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Chicago Foreclosed Homes Dragging Down 39 Banks

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By : John Cutts    99 or more times read
Chicago foreclosed homes and commercial properties have been dragging down 39 banks in the area, based on a study by bank consulting firm Loan Workout Advisers which is based in Northfield.

As of the end of September, 39 banks in Chicago have real estate foreclosures and bad loans worth more than or close to their loan reserves and core capital.

Justin Barr, head of the consulting firm, said that the number of Chicago banks with 80-percent or more in Texas ratio has increased to 39 percent as of September 30, a sharp increase from 19 percent as of December 30 last year. Of the 39 Chicago banks studied, three have already failed.

The Texas ratio is used to measure the ability of a bank to weather financial difficulties. It compares delinquent loans and repossessed properties with core capital and loan loss reserves. A score of 80 percent or more indicates worsening problems and shows the need for the involved bank to reduce the number and value of its delinquent mortgage loans.

According to analysts, the Texas ratios of the 39 banks indicate the worsening impact of Chicago foreclosed homes and commercial properties on local banks and the need for the banks to sell their foreclosure properties, increase their capital or increase their reserves for bad mortgage loans.

Barr said that because of the restrictive laws on branch banking in Illinois, Chicago community banks had been the major lender in the area during the housing boom, but they have not received significant help from the Troubled Asset Relief Program.

Builders Bank of Chicago operates on $506.4 million of assets, but its Texas ratio has reached 340 percent. It has lent heavily to condo development firms in Los Angeles and New York, which have not sold their condo units according to expectations.

Other Chicago banks with significantly high Texas ratios are Citizens Bank and Trust, which has reached the 292-percent level and Wheatland Bank, with 252 percent. Lincoln Park is next with its 250-percent ratio.

A bank with an asset value of $64.5 million Family Federal Savings has posted a 245-percent Texas ratio. Bank president Frank Guerino said that his bank has been foreclosing and taking back properties when there are no other alternatives.

With 220 percent and 205 percent in Texas ratios, respectively, Ravenswood Bank and Baytree National Bank and Trust have been looking for ways to resolve their financial problems including finding potential acquirers.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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