Fast Foreclosures? Not in Illinois
On December 9, Crain’s Chicago Business published an article discussing climbing foreclosure process time in the state of Illinois.
Fast foreclosures? Not in Illinois
The plunging volume of home foreclosure suits in Illinois over the past year or so should mean courts can process cases more quickly, right?
The average time it took lenders to foreclose on a home in the state climbed to a new high of 889 days in the third quarter, up from 828 a year earlier, according to RealtyTrac Inc. It’s the longest time since RealtyTrac started tracking the measure in first-quarter 2007, when the average foreclosure took 243 days.
At 889 days—nearly two-and-a-half years—Illinois had the fifth-longest foreclosure time in the country in the third quarter, according to RealtyTrac. The U.S. average was 615 days.
Foreclosure times keep rising even though the number of new cases is falling, easing the burden on the state courts that were swamped by foreclosure suits as the housing crisis peaked a couple years ago. Newly filed Illinois foreclosure cases fell to 2,843 in October, roughly a quarter of the peak monthly volume of 12,659 hit in October of 2009, according to RealtyTrac.
Times are rising even after a state “fast-track” law took effect last year that’s designed to zip foreclosures of abandoned homes though the process.
State Sen. Jacqueline Collins, D-Chicago and a sponsor of the legislation, said the longer times suggest the measure is not reducing the gridlock that has left some neighborhoods with too many boarded-up homes in foreclosure.
“Even though we have this legislation has it really benefited the communities ravaged by the financial tsunami?” Collins asked. “The housing market is seeing an improvement in certain communities but not in hard-pressed communities.”
The new law grew out of contentious debates in Springfield over who was responsible for maintaining abandoned homes in foreclosure that contribute to blight and criminal activity and depress the value of nearby properties. The law allows a lender to request an immediate foreclosure trial for a property certified as abandoned. It was expected to significantly reduce foreclosure times and included new fees funding housing counseling and maintenance of abandoned homes.
‘A LITTLE LIKE TURNING THE TITANIC’
Since Senate Bill 16 took effect in June 2013 new fees lenders must pay have generated about $18 million that the Illinois Housing Development Authority has used to help municipalities get abandoned residential properties back into use and provide help to homeowners at risk of foreclosure, according to the agency.
Illinois is not alone. Foreclosure times are rising in other states like Florida where new laws went into effect.
“As fast-track foreclosure laws revamp foreclosure processes it can become a little like turning the Titanic with big organizations,” said Daren Blomquist, vice president at Irvine, Calif.-based RealtyTrac.
Collins sees little evidence that the state’s fast-track law has made much of a dent in hard-hit communities like Lawndale. Collins, who is open to tweaking the law, said she fears lenders may be using it only to take back abandoned homes in stronger markets.
“That was my concern initially,” Collins said. “I was afraid they’d cherry-pick homes where there was still equity in the property.”
Representatives of the Illinois Bankers Association and Illinois Credit Union League declined to comment.
NEW REQUIREMENTS FOR LENDERS
Some lawyers think the rise in foreclosure times stems in part from new requirements lenders need to meet to get a judge to approve a foreclosure. The rules, established in 2013 by the Illinois Supreme Court, were designed to make sure homeowners and lenders were fairly treated, but some lawyers said the rules, along with heightened scrutiny of the process, led to some motions being denied and delays.
Stewart Kusper, a lawyer with Kusper Law Group Ltd. who has represented homeowners in foreclosure suits in recent years, said the new rules coupled with the volume of securitized home loans that have been bought and sold by multiple lenders is delaying some foreclosures. For example, a lender seeking to foreclose on a home loan that’s been held by multiple lenders over the years has to backtrack the loan history to when it was originated.
“It’s not just as simple as saying, ‘They missed a payment and here’s what’s due,’” Mr. Kusper said.
Some judges say results matter more than foreclosure times.
“How many of (the foreclosures) have a positive solution, either a loan modification or a sale of the property or something that’s a graceful exit?” said Judge Robert Gibson, associate judge in DuPage County’s Chancery Division. “If the ultimate result is something that everyone’s happy about then it’s not necessarily a bad thing it took longer.”
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Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally.