Chicago Bracing For Post-Pandemic Foreclosure Surge

By Lauraann Wood
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Law360 (August 28, 2020, 2:18 PM EDT) -- As the Circuit Court of Cook County stares down an influx of eviction, foreclosure and other debt collection cases, the local legal community is using the calm before the storm to help Chicago residents mitigate their pandemic-era financial crises and potentially save their homes.

Cook County remotely reopened in July, but has kept evictions, garnishments, repossessions and foreclosures at bay under a statewide moratorium on those proceedings implemented during the COVID-19 health crisis. Judge Moshe Jacobius, who presides over the court's Chancery Division, told Law360 that when a statewide moratorium on foreclosure lifts, there could be a potential onslaught of new cases.

Yet the unusual period of downtime has pushed groups like the Chicago Bar Foundation, Chicago Volunteer Legal Services and Legal Aid Chicago to get ahead of the expected onslaught of cases to develop programs intended to keep people housed. The foundation, for example, is working with the court on plans to restart a foreclosure mediation program that launched amid the 2008 recession and housing crisis but ended several years ago when demand was lower.

"The idea is to try to use some of the lessons from the foreclosure program and others around the country so we can tackle this thing really upfront and try to see if we can come to an agreement that keeps everybody in place, and if not, what's the next best solution," Chicago Bar Foundation Executive Director Robert Glaves told Law360. "If we get anything remotely like we got in 2008 and 2009, we really need to be out in front of this."

At the height of the housing crisis fallout, each Chancery Division judge was juggling an average of 8,000 foreclosure cases, Judge Jacobius said.

A county-funded foreclosure mediation program launched in 2010. It connected homeowners to housing counselors and other assistance, including attorney representation, as they navigated their legal options or opted for mediation in their cases.

In Cook County, not all foreclosure cases have ground to a halt — the court has continued to hear cases that were pending before the novel coronavirus was declared a global pandemic. And because some federal programs have allowed tenants to delay payments on their federally backed loans for several months, the court may not have to work through a large backlog of cases when the current state moratorium initially lifts, Judge Jacobius said.

"After a while, it could be that the floodgates are going to open," the judge said. "But we've been through that before, so we're kind of getting ready for that."

The county foreclosure mediation program helped save more than 7,000 homes and provided other assistance to several thousand more people. But it wound down after the 2017 fiscal year due to a lack of funding, significantly lighter caseloads and the availability of other outside resources.

The Chicago Bar Foundation has been working with the court and other organizations to not only revive a form of the earlier foreclosure mediation program, but to also implement a similar early resolution program that will help tackle the incoming pandemic-era eviction and consumer debt cases.

Glaves said that he and others involved are working in "the calm before the storm moment," but that he hopes to launch the early resolution program before the foreclosure mediation program because the consumer debt and eviction cases could potentially hit the court quicker than the halted currently halted foreclosure cases.

"The idea is to try to use some of the lessons from the foreclosure program and others around the country so we can tackle this thing really upfront and try to see if we can come to an agreement that keeps everybody in place, and if not, what's the next best solution," Glaves said.

The foreclosure program will meet a "huge need" in the community, as most homeowners typically face fast-paced foreclosure proceedings without attorney representation, Margaret Benson, the executive director of Chicago Volunteer Legal Services, told Law360. CVLS partnered with the circuit court to represent every homeowner who asked for mediation during the earlier foreclosure program, and will offer those services again in its second iteration.

The programs will also benefit the judges, who wouldn't be able to offer pro se homeowners legal advice as they try to navigate the foreclosure process themselves, Benson said.

The mediation program's goal is to find the best solution that would allow someone to stay in their home, Benson said. "If you give the homeowners a free lawyer and slow the process down, you're two-thirds of the way there," she told Law360.

Both the city of Chicago and Cook County have dedicated some of their federal CARES Act funds to help launch the mediation and early resolution programs, but the programs will have to depend on additional funding sources in order to fully tackle any potential foreclosure, eviction or consumer debt case overload that might be threatening the court's dockets, Glaves told Law360.

"If we see this jump in cases like everybody is fearing, that is going to take new resources and more resources than what we have right now," Glaves told Law360. "It's very helpful that that money is available to jump-start things here."

CVLS attorney Matthew Hulstein told Law360 he'd been trying to find ways to bring the foreclosure mediation program back since its funding was cut in 2017. When the pandemic hit, he was able to dust off his years-old proposal to revive the program.

And Hulstein wants to find a more self-sustaining funding mechanism for the mediation program, saying it's a service that shouldn't only be available during a widespread public crisis.

"When someone is facing possibly losing their home, that's a crisis," he said.

Some homeowners facing foreclosure may have some defenses available in their cases, but most "just really want to be able to try to work something out," Hulstein told Law360.

"There are these roadblocks that we keep facing that the system just isn't built to accommodate ... and mediation is a perfect way to address them and to fix them," he said.

With new foreclosure, eviction and other consumer debt cases continuing to float in the air under the ongoing moratoriums, the best way to handle them is to make sure they don't come crashing down on the court and the consumers in the most destructive way possible, James Brady, an attorney with Legal Aid Chicago, told Law360. LAC is one of several organizations Glaves said he intends to tap for help in the eviction early resolution program.

"I think it's in all of our interests to have a soft landing so that homeowners, tenants, whomever, who basically are unemployed or lost income due to COVID, which is no fault of their own, that we provide stability," he said. "Things like the foreclosure mediation program can lead to that."

--Editing by Katherine Rautenberg.

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