A year later, more fall into the dream foreclosed

Fugates start to find new life, but others struggle in wake

 
 
  • Melanie Fugate and her family are among the tens of thousands who have suffered through the foreclosure process.

    Melanie Fugate and her family are among the tens of thousands who have suffered through the foreclosure process. Tanit Jarusan | Staff Photographer

  • Melanie Fugate and her family are among the tens of thousands who have suffered through the foreclosure process.

    Melanie Fugate and her family are among the tens of thousands who have suffered through the foreclosure process. Tanit Jarusan | Staff Photographer

  • Auctioneer Mike Carr looks for a bid during the Real Estate Disposition Corp.'s auction of more than 600 foreclosed homes recently at the Rosemont Convention Center.

    Auctioneer Mike Carr looks for a bid during the Real Estate Disposition Corp.'s auction of more than 600 foreclosed homes recently at the Rosemont Convention Center. Daniel White | Staff Photographer

  • An estimated 2,000 bidders turned out as more than 600 foreclosed homes are auctioned by the Real Estate Disposition Corp. at the Rosemont Convention Center.

    An estimated 2,000 bidders turned out as more than 600 foreclosed homes are auctioned by the Real Estate Disposition Corp. at the Rosemont Convention Center. Daniel White | Staff Photographer

  • Auctioneer Mike Carr looks for a bid during the Real Estate Disposition Corp.'s auction of more than 600 foreclosed homes recently at the Rosemont Convention Center.

    Auctioneer Mike Carr looks for a bid during the Real Estate Disposition Corp.'s auction of more than 600 foreclosed homes recently at the Rosemont Convention Center. Daniel White | Staff Photographer

Published: 11/26/2008 12:03 AM | Updated: 11/26/2008 12:36 AM

A new life did not come easy for the Fugates of Carol Stream, but it has come.

A year ago, Melanie and Steven Fugate asked a DuPage County Circuit Court judge for more time so they could quickly sell their Carol Stream home before it reached the sheriff's auction block. The additional time allowed them to avoid a foreclosure by selling their home far below market value. They lost their equity. Worse, they lost their American dream.

But they did manage to get themselves moving forward again. Now, their hardships are being repeated by hundreds of families throughout the Chicago suburbs, as statistics demonstrate that the Fugates were among the first wave of a crisis that has only deepened in the year since illness forced them into DuPage County court.

"It was all very rough," said Melanie Fugate. "We had no place to go until the very last minute."

The Fugates - featured in the Daily Herald's "The Dream Foreclosed" series last year - are among 2 million homeowners nationwide this year who faced some part of the foreclosure process. Reasons families couldn't pay their mortgages vary, including job loss, salary cuts, living beyond their means or, in the Fugates' situation, illness leading to unemployment.

In the Chicago region, foreclosure filings increased to 79,626 during the period of January through October, compared to 63,259 for the same period a year ago. Lake County saw an increase as much as 41 percent, while Will and McHenry counties each saw a 14 percent increase.

By autumn, troubled homeowners' woes were compounded further with the crash of Fannie Mae and Freddie Mac, which hold nearly half the nation's mortgages, some major banks failed, and the U.S. economy tanked. The federal government was forced to grapple with the biggest financial crisis since the Great Depression.

A $700-billion-bailout plan was approved in early October and it focused primarily on financial institutions, said Phillip Swagel, assistant secretary for economic policy at the U.S. Treasury in Washington, D.C. "We needed to stabilize the banking system first," Swagel said.

Also, lending codes from financial institutions were revamped and became uniform nationwide, to get "everybody on the same page," Swagel said.

Then on Tuesday, the Federal Reserve pumped in an additional $800 billion to buy up mortgage securities and other consumer debt.

Some experts believe action was necessary because the foreclosure crisis will further deepen next year, as home values continue to drop and more homes sit unsold on the market.

Some local economists believe the foreclosure crisis should have been met head-on much earlier to avert the current crisis.

"If something isn't done, this foreclosure crisis will get even worse next year," said David Klein, senior vice president/financial consultant with RBC Wealth Management in Vernon Hills.

As she has predicted in her quarterly letters since the end of 2007, Diana J. Joseph, managing director of Dearborn Partners LLC in Chicago, said significant dislocations in the financial sector will lead the entire economy downward.

"This is occurring and the unemployment rate can only rise, possibly to 10 percent, before this is over. As people lose jobs, more will lose their homes," said Joseph. "Decisive action to an obvious forthcoming problem, not reactive 'deer in the headlights' responses, are needed to stave off the obvious perils."

