Lenders shunned ZIPs before law.
On Jan. 19, Gov. Rod Blagojevich suspended HB4050, a pilot law designed to protect homeowners in 10 Chicago ZIP codes from predatory lenders.
Behind the news:
For months, critics lambasted HB4050 saying that the controversial law made it harder for people to buy homes in the 10 affected ZIP codes: 60620, 60621, 60623, 60628, 60629, 60632, 60636, 60638, 60643 and 60652.
But even before HB4050 went into effect last September, the area was a no-go zone for reputable, prime-rate lenders and a haven for subprime and high-interest lenders, according to a Chicago Reporter analysis of conventional, home purchase loans for owner-occupied, single-family properties,
Each year, the federal government identifies subprime lenders who specialize in home loans carrying higher interest rates and fees to compensate for increased credit risk.
In 2005, about 56 percent of all loans studied in the HB4050 areas came from subprime lenders--nearly double the citywide percentage.
Subprime lenders did 35 percent of their citywide business in the HB4050 ZIP codes, but prime-rate lenders did just 11 percent of their business there.
LaSalle Bank spokesman Jeff Noe said that more than 20 percent of the company's home purchase loans went to "minority communities." However, the Reporter analysis shows that, in 2005, just 5 percent of LaSalle Bank's conventional loans for owner-occupied, single-family homes were granted in the HB4050 areas.
Furthermore, loans from prime-rate lenders in the HB4050 areas often looked like subprime loans. Nearly 42 percent of the loans there from prime-rate lenders were deemed "high-interest" loans by the federal government compared to just 14 percent in other parts of the city.
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|Title Annotation:||SPINOFFS: Keeping Current|
|Publication:||The Chicago Reporter|
|Date:||Mar 1, 2007|
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