Almost two years after the subprime mortgage crisis first ripped through U.S. neighborhoods and eventually the broader economy, far too little has been done to keep people in their homes. In February, President Obama outlined his Making Homes Affordable proposal, which set out to provide mortgage refinancing to a large pool of borrowers. But a key element of that push -- Sen. Dick Durbin's bill to allow judicial mortgage modifications -- was defeated in the Senate. Now the White House is effectively giving incentives to lenders that will take a marginal hit by modifying the loans, but isn't providing homeowners any options if the lender won't do enough to keep borrowers out of bankruptcy. In Springfield, Gov. Pat Quinn signed a law in April giving struggling homeowners an extra 90 days before lenders can force them out of their homes, but lawmakers haven't pushed any other major changes since.

Meanwhile, more and more Illinois families are desperately fighting to stay under their roofs. In February alone, 14,000 homeowners received a foreclosure-related notice. And as Crain's reported earlier this week, job losses and declining savings caused foreclosure cases to jump dramatically in Chicago's collar counties in the first quarter of this year.

After the families have been tossed out of the homes, the vacancies cause further problems -- garbage, overgrown lawns, illegal squatters. "There are terrible consequences for communities, especially those already in the most precarious financial situation," says Adam Gross, staff counsel at the Chicago-based Business and Professional People for the Public Interest (BPI). "Crime goes up, property values go down, and the tax base is further weakened."

While lawmakers can't keep people in their homes, affordable housing advocates like BPI are working to enable municipalities in Illinois to alleviate the negative side effects of this abandonment.

The organization has helped craft a pair of similar bills -- HB 1195 and SB 2101 -- to help mitigate the crisis.  Both are based on three major provisions.

The first step relates to disclosure: When taxes on a delinquent property are sold or a foreclosure action is initiated, municipalities would receive a prompt notice from the county collector that includes contact information for the person or firm responsible for maintaining the property. Currently, that information takes too long to request or is too expensive to be of any use; this bill would give local lawmakers advance warning so they can take action quickly, like sending squad cars or code enforcement agents out to protect empty lots.

The legislation would also give municipalities the power to create a land bank, a public authority that can efficiently hold, manage, develop, and later sell tax-foreclosed units. In cities and towns nationwide, land banks have expanded the base of affordable housing, enhanced local funding for schools, and protected against blight. If a local body owns the land, it also prevents tax scavengers from purchasing thes properties on the cheap, sitting on them in the hope that the neighborhood rebounds, then flipping the home for a huge profit in the future.

Under Illinois law, communities with home rule (Chicago among them) can establish the general framework for a land bank, but don't have all of the powers required to run them effectively, including the ability to extinguish back taxes so the property is easier to unload. Communities without home rule don't even have that much leeway. According to Gross, the bill's language would allow any interested community -- even municipalities as large as Joliet -- to participate. And now is a great time to get into the land banking game; the federal neighborhood stabilization program's second round of grants are competitive, and land banking is one of HUD's preferred uses.

Lastly, the bill would provide financial protections for communities who choose to clean up and stabilize their neighborhoods. While many local leaders identify vacancies as a major problem, they lack the resources to maintain the properties. Essentially, the law would put the onus on the lenders to secure and care for any building whose mortgage they serviced. If they failed in their responsibilities, the municipality could do the work in-house and then put a lien on the property to recover the costs. And the law would ensure that those liens were paid off first, before the bank receives anything for the mortgage. In other words, towns would get a legal assurance that they would be reimbursed for their efforts and the banks who dished out the now-defaulted mortgage would absorb the costs of foreclosure.

Introduced by Rep. Karen Yarbrough in the House, HB 1195 passed overwhelmingly (PDF) in late March. But current version of SB 2101 is closer to the language the housing folks desire, and it's facing stiffer opposition. The Illinois Association of Realtors has issued a public statement bashing the bill, suggesting that local governments could acquire any property "at any time, by virtually any means ... for any purpose," even though a land bank has no right to employ eminent domain. Lawmakers and the fair housing community are in negotiations with the mortgage industry as well.  What position they will stake out is unclear, but it will likely be made public sometime next week. The bill has until May 31 to reach the Senate floor for a vote.

Between then and now, we'll find out if the banks also "own the place" here in Illinois.

Image used under a Creative Commons license by Flickr user reallyboring.