Although statewide efforts to implement emergency assistance in foreclosure cases have failed to pass the last two sessions of the Illinois Legislature, downstate Danville and Vermilion County have initiated their own program to help residents in danger of losing their homes to foreclosure.
The program, Illinois` first, was prompted by Danville`s escalating foreclosure and unemployment rates, which tripled between 1979 and 1983.
After the program began in early 1984, the foreclosure rate dropped by 25 percent in the first six months, said Jerry Wright, the AFLCIO community service representative with United Way in Danville.
”The Danville program shows that emergency mortgage assistance is do-able,” said Bob Adams, coordinator for the Illinois Foreclosure Coalition, which has directed its efforts at passage of a similar state bill. ”It shows that it is not as costly as we projected because not everybody needs cash. What everybody needs is financial counseling and time to put their act together before foreclosure takes place.”
Danville`s Mortgage Assistance Program, which was funded by just $15,000, is just one part of three-tiered housing assistance administered by the East- Central Illinois Community Action Program, which also includes both energy and maintenance programs.
The program for mortgage assistance takes a broad approach, but the aim is to deal with the problem immediately, as soon as a homeowner goes into default and before the arrears become unmanageable.
First, borrowers in default are advised to talk to their lenders in order, if possible, to work out a temporary partial payment plan. When applicable, enrollment in the Federal Housing Administration assignment program, which was designed to help homeowners in default, is suggested. Financial and legal counseling by an independent agency is also provided. And finally, financial aid is also a possibility, for those who qualify.
”The crux of the program is the third-party involvement, someone representing the borrower to the lender, an advocate,” said Otis Hillsman, executive director of the East-Central Illinois Community Action Program.
”Money is a last resort.”
Reinforcing Hillsman, Wright said, ”Our emphasis is forebearance, negotiations and employment.
”Forebearance takes the heat off. The homeowner pays a lesser amount for a certain time and pays it off in the future. Lenders are allowing this, depending on the institution and the relationship the homeowner has with the institution. If you`ve been a long-time customer, they`ll work with you. But if you have a bad payment record, they won`t be as apt to work with you. It`s understandable.”
Of the 83 participants in first 18 months of the program, only 16 received financial aid. And those needed only partial assistance. The largest loan to date was $1,200. A few homeowners have repaid the fund already. Of the initial $15,000 fund, about $12,000 has been spent.
In addition, of the 83 participants, Hillsman estimated that only six ended up losing their homes.
Qualifications for the financial aid part of the program are decided on a case-by-case basis, but generally the loans are tied to the homeowner`s equity. No one borrows more than the equity in his home.
Although on a much smaller scale, Danville`s mortgage assistance program was fashioned after the Pennsylvania Emergency Homeowners Assistance Act, which when it was passed in December, 1983 was the nation`s first. Maryland recently passed the second mortgage assistance bill.
Like Pennsylvania, the Danville area has suffered econonically. As Pennsylvania steel mills were closing in the late 1970s, many of Danville`s light industries closed. As Danville`s unemployment rose from 7 to 22 percent between 1979 and 1983, foreclosures also rose accordingly, from 42 to 123.
A year after the program began, Danville`s total number of foreclosures dropped to 000.
The Illinois Foreclosure Coalition also used the Pennsylvania act as a model for their efforts to pass a statewide bill. Resistance has come from various factions. There are concerns about funding and administrative problems of inititating such a program. The lending industry has also objected to any extension of the foreclosure period in which the lender is not receiving payments on the basis that it would place an unfair burden on mortgage lenders.
However, the Danville program was supported by local lenders, according to Wright. In fact, the program began as a result of a county-wide task force, of which many members were lenders.
Local lenders were interested in having such a program, Wright said, because everyone–from the homeowners to the community to the lenders–stood to benefit.
”If you can keep somebody in a home and keep the home whole the family benefits. The home is the thing of pride the head of the household can point to. When you take that away, the family crumbles. That causes an increased demand on the community`s social programs. When that happens, we see property sitting empty and deteriorating, causing the community to decline. Then we see lenders in trouble financially because people are not able to pay back their loans.”
One of the local lenders, Robert Blagg, vice president of the American Savings and Loan Association in Danville was supportive although less enthusiastic about the program.
”In my opinion the numbers have not been staggering,” he said. ”But I believe it was worth it, even if was just one person.”
Michael Atchinson, public information officer for Danville and a member of the original task force for the mortgage program said that the key to its success has been the cooperation between the lenders and the homeowners. Because Danville has lagged behind the rest of the state in economic recovery and is still struggling with 15 percent unemployment rates, he said, ”the program can do nothing but good.”
Another local effort to initiate mortgage relief recently met with less success than Danville. The housing commission in north suburban Wilmette attempted its own assistance program, HELP, or the Housing Emergency Loan Program, which lost by a four-to-one vote in the village board three weeks ago.
According to Jean Cleland, chairman of the Wilmette Housing Commission, the proposed $40,000 item in the village budget was designed to provide maximum $8,000 loans to residents facing foreclosure through no fault of their own–illness, divorce or job loss. The loans were designed to buy them time to sell their homes and move in a more orderly fashion or to find new jobs and recover financially.
At the same time that the Statewide Foreclosure Coalition has been striving for a relief bill, the Illinois State Bar Association has been pushing a 46-page rewrite of the foreclosure laws, the Illinois Mortgage Foreclosure Act. The coalition`s bill passed the House of Representatives, but didn`t make it out of the Senate Executive Committee. The bar association`s bill remained in the Senate Judiciary Committee II.
Both bills will receive further study in the next session of the legislature. Before that time, however, representatives of both the foreclosure coalition and the bar association are planning to meet to explore the possibility of combining efforts.
