Progress Illinois

Since foreclosure rates exploded last year, the Woodstock Institute has steadily released data illustrating the homeownership struggle many are facing in Illinois. Unfortunately, the situation has only grown more difficult in the first half of this year. By the end of June, 28,520 foreclosure filings were recorded in the six-county Chicago region alone, marking a 9 percent jump over the same period in 2008. But if we dig a little deeper into the numbers, Woodstock researchers suggest there are some bright spots.

During the second quarter of 2009 -- and from April to May in particular -- the number of foreclosure filings actually declined sharply (PDF). And that's no coincidence. Over that time, Illinois' Homeowner Protection Act was strengthened, forcing lenders to extend a 30-day grace period to folks who were a month late on their payments. Moreover, should the homeowner seek out HUD‐certified foreclosure counseling, an additional 30-day reprieve is tacked on. And as Woodstock's Geoff Smith told the Tribune, this short-term progress is significant, although only the first step:

"The 90-day window is good but only good if you can help the borrower get into a better loan and theoretically that would be through the [federal loan modification] program," said Geoff Smith, Woodstock's vice president.

The grace period "seems to have achieved its goal of delaying the foreclosure process. What happens next is where the big question mark is. Are those people whose foreclosure was delayed, are they now getting the help they need?"

As we noted last month, that HUD-certified counseling -- which kept 45 percent of participants in their homes last year -- continues to be successful. Troubling, however, is the fact that the agencies providing those services are stretched to the brink. And without their assistance, the ongoing reticence by the banks to enter into mortgage modification agreements -- the most effective tool for stemming foreclosures thus far -- will remain weak. As banks continue to run roughshod on Capitol Hill, avoiding their responsibility to help mitigate the national foreclosure crisis, the Washington Post reports today that finding a solution is becoming a moving target. The Post explains:

During the first three months of this year, the largest share of foreclosures shifted from subprime loans to prime loans, according to the Mortgage Bankers Association. The change to prime loans -- traditionally considered safer -- reflects the growing numbers of unemployed who are being caught up in the foreclosure process, economists say [...]

"Rising unemployment, for the sake of this downturn, has magnified things considerably," said John Snyder, manager of foreclosure programs for NeighborWorks. "It's less about the payment adjustment."

That trend is already playing out here in Illinois. Default filings rose to 3,468 in June, compared with 1,694 in May, according to Woodstock. But as recent progress shows, that trend can be stemmed if lawmakers stop dragging their heels. On the other hand, failure to push for more loan modifications and expanded counseling, Woodstock cautions, will turn the recent second quarter progress into "a blip on the radar." And the year end totals could be staggering.