My Two Cents

Foreclosures in Chicago

Chris Farrell Apr 11, 2008

I was in Chicago last Tuesday. I flew into Midway airport and took a cab to the South Shore Cultural Center. (It’s a magnificent old complex alongside the lake.) I was there with American Radio Works producer Laurie Stern to attend a meeting between the head of the Chicago Housing Authority and public housing residents.

I found the drive along Emmett Till Drive and 71st Street (those are the street signs I remember) incredibly depressing. I have never seen so many boarded up homes, many of them nice buildings. Block after block. Street after street. It was the visible sign of the inner-city subprime crisis.

I know public budgets are strained, but I wondered why didn’t the city or the state or both come in and create a shared equity mortgage program with the homeowners before they got tossed out on the street? In essence, with a shared equity mortgage the city/state would invest enough so that the homeowner now qualified for a 20% to 30% down payment. The homeowners would then get a prime 30 year fixed rate mortgage. The owners are now in a position to make the debt service payments.(This deal would only be for those homeowners where the numbers added up; I’m assuming that would be many of the homeowners saddled with toxic subprime loans.) The price of homeownership is paying back the state/city the initial stake plus a piece of the eventual gain, ranging between 10% and 50%. There’s a lot of flexibility to writing mortgage contracts like this.

The city keeps its homeowners with a stake in the neigborhood. The homeowners still have a piece of the home so they’ll have an incentive to maintain the property. And the city/state gets it money back on sale.

I’m sure there are flaws to this idea that I’m not thinking of at the moment. But it sure seems like a better financial solution and social safety net than the current strategy of boarding up home after home.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.