Mortgage Foreclosure Mediation Programs Grow Across Illinois

Is the foreclosure crisis really over? Even when unemployment is low and the economy looks good, Illinois residents continue to struggle with mortgage payments and to worry about the looming threat of home foreclosure. While many Chicago residents experience foreclosure-related anxieties, Illinois residents across the state have concerns about how they can keep their houses even in the face of financial difficulties. South of Chicago, officials in Macon County have filed an application with the Illinois Supreme Court to begin a mortgage foreclosure mediation program similar to the one currently in place in Cook County.

Foreclosure Mediation Program in the Works in Decatur

Across the state of Illinois, counties have developed mortgage foreclosure mediation programs to help borrowers remain in their homes. A program like this already exists in Cook County, and Macon County officials just recently sought approval for something similar, according to a recent article in the Macon Herald Review. The plan in Macon County, if approved, would “require the lender and the borrower in a foreclosure case to meet with a trained impartial mediator, who would explore ways the borrower’s mortgage loan could be reworked or reinstated.” Then, if the medication proves unsuccessful, the borrower’s mortgage would “proceed to circuit court for foreclosure.”

An Illinois judge indicated that the Decatur program could go into effect as early as next year, and it could help a lot of families that remain at risk of foreclosure. According to Macon County Presiding Judge A.G. Webber, “we thought it was worth looking into anything that might, at least in some cases, preserve homes and prevent the problem that foreclosed homes have on the community.” In other words, the program could prevent more properties from “falling into disrepair,” thereby “hurting the property value of the area.” This is a problem that’s already all to common in many of Chicago’s neighborhoods.

The program wouldn’t run entirely on its own. Rather, it would work as a kind of partnership with the Community Preservation Clinic at the University of Illinois College of Law. Through the clinical training, law students can receive training as mediators, and they could use that knowledge and expertise to assist residents of Macon County who are facing the threat of foreclosure. Funding for the program would come from the Illinois Attorney General’s Office.

Thriving Mortgage Mediation Program in Cook County

While Macon County is just now seeking to implement a mortgage foreclosure mediation program, Cook County already has this important resource for Chicago-area residents at risk of losing their homes. According to the Circuit Court of Cook County, the mediation programs aims to “deliver critical services to Cook County homeowners in crisis as early as possible once the foreclosure process begins.” In short, if you’re having difficulty making mortgage payments, you need to take advantage of the mediation program sooner rather than later.

And the program in Cook County recognizes that some homeowners simply won’t be able to stay in their houses. As such, the Circuit Court emphasizes that, in addition to discussing options to stay in their homes, the mediation program also can help Chicagoans to “negotiate a respectable exit” from their properties.

Dealing with foreclosure can be a stressful and anxiety-inducing experience. You shouldn’t have to handle difficult legal and financial questions on your own. Contact the experienced Chicago consumer protection lawyers at the Emerson Law Firm to learn more about how we can assist you.

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Lower Mortgage Down Payments from Fannie Mae and Freddie Mac

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Lower Mortgage Down Payments from Fannie Mae and Freddie Mac

The housing market is recovering, and fewer Chicago residents are worrying about home foreclosure.  But has the economy bounced back enough to make consumers comfortable buying a home?  According to a recent article in the Chicago Tribune, Fannie Mae and Freddie Mac may soon permit consumers to obtain a mortgage “with as little as a 3 percent down payment.”

Reasons for the New Down Payment Terms

If Fannie and Freddie begin allowing 3 percent down payments from consumers who want to buy a home, it won’t be the first time.  Indeed, in 2011, both agencies had accepted down payments as low as 3 percent.  Fannie Mae stopped last year (requiring at least a 5 percent down payment), while Freddie Mac had stopped back in June of 2011.

Why return to 3 percent down payments?  In short, many consumers in Oak Park and across the country are creditworthy, but they don’t have enough cash for a down payment.  As Mel Watt, the director of the Federal Housing Finance Agency (FHFA) explained, “through these revised guidelines, we believe that the enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower down payment mortgages by taking into account compensating factors.”

Watt oversees Fannie and Freddie.  He elaborated that the new guidelines will add “another much-needed piece to the broader access-to-credit puzzle.”  In addition, the government has developed other policy initiatives aimed at making lenders “mort comfortable” with the guidelines.  Watt hopes that, in turn, those lenders “will loosen their purse strings.”

How Will the New Guidelines Affect Mortgages?

According to Dan Gjeldum, the senior vice president at the mortgage lender Guaranteed Rate, the new guidelines are “a very big deal,” since they’ll “dramatically reduce the expense for a first-time homebuyer.”  Gjeldum explained that, “the easier it is to do business with the agency, the easier it’s going to be for consumers to work with mortgage companies.”

It’s important to understand that home loans aren’t coming directly from Fannie Mae and Freddie Mac.  Rather, mortgages backed by the agencies work like this: when a certain mortgage meets the Fannie and Freddie requirements, a lender will sell the mortgage to the agencies.  In turn, Fannie and Freddie will “package them into securities and sell them to investors.”  These investments are guaranteed, “which means that investors recoup losses if the homeowner defaults.”  In other words, a guaranteed mortgage looks better to investors, since they’re not taking a huge risk.

However, such assurances have resulted in a “more cautious lending environment,” which tends to hurt potential new homeowners who have good credit but don’t have enough cash for a 5 percent (or more) down payment.  The average FICO credit scores for borrowers was between 742-744 for Freddie Mac and Fannie Mae in 2013.

Since borrowers who make a down payment of less than 20 percent usually will pay more for insurance until their home equity hits 20 percent, that’s actually good news for the insurance industry.  In short, borrowers who get a mortgage with only a 3 percent down payment will have a longer mortgage insurance period.  The FHFA hopes that its new guidelines will prevent housing recovery from stagnating further.

Do you have questions about buying a foreclosure or learning more about your rights as a consumer?  Contact an experienced Chicago consumer protection lawyer at the Emerson Law Firm today.

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