but McCormick said there seemed to be no record that the threatened foreclosure had been filed.

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