URBANA – Kevin Schoening's home in Thomasboro was his first and only one – shelter on a tree-lined street in a small town in northern Champaign County where he, his wife and their son lived.
Now more than a year after the house was sold at a Champaign County sheriff's sale, revisiting the past couple of years still makes Schoening feel unsettled.
What was so tough about going through a foreclosure was not so much the financial loss and the seemingly endless calls to lenders and lawyers, but "the emotional toll," Schoening said.
"I'm talking about the roof over your head, protecting your family, yourself," he said. The foreclosure process "messes with your sense of personal safety."
Far from metropolitan areas like Las Vegas, Phoenix and Chicago, East Central Illinois has not seen the dramatic spike in foreclosures that has occurred in many metropolitan areas in recent years. But in the last year, more area residents have received notices of foreclosure and, like Schoening, face the great unsettling that comes with navigating the whole foreclosure process.
The number of foreclosures in East Central Illinois has begun to tick higher. One sign of the change: The Champaign County sheriff's sales, at which foreclosed properties are sold at auction, were once held at the top of the stairs of the courthouse lobby. Now the sheriff's auctions are conducted in the more spacious Lincoln Room to accommodate the growing crowds of attorneys, lenders, prospective buyers and the occasional homeowner who has come to witness the sale of his or her house.
"Foreclosures are up this year – and by quite a bit," said local real estate lawyer Ward McDonald, who also teaches at the University of Illinois College of Law, including a class examining the roots of the country's current economic crisis. "Predatory lending may be over, but the consequence (of such lending) is not," he said.
Some subprime lending did occur here, but not nearly to the extent as in Phoenix, Modesto, Calif., and other cities, he said. Champaign will likely not see whole neighborhoods decline as foreclosures rise, the number of bank-owned properties increases and home values drop, he said.
"But I do get concerned about towns like Rantoul," he said, where if one major employer reduces hours or shuts down, "it can wreak havoc."
Another observer, the Rev. Eugene Barnes of the Metanoia Center in Champaign, said he believes the recent uptick in foreclosures locally is due more to the downturn in the economy than to predatory lending.
Those who work with local residents facing foreclosure, including Karen Hsu, attorney with the Land of Lincoln Legal Assistance Foundation in Champaign, also expressed a concern about seeing an increase in the number of senior citizens who've fallen behind in their mortgage payments.
More local defaults
When a homeowner falls behind on mortgage payments (about three months behind, according to Hsu), the resident is served papers, and a notice of foreclosure is filed with the county's circuit clerk office. These cases are classified as chancery cases, according to Fred Wilkinson, deputy circuit court clerk for Champaign County. And they can include a whole range of cases, but the majority of them are foreclosures, he said.
Back in 2000, Champaign County had 222 chancery cases pending, and over the years the number has continued to climb. So far this year, 355 cases have been filed in Champaign County; in 2009 there were 494.
"That category has super-trended up," Wilkinson said.
In Vermilion County this year 272 chancery cases have been filed. For all of 2009 the number was 341, and 339 in 2008.
The rate of foreclosures among outstanding mortgage loans in Champaign-Urbana was 1.38 percent in June, up from 0.93 percent in June 2009, according to data firm CoreLogic. But the rate is still lower than the national foreclosure rate of 3.06 percent for June 2010.
According to the website RealtyTrac, a total of 19,602 properties in Illinois received a foreclosure filing in July, the third highest state total, according to RealtyTrac. The July filings were up about 35 percent from last July, said Debbie Jemison, spokeswoman for the Illinois Bankers Association. "The number-one reason we're hearing is it's the continuing high unemployment, and it hits the northern to southern part of the state," Jemison said. "It's the fewer days on the job, workers receiving less pay and the furloughs."
Just what happens after all these notices of foreclosure have been filed is often difficult to track, Hsu and McDonald said. Some residents may reinstate their mortgage (paying back the amounts they owe), the house may be sold in a short sale (more on that later) or sold at auction by the county sheriff's office or a judicial sales firm.
During the Champaign County sheriff office's fiscal year that ended Nov. 30, 2009, there were 158 sheriff's sales in Champaign County.
"Based on numbers we have so far for fiscal year 2010, we'll have at least 200," through Nov. 30, 2010, said Champaign Sheriff's Lt. Greg Mills, who oversees the auctions.
A few years ago on auction day (they're held on the second and fourth Friday of each month in Champaign), about two to three properties would be up for bid; now on some days there will be 15 properties auctioned off, Mills said.
In Vermilion County this year, 153 homes have been sold via sheriff's sales; in 2009 there were 152. Auctions there are held on most Thursdays.
First-time owners to seniors
Residents going through foreclosure in East Central Illinois have lost their jobs or had their hours cut; are dealing with an illness and have more medical bills. Some are going through a divorce, or have taken out a subprime mortgage loan they could not afford.
In some cases they're first-time home buyers like Schoening. In other cases they're senior citizens who have lived in their homes for decades but found they couldn't keep up their payments as their expenses have climbed.
"I have seen the full gamut," Karen Hsu said.
Pending foreclosures can also be found in all neighborhoods, according to a News-Gazette analysis; from Garden Hills and Boulder Ridge in north and northwest Champaign to the area surrounding Centennial High School and Jefferson Middle School and beyond. In Urbana, most defaults are in the northern and eastern parts of the city.
Outside Champaign-Urbana, the towns with the most foreclosures pending this year are Rantoul, Mahomet and St. Joseph. "It's really affecting everyone," said Kyle Harrison, a Champaign-area real estate agent who in the last year has been busy handling short sales, in which the homeowner sells the property for less than the amount owed to the bank. "Some people borrowed against their home, then fell on hard times, be it a divorce, medical issue" or a bad business investment, he said.
