Even With Assistance, Many Illinoisans Still Face Foreclosure

When David Truman knew his mortgage payments would rise in October 2007, he reached out to his lender for a loan modification.

He “went the whole nine yards” sending in the necessary paperwork to First Franklin Financial, a defunct sub-prime lending subsidiary of Merrill Lynch, to begin the process, made follow up calls and waited.

When his lender didn’t return his calls and he missed payments in February and March, he knew he had to seek other means of assistance.

He came to a Homeowner Outreach day and got an answer.

Guaranteed Rate Inc. told him with a new loan, he would be “digging himself into a hole.”

Truman, 54, is one of about 70,000 homeowners projected to face foreclosure in Illinois in 2008; many of them could still be at risk for foreclosure even after seeking assistance from Gov. Rod Blagojevich’s new Homeowner Assistance Initiative program.

In February, Blagojevich with four private lenders unveiled the $200 million program. The four lenders, Guaranteed Rate Inc., Chicago Bancorp, Professional Mortgage Inc. and Perl Mortgage, will be providing refinancing for borrowers who qualify.

But homeowners are at a disadvantage if their credit scores are low or even, in some cases, they have missed a payment. Critics of the program say the amount of borrowers able to benefit is probably a small percentage.

“The problem with the program is that not everyone is going to qualify because the government is not trying to bail out everybody,” Khalilah Pratt, president and CEO of A-1 Real Estate, Inc .

Pratt said people who probably would not qualify for the program are those who have lost their jobs, refinanced to use the equity in their homes, have missed current mortgage payments or have lower credit rating, a score based on credit history. She said higher taxes from county assessments also are a contributing factor.

“It’s good to raise awareness, but [the program] is a lot of smoke and mirrors,” Michael Noser, a mortgage banker at Bankcorp. Noser said benefits of the program are getting borrowers aware of alternatives to foreclosure but it doesn’t address the real issue of those in foreclosure or struggling with loan payments.

He has received a lot of calls about the initiative but is frustrated because people are confused as to how it will actually work for them.

In 2005, Truman had refinanced his home with an ARM, or adjustable rate mortgage , while caring for an ailing wife and unemployed. In 2007, his ARM adjusted from $685 to $985, while his income didn’t, he said wryly. In addition, his property taxes on his Maywood home have shot up from $1,271.94 to $5,249.31.

“There’s only a certain amount of help that can be given when you’re talking about giving somebody a new loan,” said Pratt. She said a rate freeze, as proposed by presidential candidate Hillary Clinton, is a better solution for dealing with the foreclosure crisis.

Jay E. Stewart, executive director of Better Government Association , said any financial assistance would be helpful but didn’t know how $50 million from each participating lender would make a noticeable difference.

“That’s not even one block of real estate in Chicago,” said Stewart.

He said he didn’t know if there was much at the state level that could be done to stop foreclosures because it is a national-wide problem. The problem, he said, resides with the lending industry having pushed sub-prime loans onto the public.

Currently, Illinois is the 10th highest in the United State for foreclosures, according to Realtytrac.com , an online foreclosure database.

The Illinois Department of Financial and Professional Regulation , along with the Illinois Housing Development Authority , will be tracking loans offered to first-time and refinanced homeowners under its pilot program monitoring mortgage lending throughout the state, said spokesperson Sue Hoffer.

As Truman left the Homeowner Outreach Day seminar with stacks of paperwork in hand, he said he would contact the Proviso-Leyden Council for Community Action, a non-for-profit organization in Maywood in one last attempt to save his home.

“I’ve got to be prepared for the future,” he said.