By Jennifer Davis

March 5, 2011

For two-plus years, Francois and Kimberly Holtermann fought to save their El Paso home from foreclosure. They lost on Feb. 24.

It took all of 30 seconds.

At exactly 1:30 p.m. on Thursday, Feb. 24, attorney Blake Dunlap, acting on behalf of a Chicago law firm, Pierce & Associates, walked into the second floor conference room in the Woodford County Courthouse with a folder about an inch thick. Two minutes later, Woodford County Sheriff James Pierceall arrived.

Kimberly Holtermann was already there, hoping her friend, Brandon Barker of El Paso, might be able to buy her home with a low bid and sell it back to her, contract for deed. Another older gentleman, who asked not to be named, also came with the thought of helping the Holtermanns – if the price was right.

But in all three auctions – one for a home in Kappa, another in Washburn and the Holtermann’s in El Paso – the banks bid big. Exactly $117,122.41 for the Holtermann’s modest three-bedroom.

“Are there any other bids? Any other bids? I guess no one wants to buy a house today. Any other bids?” said the sheriff before closing the sale and awarding the Holtermann’s home to National City, their original lender. “Well, that was pretty quick and painless.”

Less than three feet away, Kimberly Holtermann quietly cried.

She said later: “I was in the building, in the room, in the chair – and I still wasn’t a person.”

False hope

The Holtermanns – Francois, Kimberly and their three children, Ellese, 10; Gunnar, 8, and Kamille, 2 – are like millions of families across the U.S. who have lost their homes. Nationally, an estimated 1.2 million homes will be repossessed this year, the most since the housing crisis began in 2005, according to foreclosure tracker RealtyTrac Inc.

When the Holtermanns bought their home in May 2007, they were both working, but just barely making ends meet. First, she lost her job. Then, his hours were cut in half. Then he lost his job completely.

The bills piled up, but they say they tried their best to keep up and work with their bank, National City. Francois found work again, but at less pay, and the bank said they could no longer afford their home.

“They told me they sold us off to Green Tree Servicing,” recalls Kimberly. “Green Tree called and said, ‘We’ve got your loan. We want to help you,’ I said, ‘Thank God.’ We were psyched. They said they didn’t see a problem with the numbers.”

But what followed was a twisted merry-go-round of lost paperwork, faxes and, the Holtermanns believe, outright lies from Green Tree, who kept leading them to believe they were being enrolled in the Home Affordable Modification Program (HAMP), a federal foreclosure prevention program.

HAMP was designed to lower interest rates and mortgage payments for struggling families like the Holtermanns, and it has worked for about 600,000 U.S. families. But that is far from the 3 million to 4 million it was supposed to help, which is why Republican lawmakers have introduced legislation to end it. The House Financial Services Committee is expected to consider that legislation this week.

“In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” said Financial Services Committee Chairman Spencer Bachus on Thursday. “These programs may have been well-intentioned, but they’re not working and, in reality, are making things worse.”

Neil Barofsky, the special inspector general overseeing the government’s bank bailout efforts, also has been a vocal critic of HAMP, saying it could have helped more families “if only it had been better designed, better managed and better executed by the Treasury department.”

Ahmad Sulaiman, a bankruptcy attorney specializing in foreclosures, says when the Holtermanns home loan ended up with Green Tree, “it was already too late.” Green Tree Servicing LLC, based in St. Paul, Minn., and America’s Servicing Company, a division of Wells Fargo Mortgage, are two of the nation’s largest mortgage servicers. “They inherit (the loan) right before foreclosure.”

“The government can’t cease foreclosures. They tried with loan modifications,” says Sulaiman, who is based in Oak Brook. “The banks aren’t interested in doing this. I think it’s completely intentional. They say, I’ve actually had them say this to me, ‘If we gave loan modifications to people, everyone would want one.'”

What the banks are interested in is making money, which is why they bid high for the Holtermann’s home.

“They will be made whole on every penny they lost” on the Holtermann loan, says Sulaiman, because of the insurance banks have in case of defaults. And the higher the rate of default, or foreclosure, the higher the insurance payout. “So it becomes more lucrative to actually foreclose.”

Banks that ‘shelve it’

The bank also bid high because they wanted to “buy it and shelve it,” says Sulaiman. “Later on, when they go and sell the house, they will peg out the market.”

In other words, banks are holding properties and refusing to negotiate until they get the price they want.

Problem is, banks are only legally supposed to hold property for 18 months. And with the glut of foreclosed homes, the real estate market may not bounce back within that timeframe. Indeed, Sulaiman knows some Chicago-area banks are holding them longer, but “no organization actually monitors the bank hold rate.”

The result is a shadow inventory of homes, meaning homes with no clear owner.

In Chicago and its collar counties, 79,986 new foreclosure cases were filed in 2010, according to the Woodstock Institute, a not-for-profit research and policy group focused on fair lending, wealth creation and financial systems reform. That was a 14.1 percent increase from 2009 and a 38.1 percent increase from 2008.

The Woodstock Institute released a report in January after analyzing the city of Chicago’s vacant properties, foreclosure filings, foreclosure auctions and property transfers. They found thousands of vacant homes with “limited to no oversight” from the banks and mortgage servicers now in charge of them. The result, Woodstock predicts, will be lower property values, more criminal activity and blight.

“It’s happening now,” said Geoff Smith, senior vice president of Woodstock Institute, of blight and other problems. “We walked these neighborhoods. You already see more gang activity, signs of squatters. You already see that happening. Unfortunately, a few doors down, you’ll find a family who is still trying to keep their home up. They’re trapped within this.”

Local data

In Peoria County, 933 foreclosures were filed for all of last year. So far this year, 129 have been filed. That is fairly comparable with the 129 that were filed as of Feb. 18, 2010.

In Tazewell County, 542 foreclosures were filed in 2010. For January and February of this year, 93 have been filed. Again, that is fairly equal to the 96 filed in January and February of 2010.

In Woodford County, 116 foreclosures were filed in 2010. So far this year, there have been 20. There were 26 filed at this time last year.

Still, while the problem is not as severe in central Illinois, small towns such as El Paso, population 2,800, may not be able to bounce back as well as Chicago either.

“In a big city, there are ebbs and flows in the housing market,” says Smith of Woodstock. “I don’t know that the same thing can happen in small towns. Once people have left, lost their ties to their homes, what’s going to bring them back.”

Smith and other representatives from Illinois community development organizations, including Housing Action Illinois, met with U.S. Sen. Dick Durbin the same day the Holtermanns’ home was sold at auction.

Housing Action Illinois and others are hoping legislation can be passed to hold mortgage servicers accountable for complying with federal foreclosure programs.

“(Mortgage) servicers – they’re the key entity – and they haven’t been helping people stay in their homes,” said Smith.

Family struggles

Back in El Paso, Kimberly Holtermann is packing up her family. Based on what she’s been told, she has until April 8 before she and her family have to be out of their home.

She’s looking, without much luck, for a home to rent in this small town so her son and daughter can stay in their same school.

“There’s no rentals. I can’t find a rental to save my life,” she says.

On the bright side, publicity about their plight has inspired a flood of financial help. Caterpillar Inc. engineer Dan Adler set up a website called ‘Help the Holtermanns.’ Though it only shows $505 in donations, the family has actually received almost $7,000, much of it to their P.O. Box. They also have been promised another $30,000 from a foundation and matching pledge. They plan to save the money and use it to purchase a home in the future.

Grateful as they are for all the help and support, Kimberly wishes she wasn’t uprooting her family. There is still bitterness.

“The very people who should have helped me keep my home now own my home,” she says.

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