More Notices of Bank Foreclosed Home Expected in Illinois- By: John Cutts
Foreclosure actions that have been sidelined because of an Illinois law that gives ample time to distressed homeowners to work out their troubled loans are starting to move in the forefront.
A report showed that the state law only provided a temporary relief to the housing market but did not offer a permanent solution to the foreclosure problem as it only delayed what is inevitable.
From April to May, initial default notices for bank foreclosed home declined significantly in six counties that covered the Chicago area. Default notices are the initial steps in the foreclosure proceedings.
The decline was attributed to the almost 70 percent reductions in foreclosure filings that started in April, according to Woodstock Institute. However, the institute noted that foreclosure actions are again on the rise.
In April, notices of defaults were made on 5,539 properties in Chicago. The numbers of default notices dropped dramatically to 1,694 in May. But it also rose dramatically to 3,468 filings in June. Woodstock researchers are expecting the number of default notices to continue to grow in the coming months.
Governor Pat Quinn signed the Homeowner Protection Act in April. The state law prohibits foreclosure to start within the first month of loan delinquency. The law requires banks to inform distressed homeowners that they are given a month to avail of foreclosure counseling. Also, distressed homeowners are given a grace period of one month if they coordinate and work with U.S. Department of Housing and Urban Development-certified housing counselors.
Woodstock Vice President Geoff Smith said that the law which gives homeowners a 3-month window would work only for homeowners who received a better loan, which is being offered under the loan modification program of the federal government.
Industry analysts noted that the grace period only succeeded in delaying the foreclosure actions, with no clear result on whether it was able to help distressed homeowners.
Woodstock's report stated that a high number of foreclosed homes could be found in low-income areas of the state. But it noted a spike in foreclosure activities in affluent areas.
In Austin, default notices reached 466 for the first six months of this year, an increase of 2 percent from the previous six months of 2008. And in the affluent area of Lincoln Park, 81 notices of defaults were posted, representing a 161 percent gain compared with the first half of the previous year.
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John Cutts has been educated in the finer points of the foreclosure market over 5 years.