PI Original Micah Maidenberg Wednesday January 19th, 2011, 4:03pm

The Tale of A West Side Foreclosure

We examine the recent history of 4924 W. Gladys, a vacant and blighted home on Chicago's West Side.

The building at 4924 W. Gladys is an absolute wreck.

Windows are shattered on its first and second floors. The back door's flaps are wide open. Inside, it appears that the home's wiring and metals have been stripped out by vandals. The carpeting is ripped up. There are soiled clothes strewn about in the first-floor rooms. Empty liquor bottles and little plastic baggies that presumably once held drugs litter the floor. Check out a slideshow on our Flickr account of the decaying structure.

Progress Illinois, along with a number of other news outlets, visited 4924 W. Gladys yesterday at the behest of Miguel del Valle, the Chicago City Clerk and a mayoral candidate.

Del Valle, as we reported then, used the building as a backdrop to criticize Clinton-era financial deregulation and Rahm Emanuel's stint on the board of directors of mortgage giant Freddie Mac. Ex-president Bill Clinton was in town yesterday, of course, to bestow his endorsement upon Emanuel's mayoral bid.

The del Valle campaign picked a good place to talk about the way homeownership switched from being a source of stability to an unaffordable nightmare for many borrowers and a destabilizing force for many neighborhoods. This is especially true in the city's minority communities.

The building at 4924 W. Gladys is, apparently, one of those properties that morphed from a stable place to one of complete disarray.

The Cook County Assessor's Office says the building is more than 62 years old. Property information about the home maintained by the Cook County Recorder of Deeds Office shows a woman taking out a mortgage on it in the summer of 1997.

She sold the home in December 2003, and the new owner took out a mortgage on it shortly thereafter, the records show.

Then, in December 2006, a man by the name of Reginald Orr purchased the building for $200,000, according to property transfer records. Progress Illinois' attempts to locate Mr. Orr were unsuccessful as of the publishing of this story. He took out a loan from a California-based firm named First Franklin.

First Franklin was a subprime lender, known for relying heavily on "an army of independent brokers to find borrowers and submit loan applications," a 2007 story in Reuters noted. That proved to be a risky strategy. "Court papers show First Franklin has been burned by lax underwriting, fraudulent home appraisals and borrowers exaggerating their incomes," Reuters wrote.

Orr's mortgage, to be paid in full by January 1, 2037, appears fairly standard -- there are no provisions it in for adjustable interest rates, for example. Take a look:

But then again, it is far from clear as to whether First Franklin should have even loaned Orr the money for the house. Just a few months after both sides struck the mortgage deal, Orr was in trouble.

On July 10, 2007 First Franklin moved to foreclose on the property in Cook County Circuit Court.

Did Orr have the income and ability to pay off the mortgage in the first place? Could he have lost a job by the time the mortgage agreement was sealed, forcing the sudden foreclosure suit? It isn't immediately clear. It is worth noting that there was an epic amount of subprime lending on Chicago's West Side in recent years.

At any rate, the judge presiding over the case ordered the firm to take possession of the property on March 21, 2008.

And by that time, much had already changed for First Franklin.

In December 2006 -- not long after Orr took out his $200,000 mortgage from them -- the investment bank Merrill Lynch purchased the company.

Merrill was still an independent entity then, but First Franklin's portfolio of subprime loans soon started to drag on the investment banking powerhouse, Reuters found in their August 2007 analysis.

In November of that year, Merrill's losses from exposure to the subprime loan market were staggering, spooking Wall Street and helping to send the economy into a tailspin.

On March 27, 2008, a property transfer was executed, giving Merrill Lynch Mtg. Lending Inc. control of 4924 W. Gladys. The house appears to have gotten lost in the shuffle after that.

By September 2008, the firm agreed to sell itself to Bank of America. By this time, the Great Recession was well under way and the housing boom seen during the Bush presidency was exposed as having little solid foundation. And Merrill Lynch, don't forget, was the beneficiary of billions of dollars in loans from the Federal Reserve Bank and stock purchases by the U.S. Treasury. Its former CEO, John Thain, meanwhile, made lavish purchases and extended huge bonuses to top Merrill staff as the firm was going under.

The Gladys house may have been vacant at this point; but there is no immediate way to confirm this. Nonetheless, neglect was setting in. No one, for example, was paying a water bill for the property. On July 1, 2008, the Chicago Department of Water Management filed a lien against the property, records show.

Two years later, the water department filed another lien on the property on June 1, 2010 seeking $1,698.02 in back water and sewer bills. Take a look:

Bill McCaffrey, a spokesman for the city's Department of Buildings, said on July 7, 2010, building inspectors visited the structure, finding a raft of building code violations and deeming the house as dangerous.

"Building owners have a responsibility to make sure any vacant properties are secured," he said. "Everything on the first floor must be secured with plywood. And if a property is breached, then it needs to be upgraded to steel security panels. That is the bare minimum."

McCaffrey thought the city might have initiated legal action against the property owner but details about that case were unavailable through McCaffrey and the city's Department of Law at the time of this story's publishing.

So who is responsible for the home at 4924 W. Gladys?

Bank of America spokeswoman Diane Wagner wrote in an email that her firm is not the owner of 4924 W. Gladys. Wagner wrote, "It appears as there were several quit claim deeds filed at the end of the year that now show the owner as Interstate Investment Group LLC."

She did not return a follow-up email seeking comment about how the building fell into its current blighted state, nor a question about when Merrill or Bank of America officially stopped owning the property.

For the quit claim deeds Wagner referenced show a complex series of transactions. All were filed with the Cook County Recorder of Deeds office on January 7 of this year.

One lists Merrill Lynch Mortgage Lending, Inc. as having assigned the property over to Interstate Investment Group LLC. This document shows notaries witnessed the signatories signing the deed on both October 5, 2009 and April 10, 2009.

Another one of the deeds lists Interstate as the grantor, and United Capital Fund, LLC, of Stuart, Florida, as the grantee. It asks that all tax bills be sent to a Florida address.

Yet another of the quit claim deeds filed on January 7, United Capital grants the property to CGI Properties of Jacksonville, Florida.

A call to an attorney listed as connected to the Interstate group was not returned. A number for United Capital in Stuart, Florida was not working. A number for CGI Properties could not immediately be found.

Elce Redmond, an organizer with the South Austin Community Coalition, said 4924 W. Gladys was still blighting the block with no appropriate response from its owner.

"You have these buildings sitting around and nothing being done with them," he said. The owners -- some of the biggest-name banks in the world -- are "not even cleaning up the trash."

For his part, del Valle said yesterday that the city's next mayor must aggressively fight the foreclosure crisis. He announced his support for creating a "socially responsible investment policy ... that would divert money from banks serving as city depositories that have slowly and inconsistently modified loans." Del Valle is also backing Ald. Pat Dowell's vacant property ordinance proposal.

The sordid state of 4924 W. Gladys, after all, highlights the fact that the foreclosure crisis has simply overwhelmed all federal, state, and local responses to it thus far, leaving Chicagoans, the city's economy, and its neighborhoods struggling with a messy aftermath.


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