Block after block, abandoned bungalows and empty frame houses line areas of downtrodden South Chicago. Some show signs of previous home improvements (new roofs, freshly painted siding), but most are boarded up and likely stripped bare of interior appliances, flooring, wiring and plumbing.

They are a bane to neighborhoods and cities, as well as the real-estate owned portfolios of the banks and servicers stuck with these discarded, and mostly unmarketable, homes. "I can take you through parts of Chicago where REOs are for sale for $20,000, and you can't get a nibble," said Rob Grossinger, a Chicago-area community affairs executive with Bank of America.

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