Illinois Sen. Dick Durbin agrees and says the government missed an opportunity to ease the crisis when Congress failed to act following hearings a year ago in Washington, D.C., to examine ways to help consumers. Durbin said he recently introduced legislation, called the Homeowner Assistance and Taxpayer Protection Act, which requires the U.S. Treasury, the Federal Reserve and others to restructure loans, establishes services to restructure loans that qualify for the federal Hope for Homeowners program, and allows bankruptcy judges to modify troubled mortgages on primary residences.

Similar measures were defeated three times this year, Durbin said, but he remains optimistic about this new bill.

"Under the new administration, we'll have a more forceful effort to deal with foreclosures," Durbin said about fellow Democrat and President-elect Barack Obama, also a supporter of such legislation.

Even as government has faltered, there has been life for some families after enduring the foreclosure process.

Crystal and Larry Neubauer sold their Grayslake home a year ago through a short sale, which means the lender accepted less than the amount owed. Temporary unemployment had put the Neubauers behind on their mortgage, and they felt frustrated in their attempts to tap into programs their lender offered. Worse, the stress put a strain on their relationship, which involves a large blended family.

Larry Neubauer said recently that he and Crystal are renting in Round Lake. Money is tight because Crystal is in school full time studying Web design. Larry is still working for the company where he landed a job last year.

Randall Nosalik of GNR Realty Inc. in Round Lake Beach, has been on the front lines of the housing crisis and said he's handled one-third more short sales in 2008 than in 2007. Foreclosures are continuing because, even at discounted sales prices, there are not enough buyers.

Job loss, Nosalik said, is the leading cause of the mortgage problems he has seen, compounded by increasing property taxes - especially in newer developments that installed infrastructure with special taxes under a Special Service Area.

Dru Bergman, executive director of the DuPage Homeownership Center, said 54 new clients asked for help with mortgage default issues in 2006, 133 in 2007 and 230 so far in 2008.

While job loss, income reduction, illness or divorce are sending people into default, people are much closer to the edge these days, Bergman said. For example, they may have pulled equity from the home with several refinancings and now owe more than the house is worth.

Judy Graves, a housing counselor with the DuPage Homeownership Center, said new programs from Fannie Mae and Freddie Mac have helped borrowers whose loans were sold to those agencies on the secondary market. She also said lenders are more likely to approve short sales or accept deeds in lieu of payment early in the process before attorneys' bills have piled up. When foreclosure is almost complete, they don't have much to lose by letting it go forward.

For their part, the Fugates believe the trauma of facing a foreclosure was one of the best things to happen to them. They found a rental within three days and moved in March. The rush to get out of one home allowed them to go to another to rebuild their lives with their two young sons, while three grown children make their own way in this tough economy.

Since the Daily Herald's series ran last November, the Fugates also sought help from many sources, but found their church the most receptive to their crisis.

Also, some Good Samaritans helped with food or other items, including an anonymous donor who paid their rent for a few months.

So this Thanksgiving will be especially meaningful.

"We're so thankful for everyone who came forward to help us and we credit God with all of this," Melanie said. "Without Him, none of this would have been possible."

2008 FORECLOSURES
County Default Auction REO Jan-Oct total FC filings 1/Every X HH Pct. from 2007
Cook 35,387 4,731 13,010 53,128 41 27
DeKalb 410 41 86 537 70 32
DuPage 4,168 398 1,215 5,781 62 30
Grundy 249 43 36 328 55 70
Kane 3,213 301 817 4,331 39 16
Kendall 640 65 127 832 37 26
Lake 3,931 402 1,432 5,765 43 41
McHenry 1,857 203 590 2,650 42 14
Will 4,293 587 1,394 6,274 36 14
9-County total 54,148 6,771 18,707 79,626 42 26
2007 FORECLOSURES
County Default Auction REO Jan-Oct total FC filings 1/Every X HH
Cook 29,136 8,915 3,849 41,900 51
DeKalb 303 73 30 406 93
DuPage 3,440 782 239 4,461 80
Grundy 133 27 33 193 93
Kane 2,898 593 255 3,746 45
Kendall 441 161 58 660 47
Lake 2,865 812 398 4,075 61
McHenry 1,753 389 182 2,324 48
Will 3,785 1,126 583 5,494 41
9-County total 44,754 12,878 5,627 63,259 53