Group helps Bloomington woman fight foreclosure

Indiana & Illinois Foreclosure News

By Michelle Koetters

BLOOMINGTON — Carol Thomas faced the ultimate fear last summer: the possibility she would lose her home to foreclosure.

The interest rate on her adjustable rate mortgage reset, and her affordable home payment jumped $300 a month.

“There was just no way,” Thomas said.

Thomas has felt a range of emotions since then; she’s been scared, furious, concerned and overwhelmed. But with the help of the Central Illinois Organizing Project, Thomas was able secure a fixed-interest rate loan and keep her house. After months of worry, the nightmare is over, even if it’s going to take some time for her to realize she’s now safe at home.

“I’m overwhelmed with happiness, trying to relax,” Thomas said at a press conference Thursday at her house on Graham Street in west Bloomington. “I’m having a hard time not worrying about it.”

That’s no wonder after what’s she been through.

The 69-year-old widow has lived in the one-story, two-bedroom home for 12 years, but she’s lived in the same neighborhood for 35 years. In May 2005, she consolidated her debt — which included a zero-percent interest loan from the city of Bloomington for sewer repair — into an adjustable rate mortgage. Once the rate reset, her payment increased from about $500 a month to more than $800 a month.

She admits now that she didn’t look at the details of the loan very closely, and she was under the assumption she could refinance before her interest rate ballooned.

“I got involved in a bad loan,” Thomas said. “I trusted somebody, and they didn’t do me right.”

She’s not alone.

Many subprime loans

The financial industry granted a number of subprime and predatory loans that never should have been made, especially during 2005 and 2006, said the Rev. Eugene Barnes, a board member of the Central Illinois Organizing Project, which persuaded Thomas’ lender to modify her loan. The group has offices in Bloomington, Springfield and Champaign.

About 1,357 subprime loans originated in McLean County during 2005 and 2006. It’s projected that 255, or 18.8 percent, of those homes foreclosed, according to statistics from the Center for Responsible Lending, which Barnes presented at the press conference.

Domino effect

A home’s foreclosure has a domino effect on the community, said Barnes, of Champaign. Empty homes become drug houses, crime increases and property values from nearby homes fall, he said.

“The neighborhood starts to deteriorate,” he said.

The county’s economy also could suffer from foreclosure rates, he said. In fact, the blame for the current slowdown in the national economy has largely been placed on subprime mortgage lending woes.

In its Save the American Dream campaign, CIOP wants subprime mortgage teaser rates to be frozen and mortgage companies to modify loans. Principle, interest, taxes and insurance should not exceed 28 percent of a borrower’s gross income, and total debt should not exceed 36 percent. CIOP also wants a moratorium on all foreclosures until the first two goals are achieved.

“Let’s not let more people go into foreclosure and let the entire country suffer,” Barnes said.

After Thomas’ loan was modified to a fixed rate once again, her monthly payment fell back to $421 a month.

As long as she is working — she has two jobs — she could have made the higher payment, but nothing more. And if something prevented her from being able to work, she knew she would not have been able to keep the home.

“Now I can,” Thomas said, fighting back tears.

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