By Sally Duros
Come November, thousands of Chicagoans will be ordering up what I’m
calling the double whammy: “Give me some property taxes with those
mortgage resets please!”
Not to be confused with a fast food treat, this delight comes with
a shakedown rather than a shake.
If you’re a Chicago homeowner with an “exotic” mortgage, you might
want to see what kind of pocket change you’ll need to dig up when
your property-tax bill lands in your mailbox Nov. 1 or thereabouts.
That’s because many subprime mortgages do not escrow cash to pay
for your taxes and insurance costs every month. Don’t delay, look
now and see what your mortgage says.
Chicagoans whose lenders have not been maintaining an escrow
account will have to take a serious jackhammer to the piggy bank
because as you’ve been reading in the Sun-Times, we have a record
property tax increase lined up.
And those property tax payments will be due in pretty short notice.
It looks like the General Assembly in its kindness will allow us
some relief by capping any increase in property tax assessments at
no more than a 7 percent increase over the previous assessment.
Thank goodness the double-whammy didn’t get to supersize Emma
Henry, a 67-year old widow who works for a living and resides in
Greater Grand Crossing. She qualified for a conventional loan, but
she had been given what is called an 80/20 mortgage, which means
she had an interest-only first mortgage around $672 per month, and
a second loan at $335 per month.
“Her mortgage was $134,400 on the first mortgage, and it never went
down,” says Tiffany Brooks, a lender with ShoreBank. “She had no
Earlier in the summer Henry saw that her mortgage payment was about
to rise. “It was going to go up to about $900,” Henry says. “They
also said that it could go up every six months, and I knew I
couldn’t handle that.”
In August, ShoreBank helped her refinance into a 30-year fixed-rate
Ponder this: Henry’s property taxes were an additional $1,375 and
her insurance was around $700 per year — that’s quite a hit paid
out of pocket.
“She refinanced into a conventional 30-year mortgage with a fixed
rate of 7.25 percent. It includes principal, interest and insurance
payments,” Brooks says. “Her payment now is $1,319. She will be
paying off her entire loan and not just paying the bank interest.”
Lenders are not required to maintain an escrow account for paying
taxes and insurance, HUD says on its Web site. Lenders trying to
make the pricing of their loans look even more appealing
undoubtedly left the escrow out, making it look like a good deal.
The repercussions of that detail likely slipped by many new
homeowners when they were signing the volumes of paper on their
mortgages — in fact 45 percent of mortgage holders surveyed by
Neighborhood Housing Services HOPI (Homeowner Preservation
Initiative) last spring did not have escrow accounts, and 78
percent had no emergency savings.
As of September, 5,561 households in the Chicago six-county area
were in the initial step of the foreclosure process, according to
data from RealtyTrac. Nearly 3,600 of those were in Cook County
A large number of mortgages have interest rates about to reset,
adding stress to many homeowners.
Mayor Daley has decided to use his bully pulpit to address the
foreclosure problem in a series of community town halls beginning
Saturday. It’s all nicely timed with our property tax bills.
Maybe we should request that the mayor provide a copy of the City
of Chicago budget at every meeting so we each can try a hand at
crossing out unneeded budget lines contributing to waste and
corruption without cutting police and fire — that tired old fear
I’ve heard the theory discussed that we effectively could cut
millions from the city budget just by randomly crossing out every
10th line. It’s worth a try! We should be willing to give it a go
if it minimizes the heartache our soaring property taxes are
creating for Chicagoans.
The mayor also says the city will expand its efforts to help
Chicagoans who face or want to avoid foreclosure by discussing
solutions to the problem by meeting with Wall Street investors and
ratings agencies later this month. It’s a good call, but we’re
hearing and we believe it’s true that nothing will happen to sort
out the good mortgages from the bad mortgages — and get help more
quickly to homeowners who need it — before the new year. That’s
when Wall Street will have gotten its bonuses.
Credit: The Chicago Sun-Times