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A Micro-Market Miracle on Central Park?

Orlando Graham could buy a house anywhere.

So why is this college-educated, ex-NBA player and successful security executive looking at a red brick two-flat smack in the middle of an entire block of foreclosed properties on Chicago’s West Side?

“It’s a great opportunity,” explained Graham. “I look to be part of the future. If I get in now, and if John keeps recruiting good people, it changes into something bigger. … It’s all going to come up.”

Artsy plywood windows signal help is on the way for this Franklin Boulevard walk-up, through the city's Micro-Market Recovery Program, of which LISC Chicago is a key partner.

John McCarron

John-the-recruiter-of-good-people is John Groene, director of the West Humboldt Park office of Neighborhood Housing Services of Chicago, or NHS. Operating out of a converted gas station at 3601 W. Chicago Ave., Groene and his small staff have a two-fold mission: 1) help families avoid foreclosure; and 2) save as many foreclosed-and-vacant houses as possible by gaining control, preventing further damage and–hardest of all–finding and helping responsible new owners.

Talk about “mission impossible.”

Like other knowledgeable leaders in the foreclosure fight, Groene admits there’s no way non-profits like NHS–despite their considerable corporate, philanthropic and government support–can, by themselves, stabilize and restore the city’s foreclosure-wracked housing stock. Not when new research shows that one in seven city residences were hit with foreclosure during to 2005-11 mortgage meltdown. Not when research shows that, in ground-zero neighborhoods like West Humboldt, the foreclosure toll was an appalling one in three.

Only a strong rebound by the private real estate market can reverse damage of that scale and magnitude.

The micro approach
That’s why LISC Chicago is helping the City of Chicago and Mayor Rahm Emanuel implement a kind of triage/stimulus strategy called the Micro-Market Recovery Program, or MMRP.

Rather than scatter inadequate public and private resources across the city, or even across entire neighborhoods, MMRP is focusing on just a handful of hard-hit blocks in a handful of hard-hit neighborhoods. These “micro markets” were carefully chosen, however, so they include, or are near, existing public investments that can anchor a wider recovery.

In the case of West Humboldt, one of MMRP’s initial nine target neighborhoods, a rectangular subset of 15 blocks was chosen. Therein are 123 foreclosures … yet the zone is bracketed by the CTA’s Green Line, broad tree-lined boulevards, a revitalizing high school and the magnificent Garfield Park Conservatory.

Located close to the Garfield Park Conservatory, the 500-block of Central Park Avenue fits the city's build-on-strength MMRP strategy.

John McCarron

So when a row of foreclosed and abandoned masonry buildings on the 500 block of North Central Park Avenue, just north of the Conservatory, ended up in demolition court–their windows having been smashed, their plumbing ripped out–NHS obtained Cook County Circuit Court designation as temporary “receiver.”

 A rehabber and re-seller of homes and small flats with historic support from the city’s banking industry, NHS is a boots-on-the-ground partner in the MMRP mix. Its hired contractors moved quickly to board up all five two-flats, paint faux-windows on the plywood, clean out interior filth and do some remedial landscaping.

Having spent about $10,000 on each, Groene explained, NHS is now foreclosing on the foreclosers—which is to say, the unresponsive mortgage lenders and/or long-gone owners, none of whom have shown interest in trying to pay back taxes or utility bills, much less repay lien-holding NHS.

If this sounds like a convoluted and time-consuming method for gaining control over blighted and dangerous empties, that’s because it is. Illinois’ judicial foreclosure process is a blessing when it comes to buying time for families to negotiate better mortgage terms, said Groene, but it’s a curse when occupants are long-gone and the lender isn’t stepping up to manage its property.

A buyer’s bargain
So part of Groene’s job, once he finds a prospective buyer, is to keep them enthused about their hoped-for investment while NHS lawyers maneuver in court to gain a clean title for resale.

Fortunately, NHS has a growing list of incentives for patient buyers willing to endure some paperwork. Groene figures Orlando Graham can buy that red-brick two-flat for no more than what NHS paid to save it, plus rehab costs, all rolled into a deeply subsidized purchase/rehab loan of about $120,000 booked through NHS.

Former professional hoopster Orlando Graham could buy anywhere, but he likes the upside he sees for the 500-block.

John McCarron

How deeply subsidized?

