Emanuel Announces Program To Curb Damage Done By Foreclosures

Updated 08/17/11 - 5:56 p.m.

CHICAGO (CBS) -- Mayor Rahm Emanuel has revealed the second phase of the city's assault on the home foreclosure crisis.

First, Emanuel pushed through an ordinance making banks responsible for maintaining foreclosed properties. On Wednesday, he unveiled a strategy to keep those homes occupied.

CBS 2 Chief Correspondent Jay Levine reports on what the epidemic of foreclosures has been doing to people and neighborhoods.

For the most part, we're talking about hard-working people in well-kept neighborhoods, who, through no fault of their own, fall impossibly behind on mortgage payments.

People like Sue Rosenthal-Matthews, who said, "I have been so scared" about the prospect of losing her home foreclosure.

The foreclosure crisis has hit hard in neighborhoods like Gresham, where nice homes sit side-by-side with abandoned properties.

"It brings the neighborhood down, you know the property values go down," Auburn-Gresham resident Brenda Bowman said.

That's why the mayor came to the Auburn-Gresham neighborhood on Wednesday to announce a new strategy to fight foreclosure.

LISTEN: WBBM Newsradio Political Editor Craig Dellimore reports

"It is not just a homeowner, but when that property forecloses it affects the houses on this block. So it needs a neighborhood approach," Emanuel said.

The Micro-Market Recovery Program will target specific parts areas with serious foreclosure problems, and work to place foreclosed properties in the hands of real estate developers and home buyers. To do so, the city will use incentive programs, for-profit capital sources, and non-profit intermediaries.

The John D. and Catherine T. MacArthur Foundation will contribute between $15 million and $20 million through loan programs, which should leverage existing private capital for a total up to $50 million, the Mayor's office said.

The MacArthur Foundation will also work with the Chicago Department of Housing and Economic Development to create loan products that address the need to stabilize the areas the city has targeted.

He called it the Micro-Market Recovery Program, an ordinance targeting nine of the hardest-hit communities in Chicago – from West Pullman on the Southeast Side to Belmont-Cragin on the Northwest Side, where Rosenthal-Matthews and her children nearly lost their home.

"My parents brought us up, you know, we're American first and foremost and you pay your bills and you work hard and then things will be okay. Only I did, I tried that … but things weren't okay, until today," she said.

Rosenthal-Matthews got the help she needed at a Wells Fargo home preservation workshop at the United Center on Wednesday, from bank officials who seemed to be on the same page as the Mayor.

"We share the same objectives that customers do, that neighborhoods do – and stabilizing home values. And we do that by avoiding foreclosure sales," said Russ Cross, a vice president with Wells Fargo.

Wells Fargo invited 13,000 Chicagoans facing foreclosure to an event where counselors were waiting to offer advice and bank officers offered alternatives to foreclosure.

Andrew Mooney, Commissioner of the city's Department of Housing and Economic Development, said the city's new goal is to "either move that property into responsible hands, or to help the homeowner who is in foreclosure try and figure out a way to stay in that home."

Both Emanuel and President Barack Obama – who was on a listening tour in northwestern Illinois on Wednesday – spoke about urging banks to work with homeowners on loan modifications. Wells Fargo was actually doing that on Wednesday.

However, of the 13,000 troubled borrowers that Wells Fargo invited to come in and talk about loan modifications, only about 600 responded.