Since 1997, Chicago has added almost 150,000 condos to its housing stock. The people who bought those units maybe didn’t fully realize it at the time, but they’re taking part in a big experiment in communal living. Everyone has to pool their money to fix the roof or keep the elevator working. And if your neighbors stop ponying up, you’re on the hook. Now the foreclosure crisis is pushing many condo buildings to the verge of collapse. And one expert says that here and around the country, the whole grand experiment may be falling to pieces. Today we continue our series, Facing the Mortgage Crisis, with a report on a couple of condo owners determined to salvage their building.

Web Extra: Untangling Mortgage Fraud in Chicago Condo Buildings

ambi: key opening door

When Dee Hutchinson bought her condo, let’s just say this was not part of the plan.

BOB GAONA: Hello, hello
HUTCHINSON: Oh God, Oh my God, this is the worst, oh.

She and several others have just walked into a foreclosed condo upstairs from where she lives.

The smell almost knocks us over.

Hutchinson opens the fridge and it’s covered with black maggots.

GROSS AND HUTCHINSON: Oh my God, oh Jesus Christ.
WOLF PEDDINGHAUS: You didn’t open that, did you?
HUTCHINSON: What? I’ve never seen anything like this before.

But Hutchinson’s got to take stock of this mess if she and a couple neighbors are ever going to save their building.

This 27-unit condo building in Chicago’s Washington Park neighborhood is almost completely empty.

Most of the units are foreclosed or abandoned, some inhabited by squatters.

But so long, squatters.

The three stalwarts keeping this complex from being condemned are fighting back, armed with the Illinois Condominium Property Act.

HUTCHINSON: Yeah, this is where they were sneaking in and out of, squatting.

They have a court order to take possession of this unit.

Illinois law says they can do that if the owner stops paying monthly assessments.And in fact, for months, only Hutchinson and a few other owners have been paying assessments.

They’ve had no heat or hot water since April when the gas was shut off.

Hutchinson loves her unit and wants to protect her credit, but even she had started packing to leave for good. She says she was tired of crashing at her brother’s place.

HUTCHINSON: And I was just paying mortgage and struggling paying this mortgage and not living here and I was just going to walk away and foreclose like everybody else.

EBONY WILKERSON: This is the actual paper that they gave me when I met them.

Ebony Wilkerson is an attorney who specializes in condo law.

Wilkerson says when Hutchinson and a neighbor approached her with this spreadsheet of all the foreclosed units in their building, she had never seen a case this bad.

At first, she chased the banks to get them to pay assessments for the units they foreclosed on.

But soon, she told the association they needed a more drastic approach.

WILKERSON: Okay, we wait for these banks to pay us, but they’re not paying. And when they pay, they’re paying the past due amounts, and then they’re not paying moving forward, so we can’t keep going around in this circle, you guys will never get out of this situation, let’s take the front seat.

It was Wilkerson’s idea to file for possession to rent out the units to shore up the building’s finances.

And she put them in touch with a wife-and-husband team called Haus Financial Services that helps condo associations manage their books.

For this building, they’re cleaning up and finding renters for the units.

It’s the first ray of hope for these three owners in a great big empty building that’s suffering the effects of the global banking meltdown.

And they’re not alone.

Angela Maurello of the non-profit Community Investment Corporation has been working on this for years. Her program acts as a receiver on behalf of the city for distressed condo buildings. I asked her how many she thinks there are in Chicago.

MAURELLO: Oh there’s hundreds because we already have 200 of the ones we have, so I’d say there’s got to be 400, 500 of these buildings in the city. This is a serious problem.

And that means lots more condo owners like Hutchinson trying to shoulder the expense of a whole building without help from their neighbors.

Maurello calls these fractured buildings and says many are clustered in South Side neighborhoods like Washington Park.

But they’re also scattered throughout the city.

It’s no surprise they’re everywhere – what’s happening goes to the heart of how condos are set up.

Evan McKenzie is a professor at University of Illinois Chicago who studies condo associations.

He says for decades he’s worried the whole system of condo living was flawed.

MCKENZIE: It’s not individual ownership, it’s collective ownership, and this multiplies the complexities many times over and the responsibilities many times over. I mean, I might be able to manage my single family home, could I manage an apartment building? I mean, it’s much more demanding.

McKenzie says one good thing about Illinois law is that rule that lets associations take possession of units.

That’s not common in other states.

But some other states do have an ombudsman or an agency that condo owners can turn to rather than hiring a lawyer.

McKenzie says that’s sorely lacking here.

MCKENZIE: There’s nobody overseeing this, there’s nobody making it happen. There’s no state agency, no federal agency, no local agency making sure condo developments are run properly, there’s nobody standing behind them financially. The whole thing rests on the resources of the individual owners.

Ambi: keys jangling

HUTCHIINSON: This is a padlock key, boiler room key, rear gate key.

Hutchinson is sorting through a big pile of keys – by default, she became president of her building’s condo association as her neighbors disappeared one by one.

She was a first-time homebuyer in 2006 when she chose this condo.

HUTCHINSON: I was able to pick out the cabinets, my floors, my paint – it was like, oh whatever you want! And I had no clue what I was walking into.

The one thing she couldn’t pick out were the people who bought the units around her.

Some of them went into foreclosure just months after they purchased.

She suspects some kind of mortgage fraud, but that’s tough to pin down.

What’s clear is the association was hobbled from the very beginning.

The condo owners inherited an empty bank account from the developer.

And with no financial cushion, things like keeping the gas on have been a gigantic challenge.

JOHN: We got to warm up the boiler nice and slow.
MANNY: Very slow.

Ambi: boiler turning on

That’s the sound of heat finally being turned on in Hutchinson’s building a couple weeks ago.

Lawyer Ebony Wilkerson managed to get some of the banks to cough up $21,000 in past-due assessments.

That didn’t totally pay off the bill, but it was enough to get the gas back on.

HUTCHINSON: Yeah, I have hot water, it’s running, up and running, it’s the first thing I checked when I came in the house last night.

So things are starting to move in the right direction.

The condo association has signed a lease with a renter for one of the units in its possession and has a couple more in the works.

But turning this building around won’t be easy.

Investors are now buying units there for as low as $14,000.

Hutchinson says some of the new people have as little commitment to the building as the previous owners. 

HUTCHINSON: It’s been a struggle, because we have no control of the people moving out and going foreclose, but then we have these knuckleheads coming in buying these units short sale – that’s fine, but you still have to pay assessments. So we have new people coming in now that we’re fighting with.

Hutchinson sinks back into her couch, exasperated.

She says she misses the days when she was a renter.

And she says if she ever buys another home, it won’t be a condo.