CHICAGO America's housing mess came to the western part of Humboldt Park long before it hit wealthier neighborhoods, but like much of the country the crisis is apparently going nowhere.
"Everything is on hold here," said John Groene, director of the neighborhood's branch of nonprofit lender Neighborhood Housing Services of Chicago (NHS), on a tour of this predominantly black and Hispanic area. "And there's no end in sight."
The housing stock in the area NHS calls West Humboldt Park consists largely of old, well-built red brick homes that would sell for large sums in Chicago's richer areas. Many blocks have one or two foreclosures, others have half a dozen.
On the worst affected blocks, drug dealers are a common sight at street corners -- many of their customers cycle in from white neighborhoods, an easy ride in this flat city. Vacant homes are a magnet for crime and fewer residents make it easier for criminals to move in.
And while West Humboldt Park is at the lower end of the market and has unique problems, it shares much of its DNA with the rest of America's deeply dysfunctional housing sector: a lack of jobs, a lack of credit for potential homeowners and persistent negative equity. These snags have combined to act as a major brake on a possible recovery.
Before the worst housing crisis since the Great Depression turned America's real estate market on its head, NHS targeted the worst blocks in working class areas across Chicago.
But mounting foreclosures and dwindling resources have forced NHS to focus on stronger blocks and provide basic triage to struggling areas. The foundation, and individuals who donate to NHS, have been hurt by the crisis and are giving less.
Efforts to rebuild blighted neighborhoods have been further complicated by allegations that mortgage servicers nationwide have been using shoddy paperwork to support foreclosures, delaying sales of foreclosed properties.
West Humboldt Park is particularly susceptible. There were 380 new foreclosure filings in the area in the nine months to Sept 30. Most of the area falls within the Humboldt Park district (population about 75,000), which had 402 new foreclosure filings in the first three quarters. That was down from 434 in the same period in 2009, though the figures for this year may be slightly lowered by the paperwork fiasco.
"West Humboldt Park has not been devastated by the crisis," Groene said. "But whole blocks here have been devastated."
"We're trying to help people there keep their homes."
AS GOES WEST HUMBOLDT PARK...
While most of America became aware that all was not well with the housing sector when it began to hurt financial markets in 2007, NHS had been sounding the alarm about subprime lending -- the unstable fuel that eventually blew up the U.S. housing boom and the economy -- since 1999.
For a while, easy lending made buying here attractive and removed the bulldozers that were used to demolish vacant, boarded-up buildings.
On some blocks, the bulldozers are back.
Joyce Carter, 76, and Mattie Johnson, 78, live at 834 North Harding, on one of the healthier blocks in the area, as residents have a strong sense of community. It was one of the worst blocks until a neighborhood program instilled that sense of community in the 1990s.
The issue now is 844 North Harding, which has been vacant for months. Drug dealers hide their wares there and sell them a few doors up on the corner of Harding and Iowa.
"The problem is they are trying to come back," Johnson said, pointing at a group of men loitering at the corner.
Carter, who refuses to shake hands as she has been picking up garbage off the street to keep it clean, said "all we want is for someone to move in and take care of that house."
Before the crash, NHS could have stepped in to buy and renovate 844 N Harding, then sell it at a reasonable price.
"To do that we need one key partner at the table: a first-time home buyer," Groene said. "If there's no buyer, we can't do it."
UNEMPLOYMENT DRIVING FORECLOSURES
A major problem here and elsewhere is unemployment, which stood at 9.6 percent nationwide in October.
"The solution to the problems of areas like this consists of one word, four letters: jobs," said NHS' executive director Ed Jacob. "It doesn't matter what you do with loan modifications, what you do with foreclosure prevention, or what you do with interest rates."
"Nothing is going to really change until people have jobs and have confidence in the future of their jobs," he added.
Real estate data company RealtyTrac said in a monthly report that U.S. foreclosures were flat year-on-year October. But RealtyTrac added the number would have been higher if not for recent allegations banks had failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties, leaving many foreclosures on hold.
"(Unemployment) is driving a lot of the foreclosure activity and also suppressing home buying activity," said RealtyTrac senior vice president Rick Sharga. "So really it comes down to the overall economy improving and the creation of jobs before we're going to see the housing market start to come back."
Credit has become a perennial problem. Long gone are the days of zero down-payment loans and other products like stated-income loans, often referred to as "liar loans", that artificially prolonged the boom.
"Even if you have a job, if you want to buy a house then higher credit standards and tougher loan criteria at banks have made that much more difficult," said Geoff Smith, senior vice president at the Woodstock Institute, which studies lending in poor communities. "But the really big looming problem that no one seems to want to tackle is negative equity."
According to real estate website Zillow.com, in the third quarter nearly one in four single-family homes (23.2 percent) had negative equity -- where the home is worth less than the mortgage. In Chicago that total was 32.9 percent, but that is lower than cities like Miami (42 percent), Riverside, California (48.1 percent), Orlando (64.2 percent) and Phoenix (68.4 percent).
"One of the greatest failures of the crisis has been the unwillingness to write down or write off loans that are under water or difficult to service," said Diane Swonk, chief economist at Mesirow Financial. "By kicking the can down the road, the underlying problems have not been dealt with."
She added that the solution for the U.S. housing sector lies in lenders coming to the table and writing down loans -- a solution that has so far been elusive, with banks reluctant to realize associated losses. It also needs stimulus from the U.S. government, Swonk said, despite how unpopular that option is with American voters.
Swonk said a housing recovery will play a large role in job creation and a broader economic recovery.
"Unaided, the housing crisis will slowly unwind itself," she said. "Without stimulus, there will be less pain upfront. But the recovery will be slower and more painful as a result."
In West Humboldt Park, NHS has been working to persuade homeowners in foreclosure to stay in their homes while the firm tries to arrange a loan modification with their lender.
"Too often, people receive notice that foreclosure proceedings have begun and they think that means the sheriff is coming to evict them immediately," Groene said, standing amid the rubble of a vacant home demolished recently because it had attracted crime and was next to a school. "So they just walk away."
"A lot of people seem to think the foreclosure crisis is over and it's getting better," said Groene. But it's not."
(Reporting by Nick Carey; Additional reporting by Al Yoon; Editing by Tim Dobbyn)