Some Illinois thrifts expressed concerns about a regulatory
proposal for a weeks-long moratorium on foreclosures, saying they are
worried about the halt stretching on for months as well as the fairness
to struggling homeowners current on their loans.
A foreclosure freeze, if prolonged, would prove a particular burden
to Illinois lenders that are unable to work out modification plans with
owner-occupant residential borrowers, said Tony Kensinger, president of
Ottawa-based First Federal Savings Bank.
That’s because "antiquated" Illinois laws extend the time it takes
to seize foreclosed real estate by nine to 12 months, Kensinger said.
In contrast, banks in Texas generally can seize foreclosed property in
two months.
"If they’re going to delay foreclosures, a party could stay in that
home for close to a year and a half without making any payments,"
Kensinger said. "If I’m in Texas and it takes me 60 days to foreclose
on a property, and they want to forbear it for another 60 days, I don’t
have a problem with that, but in Illinois I do have a problem with
that."
The Office of Thrift Supervision, a Treasury Department unit that
oversees more than 800 institutions, including about 45 in Illinois,
"urged" lenders to suspend foreclosures of owner-occupied homes until a
$50 billion home-loan modification program is finalized.
In other words, thrifts are being asked to support "the national
imperative to combat the economic crisis by suspending foreclosures
until the new plan takes hold," said John Reich, director of the Office
of Thrift Supervision.
Later, a spokesman at Reich’s department said the government isn’t
mandating a moratorium, but it is using its "bully pulpit to convey
supervisory expectations."
Matthew Gambs, chief executive of Diamond Bank, said the
Schaumburg-based thrift plans to adhere to the regulator’s wishes. But
he said he worries about the signal such a moratorium sends to
borrowers who have kept up with their mortgage payments.
"It’s a fairness issue for people who pay their mortgages," Gambs said.
The Office of Thrift Supervision also seems to have competing interests.
The call for a short-term moratorium is "well intentioned, but it’s
not simple," said Rick Remijas, chief operating officer for Park
Federal Savings Bank.
Local regulator representatives are concerned about banks’ ability
to collect on their loan balances so they can preserve capital and stay
healthy.
So different "interests have to be addressed," Remijas said, "and a
moratorium on foreclosures doesn’t answer all of the questions."
Even if a moratorium is imposed, it wouldn’t have a major impact on
foreclosures in the Chicago area, said Geoff Smith, vice president of
the Woodstock Institute, a Chicago-based economic development
non-profit.
Of the 10 thrifts that were most active in loan originations in the Chicago market in 2007, seven no longer exist, he said.
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