Since the mid-2000s, Barnes has been working to fight predatory lending and working with people in foreclosure from Danville to Decatur. He is executive director of the Metanoia Center in Champaign and the board president of the National People's Action, a network of community groups that work for economic and racial justice. The Metanoia Center partnered with loan service companies Ocwen and Select Portfolio to help homeowners apply for loan modifications. "Initially when the debacle first started – in 2004, 2005, 2006 – the reason (for foreclosure) was medical; then there were people who got a home who shouldn't have and they couldn't afford it; and there was some improper lending. This second wave is due to the economy – a husband or wife lose their job or has less income, and medical bills are still an issue," Barnes said.
Hsu said her caseload is up this year. Last year the office closed 97 home cases, up from 46 in 2008, Hsu said. A homeownership case involves someone who has a mortgage note and is having difficulty with it – either the person is behind on mortgage or property tax payments, she said.
"The types of cases I'm seeing, especially in Champaign County, tend to be clean loans," she said – mostly 30-year fixed mortgages with rates around 5 percent to 7 percent that did not come with any prepayment penalties, "nothing that would indicate a predatory loan."
Sometimes residents received a home equity loan or refinanced for a home improvement, but their expenses increased and they were unable to keep up with the payments after having spent through their savings or retirement funds and exhausted other options.
When she started working at the clinic a few years ago, Hsu said, it was rare to encounter seniors with credit card debt. Now she's counseling seniors who have accrued unsecured debt.
A senior may take out a second mortgage to pay for a roof or other repair. The senior, who may have a part-time job at the time, is able to handle the payments for a while. But over time, perhaps the senior is unable to work as many hours due to health issues and his or her income declines. The senior's living expenses, such as utilities, rise more than anticipated, and he or she starts to charge items like medications or groceries on a credit card. Debt accrues. Then the senior runs into problems making the mortgage payment. Hsu estimated at least one-third of her clients are 60 years or older.
"What I think is happening over the last few years, the utility expenses have been climbing at such a fast pace it's cutting into what they predicted they'd need. ... It becomes difficult to meet their budget," said Amy Marchant, chief executive officer of CRIS (Community Information Resource and Research Services) Health-Aging Center in Danville, which serves seniors in Vermilion County.
"There have been more cases than I can count" of seniors who needed to move into their children's homes, into senior housing or walked away from their homes, Marchant said. "I've also seen issues of seniors who've refinanced as well so they could pay off some debt they've incurred," but later they couldn't keep up with the payments, she said.
In Schoening's case, a few years after he and his wife bought their home, his wife became sick and could not work for some time. They fell behind with mortgage payments and eventually set up a forbearance agreement with their lender at the time (the bank that held their mortgage note changed several times). Along the way, Schoening filed bankruptcy, continued to make payments and ended up in a dispute with the lender, eventually landing in court and trying to make his way through the foreclosure process without an attorney.
"It's a really long, drawn-out process," he said.
What can happen
A foreclosure usually starts when someone is about three months behind in payments, Hsu said. (However, banks can consider the homeowner in default if he or she misses one payment, she said.) The first court notice is the summons and complaint for foreclosure. That date will play into how much time the debtor has to reinstate or redeem the mortgage, Hsu said. During the reinstatement period, the debtor can come up with the money to become current on the loan. The amount will include any court and attorney fees. During the redemption period, the debtor can come up with the full amount of the loan, including the principal, accrued interest and fees. But for most people, if they're already behind on their mortgage payment, they usually don't have the credit score to qualify for a refinance, Hsu said.
A person can continue living in the house until the foreclosure is finalized.
If the homeowner wants to stay in the home, there may be some options available to them, such as a loan modification, especially if the mortgage payment is over 31 percent of the gross household income, she said. "The main goal for most home loan modification programs is to put people into a more affordable monthly payment."
"The banks have many ways in which they can modify a loan," said Jemison, the spokeswoman for the Illinois Banking Association.
The loan could be modified by having the interest rate lowered or having the loan term extended. Those programs are still available, Hsu said.
But the earlier in the process the homeowners contact housing counselors, the better they'll be able to help them, she said.
"The banking industry has always encouraged consumers who have trouble paying to contact their institution as soon as they're having a problem. Nobody wants a foreclosure," Jemison said.
Figuring out whom to contact during the process can be confusing.
A couple may apply for a mortgage with "ABC bank," which originated the loan and handled the closing documents, "but for the majority of loans processed these days ABC bank is not the bank that holds onto that note," Hsu said. The original bank may not service the loan, which entails receiving the mortgage payments or handling escrow. The noteholder may have a servicing firm handle that.
"I think a lot of people will acknowledge it's difficult to figure out who the noteholder is," she said.
The entire foreclosure process, including the eventual auction and sale, may take up to a year, real estate lawyer McDonald said. Often the only bidder at an auction is the lender, and the house becomes bank-owned property.
"The auction is not truly an auction. Most of the times it goes back to the bank," he said.
Foreclosures will not go away by the homeowner avoiding court or ignoring letters from lenders or attorneys, said Schoening, who said people who go through a foreclosure should document every person they see and every conversation they have about the case.
"There's going to be some tears, some yelling, some sleepless nights," he said. "When you're in foreclosure, you've got to jump into that system. Show up in court. If you don't know what to do, say, 'I'm not sure what do to,'" said Schoening, whose wife has regained her health and is able to work again. They're now renting a home in Champaign.
"There is life after a foreclosure," he said.