Although she is an attorney with decades of experience, Mary Flynn joined the ranks of the unemployed after the social services agency she worked for cut jobs this year. Unable to keep up with mortgage payments for her Berwyn home, Flynn wasted no time enrolling in the federal Hardest Hit Fund program.
"I filled out an application on March 31 and was approved by May," Flynn said. The program, which has a $25,000 cap per recipient, paid bank penalties she had incurred, then reduced her mortgage by one-third.
Flynn now has a temporary job in her field, which she hopes to parlay into a permanent one.
"Hardest Hit was the bridge that helped me keep my home," she said.
Hardest Hit is one of several federal funds designed to help unemployed and underemployed borrowers keep up with mortgage payments. It is the biggie, with $57 million dispersed to homeowners in Illinois alone since it was launched in 2011. The government offers other programs under the Making Home Affordable umbrella. They include mortgage modification, principal reduction and refinancing programs, as well as resources geared toward veterans.
Illinois ranks third nationally in delinquent home loans, behind Florida and New Jersey, according to the Mortgage Bankers Association.
Borrowers facing foreclosure can pursue other remedies.
The federal independent foreclosure review program provides a third-party review and, in some cases, offers compensation. Residents of Cook, Madison, Peoria and Will counties can take advantage of county mediation programs to try to resolve foreclosure claims.
Minority homeowners who were given mortgages under unfair terms can tap into restitution programs such as the Wells Fargo Fair Lending and Civil Rights Violations Settlement and the Countrywide Mortgage Fair Lending and Civil Rights Violations Settlement.
At the state level, the Illinois Foreclosure Prevention Network coordinates federal programs with local agencies, hosts foreclosure prevention workshops for homeowners and has free counseling services that homeowners can reach through a hotline, 855-KEEP-411, and website, keepyourhomeillinois.org.
On its website, illinoisattorneygeneral.gov, the Illinois attorney general's office offers mortgage-related resources for distressed homeowners.
Because of the Illinois Homeowner Protection Act, borrowers at risk of default have a 90-day grace period before lenders can initiate foreclosures. This law expires July 1.
Typical of many federal grant programs, Hardest Hit money is dispersed locally after recipients meet with counselors approved by the U.S. Department of Housing and Urban Development. Flynn's counselor, for example, was with the Neighborhood Housing Services of Chicago Inc.'s Chicago office, which also has an Elgin office.
In addition to advising homeowners about keeping up with their mortgages, HUD counselors teach basic money management.
"More and more, that includes credit counseling," said Ruth Contreras-Di Diana, director of counseling for the Greater Southwest Development Corp. in Chicago. "The banks tell us that homeowners are having trouble overcoming their credit card debt, especially."
She said her crew "triages" clients so they can help those with the most dire situations first. After the counselors help clients secure new mortgage terms, the counselors talk to them about financial goals.
Contreras-Di Diana said she tells clients: "You may be back on your feet for now, but what about after that? Where will you be financially in a year and how are you planning for that?"
Pablo Arontes, of Niles, praises the counselors at the Spanish Coalition for Housing in Chicago for their advice, which included renting out a room in his house and increasing his work hours. Both recommendations help him pay his mortgage, which was modified.
"After my partner died, it was hard to make the mortgage myself," Arontes said. "The coalition helped me apply for a loan modification by showing the bank the lease for my renter and proof of my raise."
His lender agreed to a trial modification, then granted a permanent modification that reduced his monthly payment.
Theotha Lane, of Chicago, said the counselors at the Chicago Urban League helped him wade through the stacks of paperwork required to alter his mortgage.
"The bank kept asking for other documents," Lane said of his application for a loan modification after he lost his job this year. "Since we got the mortgage in 1989, it had been sold to other banks eight times, so I had piles of papers."
Because of Chicago Urban League's help, Lane said his bank reduced the principal on his loan. His monthly payment went to $700 from $1,100, which he and his wife can manage on her salary alone. "Now, we're making it," Lane said.
Just because a credit counseling agency is labeled nonprofit, keep in mind that its services might not be free, affordable or legitimate. Some organizations charge high fees or urge consumers to make voluntary contributions.
Some of the larger banks in the country, including those that have been sued for mortgage or foreclosure fraud, are funneling money to grass-roots organizations that are helping homeowners in need.
Bank of America gave $22 million in 2012 to Chicago nonprofit organizations, including the Chicago Urban League, Greater Southwest Development Corp. and the Spanish Coalition for Housing.
Bank of America also invests in its customer assistance centers, where homeowners can get free advice. Local centers are in Chicago and Bolingbrook.
"Don't be afraid to call us," said Kevin Gallagher, mortgage manager at Bank of America's Chicago office. "Then be careful of scammers. Some send you letters that look like they're from your bank. In general, if they ask for money, they're not legit."
Out of the ashes has emerged a new type of private-sector business that helps struggling homeowners through cash reward systems. Loan Value Group (www.loanvaluegroup.com) in New Jersey, for example, offers the Responsible Homeowner Reward program. It gives cash rewards to homeowners with negative equity after they reach certain milestones. The lender selects the eligible homeowners and covers the cost.
"It does not alter the mortgage," said Frank Pallotta, Loan Value Group partner. "It's based on the psychology that if we have incentives, we're more likely to pay the mortgage before spending the money elsewhere."
When all else fails, take your lender to court to force it to negotiate with you, said Alan Sims, author of the e-book "Sue Your Bank." Through his book, website and email coaching, Sims guides consumers through the small claims court system, which is simpler and quicker than filing a lawsuit with a higher court.
"Illinois has a great small claims system," said Sims, a forensic real estate appraiser based in Redlands, Calif. "The maximum judgment is $10,000, but you don't need a lawyer. Costs vary by county, but expect to pay about $250."
Homeowners whose houses have been foreclosed can use the small claims court to restore credit. "That's a huge part of moving forward," Sims said.
Even if your financial future looks grim, persistence sometimes pays off.
"I kept getting denied but kept reapplying until it worked," Arontes said. "Get help and don't give up."