Settlement to fund more foreclosure help by legal clinic

A University of Illinois legal clinic that helps homeowners facing foreclosure will develop similar programs in other counties with a second major grant from a government settlement fund.

The University of Illinois College of Law's Community Preservation Clinic will receive $794,000 from the Illinois attorney general's office to support the expansion of foreclosure mediation programs, including in Champaign and Vermilion counties. The money will also fund research about the perceptions of people involved in foreclosure mediation.

The grant is the second from a $25 billion government settlement with five of the nation's largest banks over their role in the foreclosure crisis.

The UI clinic received another $403,271 earlier this year.

The banks were accused of fraudulent practices, such as "robo signing" foreclosure documents, telling homeowners to stop making payments to qualify for loan modifications, and repeatedly losing documentation.

The settlement is providing an estimated $1 billion of relief to Illinois homeowners in the form of refinanced loans or other modifications. The state also received $100 million to counteract the effects of the foreclosure crisis, including legal services for homeowners.

The UI's Community Preservation Clinic provides free legal help to homeowners facing foreclosure in McLean County and tenants living in foreclosed properties in Champaign County. Through the McLean County Mandatory Foreclosure Mediation Program, it has helped more than 100 clients seeking to reduce or modify their loans or achieve a "graceful exit" through short sales when needed, officials said. In Champaign County, law students at the clinic represent tenants caught up in disputes with landlords on the verge of foreclosure.

The law students are not paid for their work, which is part of a law class.

The first grant in January supported direct legal services provided by the clinic, allowing it to train more law students, tackle more complex litigation and increase neighborhood canvassing efforts to reach tenants and homeowners who need help, said director Stacey Tutt. The funding also allowed the clinic to remain open during the summer months, Tutt said.

Since Jan. 1, when the grant took effect, the clinic has opened 69 new cases where UI law students are providing direct representation, Tutt said.

"It's not only about helping the clients and the difference you can really make in their lives. It's also about how it changes the students" as they interact with a diverse group of clients, she said. "It impacts their career."

With the new grant, the UI clinic will help other judicial circuits set up similar mediation programs, in Kankakee, Vermilion, Champaign, Macon and Sangamon counties, Tutt said. Organizers chose counties with relatively high percentages of homes in foreclosure because mediation could have the greatest impact, Tutt said.

The UI clinic will not provide direct services in those counties but work with the judiciary, local bar associations, HUD-certified counseling agencies and legal services agencies to develop mediation programs that match the resources and needs of each county, she said.

"There are a lot of different models out there," Tutt said. "Our role is to help educate the circuit on their operations and how it could work there, and also help put resources in place so people are successful."

The UI clinic will work with the Land of Lincoln Legal Assistance Foundation and Prairie State Legal Services, both of which received previous funding through the attorney general to provide direct legal help to homeowners, she said. Prairie State covers 36 Illinois counties in northern and central Illinois, and Land of Lincoln covers 65, including Champaign and Vermilion.

The first step is to work with the presiding judge, then the judge who oversees the foreclosure docket. Organizers will draft rules to propose to the Illinois Supreme Court, which must approve all mediation programs. They will also recruit and train mediators and educate attorneys representing both sides in foreclosure cases.

"We've got to look at it from all sides and make sure it's workable for everyone," Tutt said.

The grant covers three years. The UI submitted the application with two other mediation agencies that had received previous grant funds, to coordinate on a statewide effort to expand services south of Cook County.

Since the UI's foreclosure mediation program started in April 2012, it has helped 14 homeowners keep their homes through permanent loan modifications that made their mortgages affordable, Tutt said. Seven more clients are in trial payment plans preparing for a permanent modification, she said.

Hundreds of Illinois homeowners still face foreclosure. In 2012, there were almost 500 in McLean County and more than 200 in Champaign County. Having a lawyer more than doubles a homeowner's chances for a positive outcome in a foreclosure case, but the vast majority of homeowners don't get legal representation and end up losing their homes or paying more than they have to, according to Attorney General Lisa Madigan.