2009 foreclosure rate bad, but wait until next year

The foreclosure rate for 2009 kept Illinois in the top 10 of states with a 30 percent increase over 2008 and a whopping 104 percent increase over 2007, according to data expected to be released today by Irvine, Calif.,-based RealtyTrac.

Worse, foreclosures are expected to continue this year and peak in 2011, due to rising unemployment, sinking home values and resetting adjustable-rate mortgages, said RealtyTrac spokesman Daren Blomquist.

Also, a state law that delays the foreclosure process just seemed to delay the inevitable for many, he said.

"The law that went into effect in April just delayed the foreclosures, and those showed up in the third and fourth quarters," Blomquist said.

RealtyTrac reported that Illinois had about 131,000 filings on properties statewide, or about one in 40 households. Nationwide, about 3.9 million foreclosure filings - including default notices, scheduled foreclosure auctions and bank repossessions - were filed in 2009, up 21 percent from 2008 and 120 percent from 2007.

Illinois, along with California, Florida and Arizona held the dubious distinction of accounting for 50 percent of the nation's total foreclosure filings.

"As long as people are still losing their jobs and cannot sell their homes, foreclosures will continue," said Marve Stockert, executive director of the Illinois Association of Mortgage Professionals in Lombard. "And as long as homes are under water (where more is owed than the home is worth), people don't have much of a choice."

Stockert believes the resetting ARMs should not have as great an effect if mortgage rates stay down. But if Treasury rates go up, then more people will be affected, he said.

David Siegel, a bankruptcy attorney in Wheeling and Chicago, said he's seeing more people in trouble than ever.

"We're seeing a lot of people walking away from their homes, because they owe more than the properties are worth," he said.

He's also seeing more use Chapter 13 bankruptcy to save the home and work with lenders to modify their loans, but many homeowners remain vulnerable, he said.

"But next year, I agree, we'll see more foreclosures," Siegel said.