Gov. Blagojevich urges immediate federal action to help homeowners avoid foreclosure

Mortgage Fraud Task Force to investigate charges of racial bias in Chicago mortgage industry

Call for action follows successful public participation in Homeowner Outreach Days workshops

SPRINGFIELD – Acting to find a broad-based solution that helps hard working homeowners avoid losing their properties through foreclosures, Governor Rod R. Blagojevich today urged the U.S. Secretary of the Treasury Henry Paulson to reach an agreement with federally chartered mortgage lenders that will give all homeowners with adjustable rate mortgages (ARMs)  a reprieve from skyrocketing mortgage rates.  In Illinois, mortgage foreclosure rates have increased 16 percent since last year. 

“The need for such a plan is obvious.  We have to protect hard working families from losing what they’ve worked so hard to achieve.  People here in Illinois and across the country should not be priced out of their own homes because of skyrocketing interest rates,” Gov. Blagojevich said.

In a letter sent to Secretary Paulson over the weekend, Gov. Blagojevich pointed out that establishing arbitrary standards to “prove” that a new rate is unaffordable does not help the millions of homeowners who are currently struggling to make their payments – often at the expense of meeting their family’s other needs.  Setting a moratorium for all ARMs, the Governor insisted, is fairer, and would allow Illinois families to ride out the perfect storm of ever increasing mortgage payments and the flat real estate market that prohibits them from selling their homes if they become unaffordable. 

In establishing the length of the moratorium, Gov. Blagojevich recommended that the freeze be set for at least one year. Finally, the Governor urged that pending foreclosures be placed on hold until the federal plan to freeze rate adjustments is implemented. For families whose rates have already adjusted to unaffordable levels, the Governor urged that mortgages be reset for at least one year to the levels families had demonstrated they could afford.

Also today, Gov. Blagojevich announced he was asking his Mortgage Fraud Task Force to open an investigation based on disturbing allegations of racially biased lending for Chicago families.  The Chicago Reporter recently issued a report that shows serious discrepancies between rates charged for white, Hispanic and African American families with identical income and credit scores.  The MFTF will start its investigation on Monday by reviewing the tens of thousands of loan files used in developing the report.  Based on its findings, the MFTF will recommend appropriate actions that could include monetary fines, revocation of licenses and referrals to the appropriate federal regulatory agencies that have jurisdiction.

Finally, to ease the immediate challenges facing families who are unable to meet their current mortgage obligations and to facilitate face-to-face meetings between homeowners and mortgage lenders, Gov. Blagojevich recently launched the State’s Homeowner Outreach Days program.

The Outreach program, managed by the Illinois Department of Financial and Professional Regulation (IDFPR) and the Illinois Housing Development Authority (IHDA) began on November 15 with an event in Chicago’s west side and events are continuing in communities across the state through early next year.  Numerous families, homeowners and homebuyers have attended each of the events held to date, in Chicago, Rockford and Champaign.  Future events will be held in East St. Louis, Chicago and Decatur.  The current schedule is available at www.Illinois.gov.

The text of the Governor’s letter follows:

U.S. Secretary of the Treasury Henry M. Paulson, Jr.
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Paulson,

I want to thank you for your leadership in bringing together lenders and federal regulators to seek a solution to the problems affecting families who are facing unaffordable mortgage rate adjustments. The need is obvious.  Illinois alone has seen an increase of 16% in foreclosures over the past year.  We must protect hard working families from losing what they’ve worked so hard to achieve.  People here in Illinois and across the country should not be priced out of their own homes because of skyrocketing interest rates.

In developing the standards for the rate adjustment moratorium, I urge you to consider offering moratoriums to as many families with Adjustable Rate Mortgages (ARMs) as possible. Establishing arbitrary standards to “prove” that a new rate is unaffordable does not help the millions of homeowners who are currently struggling to make their payments – often at the expense of meeting their families other needs.  Setting a moratorium for all ARMs would allow Illinois families to ride out the perfect storm of ever increasing mortgage payments and the flat real estate market that prohibits them from selling their homes if they can no longer afford their payments.  

In determining the length of the moratorium, it would equitable that the freeze be set for at least one year. This would be good and fair for both homeowners and for lenders, because in foreclosures, both parties loose.

Finally, I urge you to include a provision that immediately halts foreclosures that are currently pending, if they are based on failure to pay as a result of unaffordable rate adjustments that have already occurred.  Once the moratorium is established, homeowners who are facing foreclosure deserve to have their mortgage rates reset for at least one year to levels that families had already proven they could pay.

I have asked the Secretary of the Illinois Department of Financial and Professional Regulation, Dean Martinez, and the Executive Director of the Illinois Housing Development Authority, DeShana Forney to work with their federal counterparts to determine options to help homeowners in Illinois.

I look forward to working with you to protect Illinois families from losing their homes due to circumstances beyond their control.

Sincerely,

 Rod R. Blagojevich
Governor
State of Illinois