Urgent action needed to stem foreclosure crisis

By John Bachtell
Chicago – The foreclosure crisis is so severe in Cook County that a judge ordered a temporary halt to scheduling new foreclosure cases. The crisis is devastating Chicago’s African American and Latino communities, where one South Side neighborhood is experiencing a vacancy rate of 40%. But the crisis is now spreading to the 6 county suburban areas.

Housing advocates are demanding urgent action especially from the banks and lending corporations. So far there has been little relief although Illinois Governor Pat Quinn recently signed into law a measure that would give homeowners facing eviction 90 extra days to work out a borrowing plan with their lenders.

The organization Action Now has mobilized to block threatened evictions and has been able to keep several families in their homes. They are demanding action by the Cook County Board of Commissioners. According to Action Now, the courts have the power to permit mediation in foreclosure cases but the program goes unused.

“It is time for (the county) to push for a mediation program in the Courts and act in the interest of the taxpayers of Cook County. The taxpayers are paying for the courts to foreclose on the very people who are paying the property taxes now for the interests of often out of state and out of country banks. We are also paying for the eviction process, which results in thousands of vacant houses throughout our communities," said Denise Dixon, Executive Director of Action Now.

In her April 1 order to suspend scheduling, Chancery Division Presiding Judge Dorothy Kinnaird starkly illustrated the growing crisis. In 2005 there were nearly 16,500 mortgage foreclosures in Cook County. That figure leapt to 44,000 in 2008. Based on foreclosure filings for the first three months of 2009, mortgage foreclosures are expected to top 52,000 this year.

“If the filings and dispositions continue at the current pace,” said Kinnaird in her order, “it is estimated that there will be in excess of 92,000 cases pending as of December 31, 2010.”

The court will not permit any 2009 foreclosure filings from being scheduled for hearing and has cancelled already scheduled hearings in July and August so the tremendous backlog of cases can be heard.

Illinois now ranks seventh nationwide in foreclosures. Filings in the first quarter of 2009 in the 6 collar counties around Chicago increased between 25-70% over the last three months of 2008. The cause is the deepening economic crisis, massive job loss and families who have exhausted their small savings.

In the far western Chicago suburbs of the Fox River Valley 20% of real estate listings are of homes being sold due to foreclosures and short sales. “We were able to ignore (the foreclosures) for a while, but we can’t ignore it anymore,” said Donna McQuade, president of the Realtor Association of Fox Valley.

The crisis cries out for legislative action. The Helping Families Save Their Homes Act introduced by Sen. Dick Durbin (D-IL) is winding through Congress. The measure has passed the House and Senate and awaits a conference to resolve differences.

While the legislation contains some help for struggling homeowners, the finance industry led by the Mortgage Bankers Association, was able to gut the key provision from the Senate version supported by President Obama that would give bankruptcy judges the power to rewrite the terms of mortgage loans. This provision was kept in the House version and could be added later during conference committee negotiations if there is enough grassroots pressure.

“I hope people of this country will stand up and say to Congress, ‘You’ve got the wrong friends,’” said an angry Durbin. “Your friends (should be) the families across this country who are struggling in this economy, and they need a lot of help.

“And the banks, hard to believe in a time when we're facing a banking crisis that many of the banks created, are still the most powerful lobby on Capitol Hill. And they frankly own the place,” he said. Senate Republicans were united against the mortgage reform provision and were joined by 12 Democrats.

If the legislation stands as is homeowners will have to rely on the voluntary efforts of the banking industry for help. Based on the track record of the lending industry voluntary measures are ineffective. Some 75% of lenders rarely agree to workout plans that allow homeowners to maintain their homes.