MORTGAGE FORECLOSURES

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MORTGAGE FORECLOSURES PREDATORY LENDING IN
ST. CLAIR COUNTY 1996-2000

• Assistant Professor Lynne Dearborn
• East St. Louis Action Research Project
• University of Illinois at Urbana-Champaign

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Study Questions

• How prevalent is predatory lending in St. Clair
  County?
• Are there specific areas or populations within
  the county that are particularly vulnerable?

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Data Collected

• Circuit Clerks Foreclosure Files
• Assessments and Sales Prices
• Tax Stamps and Document Records

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Estimated 5-Year Totals Foreclosure Complaints
2170 Judgements to Foreclose 1460
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8 Indicators of Abusive Lending

• 1. Single Premium Credit Insurance
• 2. Mandatory Arbitration Clause
• 3. Prepayment Penalties
• 4. Balloon Payments
• 5. Interest Rate Spread
• 6. Adjustable Rate
• 7. Sale Price Difference
• 8. High Loan to Value Ratio

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Estimated 5-Year Totals Suspect Predatory Loans
1120 High Loan to Value Loans 1105
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• Number of Judgements Increases
• ARMs Increase as Percentage of Judgements

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ARMs are More Likely in Judgements and Suspect
Predatory Loans
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Average Difference between Mortgage Interest Rate
and T-Bill Rate Increases from 2.14 to 3.43
During a Time Period when Interest Rates were
Generally Declining
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Among Judgements, the Percentage of ARMs with
Interest Rates More than 6 over the T-Bill Rate
is Significantly Greater than the Percentage of
Fixed Mortgage Rates at more than 6 over the
T-Bill Rate
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General Statistics Relating to Census Block-Groups
1. Close to 2/3 of census block-groups in the
county (172 out of 263) have seen foreclosure
complaints. 2. Just over 1/2 the census block
groups in the county (145 out of 263) have seen
judgments to foreclose. 3. Close to 1/2 the
census block groups in county (128 out of 263)
have seen suspect loans made. 4. Close to 1/2
the census block groups in the county (124 out of
263) have seen loans with high loan-to-value
ratios.
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Geographical Analysis - Complaints
Map of Foreclosure Complaints by Census Block
Group 1996-2000
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Geographical Analysis - Judgements
Map of Judgements to Foreclose by Census Block
Group 1996-2000
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Geographical Analysis - Suspect Loans
Map of Suspect Predatory Loans by Census Block
Group 1996-2000
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Geographical Analysis - High LTV Loans
Map of High LTV Loans by Census Block Group
1996-2000
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Geographical Analysis - Comparing Municipalities
Map of Suspect Loans by Municipality 1996-2000
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Geographical Analysis - Comparing Municipalities
Map of High LTV Loans by Municipality 1996-2000
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Summary

• Racial, income, and in some cases age group
  concentrations figure prominently in the
  geographic distribution of loans with both
  predatory characteristics and high LTV ratios.
• Individual demographic characteristics
  highlighted in interviews with individuals who
  have experienced foreclosure suggest low-income
  single-mothers are particularly vulnerable to
  predatory tactics.

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Recommendations

• Provide alternative sources of sub-prime lending.
  
• Increase the use of available enforcement tools.
• Employ caution in the use of Adjustable Rate
  Mortgages.

A more comprehensive description of the study
will be available soon at http//www.eslarp.uiuc.e
du