Very. A recent city expansion of its tax increment financing program, or TIF, offers loan forgiveness of 25 percent over five years for qualifying owner-occupants. Another subsidy offered by the city’s federally funded Neighborhood Stabilization Program, or NSP, forgives up to half the loan over an owner’s 15-year occupancy. 

Yet another subsidy is being offered through the offices of Illinois Attorney General Lisa Madigan, a leader in the national fight to win reparations from lenders complicit in the sub-prime mess. Buyers qualifying for the AG’s “City Lift” program can get up to $15,000 in down payment assistance.

All told, said Groene, Graham could end up owning a freshly rehabbed two-flat with monthly mortgage payments considerably less than he’d pay elsewhere on a standard 30-year fixed-rate rate loan.

Still, there’s no guarantee Graham will buy the two-flat. A better deal could materialize any day. So the prospective buyer has been restive … but still pumped.

“It’s an excellent location,” said Graham, who oversees the security force of 175 that guards Northwestern Memorial Hospital. “You have the Chicago Avenue bus which goes right to where I work. There’s the Green Line. The Conservatory, The new Westinghouse College Prep High School. I just want to be part of it.”

Pushing the model
So what’s next for Chicago’s MMRP effort?

Obviously, program partners are looking for a faster way to gain control of abandoned properties so they can be resold, fixed and occupied. One way, Groene said, might be for courts to make greater use of existing state laws allowing cities to seize property considered abandoned and/or a public nuisance. Another would be to acquire batches of properties for bulk resale to carefully screened developers.

John Groene of NHS (left), which manages MMRP, says helping buyers like Orlando Graham is key to solving the foreclosure crisis.

John McCarron

“Single-family foreclosures are the greatest challenge,” said Jack Markowski, a former city housing commissioner, who’s now president of the Community Investment Corporation, a nonprofit specializing in saving larger apartment buildings.

CIC is also part of the turnaround on North Central Park, having recently saved a 17-unit walk-up just around the corner on Franklin Boulevard. The building’s brightly painted plywood “windows” signal that somebody cares. And in fact, a solid developer/owner has been engaged by CIC to turn it around.

“A neighborhood might have four or five foreclosed walk-ups,” said Markowski, who’s part of the MMRP brain trust. “But it’s got hundreds of vacant houses, every one in its own stage of foreclosure or tax delinquency. So how do you get to any scale?”

Little wonder Mercy Portfolio Services, the city’s hired NSP coordinator and another MMRP partner, has switched focus from rehabbing bungalows to turning around foreclosed multi-units. In its third year of federal funding, Mercy has purchased more than 800 foreclosed dwelling units … but has found a lot more qualified renters than buyers. There is, in other words, a nagging shortage of Orlando Grahams.

“We need to have an end-user in mind,” echoed Andrew Mooney, commissioner of the city’s Department of Housing and Economic Development and quarterback of the MMRP effort. “Having the city own these properties is, in many ways, no better than leaving them lender-owned.”  

Susana Vasquez, LISC Chicago’s executive director, seconded Mooney, adding that the main challenge “is to cost-effectively create a market of owner-occupants and small investors” for the smaller empties that dot neighborhoods like West Humboldt. Those would include places like Chicago Lawn, where MMRP is helping neighborhood contractors, buyers and the Southwest Organizing Project work with residents as they recover from the foreclosure tsunami.

Slam dunk
Back on Central Park Avenue, John-the-recruiter echoes those concerns with a nod toward the 6-foot, 7-inch Orlando Graham.

“The critical partner in all this is the buyer, the Mr. Grahams,” said Groene. “It’s easy to have someone say ‘I want to buy this building with your subsidy and rent it out.’ But to find people who say ‘I want to buy and live there with my family,’ well, that changes everything. That’s what creates the stability and the buy-in.”

Graham has owned before but never has been a landlord. So he’s signed-up to take a one-day crash course in property management offered by CIC.

“It’s been a process with the whole foreclosure thing,” said Graham. A second-round NBA draft pick in 1988, he played a season for Golden State before finishing his roundball career on the European circuit. 

“You get impatient,” he admits. “John tells me to check in once a week. But I’m ready to go. It’s a great block … a great opportunity.”

More information:

Jack Swenson, LISC MMRP coordinator, (312) 422-9574

John Groene, NHS, (773) 533-5570 jgroene@nhschicago.org

Posted in Housing, East Garfield Park, Humboldt Park

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Local Initiatives Support Corporation Chicago connects neighborhoods to the resources they need to become stronger and healthier.

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