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Meetings across state aimed at helping subprime borrowers

Posted December 05, 2007 10:00 pm

Tim Landis

Two of Illinois' key regulatory agencies for housing and finance have started a series of meetings around the state that allow homeowners struggling to pay mortgages a chance to sit down one-on-one with local lenders.

The first meetings are in Chicago, Rockford and East St. Louis. A session is scheduled for January in Decatur, and others are planned in central Illinois.

The Department of Financial and Professional Regulation and the Illinois Housing Development Authority announced the meetings in early November in response to rising foreclosure rates, including in Illinois.

"There are a lot of homeowners who are doing nothing, and that's exactly what they shouldn't do," said Man Yee Lee, spokeswoman for the Illinois Housing Development Authority.

Lee said attendance at the first few meetings averaged about 100 people, some of whom were within days of losing their homes.

"That's pretty late in the process. We're telling them don't ignore that piece of paper. Maybe they're hoping the problem will just go away, but it won't," she said.

The Decatur meeting, which will include lenders, state agencies and local housing assistance groups, is scheduled for 3-7 p.m. Wednesday, Jan. 23, at Richland Community College.

Lee said plans for other downstate sessions have not been finalized.

The executive director of TSP-Hope Inc. in Springfield said the number of homeowners seeking foreclosure counseling from the not-for-profit agency has averaged six to 10 a week the last six months.

"We had very, very few before. Some are now experiencing problems with their adjustable-rate mortgages, but most of them have had a job loss, medical problems or are just overspending," said executive director Ron Fafoglia.

TSP-Hope is among area agencies designated by the U.S. Department of Housing and Urban Development as a mortgage counseling service.

Fafoglia said subprime loans are only a small part of the problem, adding that he questions whether the program announced Thursday by the Bush administration would reach that many troubled homeowners.

"It seems designed to reach a limited number of people in a limited period of time," he said.

Illinois Association of Mortgage Professionals president Paul Lueken said it would take time to sort out specifics of the Bush plan, but he, too, said the five-year freeze in loan rates for qualifying homeowners addresses only a portion of the mortgage problem.

"There are a lot of ARMS (adjustable-rate mortgages) coming due in the next two or three years that are not subprime loans," said Lueken.

"They are the ones that are likely going to continue making their payments, but it could put a crimp in your other spending," he said.

Tim Landis can be reached at (217) 788-1536 or tim.landis@sj-r.com.

How Illinois and surrounding states compare. Percentage of adjustable, subprime loans that are delinquent and in foreclosure.

Illinois: 19.74; 12.55

Wisconsin: 20.23; 14.06

Kentucky: 21.79; 13.55

Iowa: 22.01; 15.54

Indiana: 22.28; 16.66

Missouri: 25.70; 8.70

Michigan: 26.17; 15.50

United States: 19.59; 10.38

Source: Mortgage Bankers Association

 

Who is a subprime borrower?

n Two or more 30-day delinquencies in the last year, or at least one 60-day delinquency in the last two years.

n Judgment, foreclosure, repossession or a loan charge-off in the past two years; bankruptcy in the last five years.

n High probability of loan default, such as a credit score of 660 or below.

n Debit-to-income ratio of 50 percent or more, or otherwise limited ability to cover monthly living expenses after paying the bills.

Source: Federal Deposit Insurance Corp.

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