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Homes Held Hostage in Foreclosure

Suburban homeowner can't get rid of the home she thought she'd already lost

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    NEWSLETTERS

    As if foreclosure isn't bad enough, now many homeowners find themselves stuck -- victims of a process so confusing and complicated -- that even their homes are held hostage for years. (Published Thursday, Aug 18, 2011)

    Three years after filing foreclosure, one Berwyn resident says she's still unable to move on because her home -- and her credit -- are being held hostage by a pair of banks.

    "They're fighting over who has first position, who has the second position, who's entitled if the house sells, who gets the money first, who doesn't," explained Kathy Gillin.

    Gillin said she was emotional the day she moved out of her home. During the 15 years she owned it, many good memories were built. But when her mortgage rates skyrocketed and a bank wouldn’t modify her loan, she says her investment became a losing proposition.

    She opted to file for personal bankruptcy.

    "It was decided the best thing to do was file for bankruptcy and turn the house back over to the banks," Gillin said.

    But an unexpected obstacle was blocking her new beginning. The two banks holding liens on the home are fighting in court over a technical issue, holding Gillin up in the process.

    Real estate attorney Michael Van Zalingen the case is a sign that banks still don’t appreciate the enormity of the crisis, as they wage legal battles over single homes.

    "You've got someone who says, 'You know, I can't handle this mortgage and this house. I want to do the right thing and move on with my life. Please take this thing off my hands.' And they won't do it. So what do they want?," Van Zalingen said.

    Foreclosure after personal bankruptcy is routine, and can be sluggish. On average, it takes about a year-and-a-half in Illinois.

    But it could be getting worse, as the foreclosure train slows to a near standstill. After accusations that banks foreclosed too fast and without due process, the process slowed to an excruciatingly slow pace.

    A recent study by real estate data firm LPS Applied Analytics estimated that at the current pace, foreclosure on a home in severe default or foreclosure in New York state would take 62 years. In New Jersey, the pace is 49 years. In Illinois, it's nearly a decade.

    For many homeowners, the chance to live rent-free in a home they are losing could be a bittersweet gift. But no one told Gillin she could do that. She moved out and tried to move on. Had she stayed, she could have saved nearly $40,000.

    "It’s a nice house. It’s ridiculous it is empty," she said. "I want someone else to have the house if I can't have it. Why shouldn't someone else be able to paint it whatever color they want or play in the yard or put flowers in the yard?"