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People may suspect that a balloon or adjustable rate mortgages represent a majority of Chicago foreclosure filings. In reality, although mortgages with ARMs and adjustable rates used to represent about half of Chicago foreclosure filings, that percentage is falling.

According to a recent report released by the Woodstock Institute, at the start of the current economic downturn, government-backed fixed rate mortgages and conventional loans were used in 50.1 percent of homes entering foreclosure. The riskier adjustable rate, ARMs and balloon mortgages were used in 49.2 percent of foreclosure filings.

Last year's numbers showed a different story. Only 29.4 percent of foreclosures were on balloon and adjustable rate mortgages, while 68.2 percent were on government-backed or conventional mortgages.

It seems the Chicago housing market has yet to hit bottom. The amount of foreclosures filed on homes in the Chicago metro area increased by almost 14 percent between December and January. This may be attributed to the resolution of problems with lender documentation, which previously prevented Chicago foreclosures from moving forward along with foreclosures nationwide.

The CEO of RealtyTrac explained, "Although overall foreclosure activity was down from a year ago for the 16^th straight month in January (nationally), we continue to see signs on a local and regional level that the frozen-up foreclosure process is beginning to thaw."

According to the report by Realty Trac, 13,750 Chicago area homeowners received a notice of a foreclosure filing last month. This translates to one out of every 276 homes. The almost 14 percent rise since December is also a 13 percent jump from January 2011.

The holidays are a time for most families to gather together in the family home and enjoy some good food and company. Unfortunately, many Chicago-area residents are now facing the real possibility they may be without a home. An increasing number of properties in some Chicago areas have been sent to court-ordered auctions.

Cook County foreclosure activity increased by 20 percent last month, even though the foreclosure rate dropped on the national level and in a majority of Chicago-area counties. The increase has largely been attributed to the fact that there has been a 57 percent rise in Cook County homes heading to court-ordered auctions. Dupage County also experienced a 41 percent rise in auction notice filings.

Last month, Illinois Attorney General Lisa Madigan filed suit in Cook County against several "mortgage rescue" companies for allegedly scamming homeowners out of over $375,000. The suits claimed that several Cook County loan modification companies were charging up-front fees and never delivering the results they promised.

Allegations Against the Firms

The Attorney General's office claimed that the four firms that were targets of the lawsuit were taking advantage of a provision in the 2006 Mortgage Rescue Fraud Act which allowed attorneys working on mortgage rescue work to collect fees before beginning work on the cases. The suits alleged that the firms hired attorneys to front their operations in order to be able to collect fees up front, but in reality the attorneys never did any work on mortgage modification cases.

The Attorney General argued that these firms actually made it more likely that homeowners would face foreclosure because the firms were taking money from these homeowners that the homeowners could not spare.