By Micah Maidenberg

March 18, 2011

Foreclosures have hit Illinois hard. More than 151,304 properties across the state received a foreclosure notice in 2010, the fourth-highest total in the country and an increase of more than 15 percent over 2009, according to the research firm RealtyTrac. There are indications the pace of new filings is slowing, but that’s due in large part to the robo-signing scandal that called into question banks’ foreclosure filing practices. Meanwhile, cities and towns still have a ways to go to dig out from the crisis.

To date, the policy response has not been commensurate with the foreclosure problem. The Home Affordable Modification Program (HAMP), the Obama administration’s effort to prod lenders into voluntarily modifying distressed borrowers’ home loans, has been a bust.

Nationwide, just more than one in five homeowners who applied for a modification under HAMP received a permanent modification, Pro Publica reported in a comprehensive look at the program. The website reports that “getting placed in a trial [modification] is just the beginning of a disappointing process for many homeowners: More than half of trials were canceled, most of the time despite the fact that the homeowner had made all of the payments.” Servicers haven’t been responsive. Federal funds set aside to help homeowners have not even been spent. Struggling borrowers are simply not getting the help they need.

Advocates say the program needs big improvements but they don’t want to throw the baby out with the bathwater either; HAMP is currently on the House Republicans’ budget cut list. Woodstock Institute President Dory Rand wrote recently that following a string of scandals, mortgage servicers simply cannot be trusted to offer sustainable loan modifications on their own. There must be, Rand wrote, “a cop on the beat to hold them accountable.”

While the budget drama plays out in Washington, there are local efforts afoot to tackle the foreclosure crisis and its aftermath. On Wednesday, Progress Illinois wrote about Chicago Mayor Richard Daley’s proposal to let some first-time home buyers apply for grants funded by tax increment financing dollars and use the money to purchase and rehab empty homes.

Some General Assembly members are also thinking about the issue as well. State Reps. Karen Yarbrough (D-Broadview) and Marlow Colvin (D-Chicago) are the chief co-sponsors of three foreclosure-related bills in the state House. Here’s a look at each piece of legislation and some further context:

HB 1810 levies a $500 “Mortgage Foreclosure Prevention Fee” on purchasers of foreclosed homes. The fee would create a new fund to play for foreclosure mitigation activities, like housing counseling, legal services, and administering foreclosure mediation programs in the courts. Cook County has a voluntary foreclosure mediation program, but the Chicago Reporter found that as of last October fewer than 10 percent of eligible Cook homeowners were participating.

HB 1109 adds language to the Illinois Municipal Code about vacant properties located in cities around the state. The bill explicitly states that municipalities may create rules and regulations for vacant properties, such as imposing registration fees and fines on property owners and previous owners that failed to comply with existing regulations, trusts, and mortgagees.

HB 1108 is another crack at the Illinois Land Banking Act, a bill Yarbrough introduced into the last General Assembly (a previous land bank bill passed the State Senate in 2009 before stalling in the House). The bill would allow cities to create a “land bank authority” with a board of directors to acquire vacant homes or abandoned properties in the foreclosure process, manage the land, and facilitate rehabilitation and development of it. Land bank authorities are used in Atlanta, Baltimore, Flint, Michigan, and other localities. A guidebook (PDF) from the Local Initiatives Support Corporation says the St. Louis Land Reutilization Authority, created in 1971, was the first major land bank program.

We’ll be tracking these bills as they make — or fail to make — their way through the legislative thicket in Springfield.

UPDATE (3:21 p.m.): Progress Illinois caught up with Rep. Colvin, who said these foreclosure-related bills would likely change as the General Assembly session starts to unfold. “These negotiations can be very delicate,” he said. Colvin mentioned the $500 fee for a foreclosure mediation fund. “I think there will be an amendment, some type of amendment when it comes to that bill,” Colvin said. “It may be a situation where a judge or mediator will decide what that fee will be.” Still, Colvin described the foreclosure crisis as grave.

“It’s been worse in some areas than others, but I will tell you the foreclosure crisis in Illinois from a statewide perspective hase been enormous,” he said. “We may not have reached the arc yet — it’s still going on. You can drive in and around any comunity … and see abandoned homes.”

State Rep. Yarbrough, he said, is taking the lead on these bills; she could not be reached by the time this story went live.

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