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Illinois is one among many states that are planning legislation in response to the rising number of defaults associated with subprime mortgages. With tens of thousands of Illinoisans poised to lose their homes in the collapse of the subprime mortgage industry, Illinois Attorney General Lisa Madigan called for a coordinated statewide effort to assist homeowners facing foreclosure and curb abuses in the mortgage lending industry.

"We are in a crisis of potentially large proportions," said Madigan, noting that foreclosure filings statewide jumped 55 percent in 2006, totaling 72,455, and are projected to spike even higher in 2007. "As the outlook for many Illinois homeowners turns grim, it is critical that everyone with a stake in the problem – state and local government, lenders, regulators and housing advocates – come together now to implement solutions."

Madigan said she would spearhead a statewide strategy that includes working with State Rep. Dan Burke to pass legislation to enhance protections for homeowners who are already – or soon-to-be –in foreclosure and to impose duties on mortgage lenders and brokers to ensure future borrowers have the ability to repay their loans and keep their homes. Additionally, Madigan will convene two statewide "summits," one to develop a blueprint for expanding financial assistance for homeowners trapped in bad loans, the other to coordinate legal assistance resources for homeowners in distress. Madigan is working with Burke to introduce the legislation during the current session and plans to convene the two summits this spring and summer.

The incidence of subprime refinance lending in Illinois and the surrounding region is higher than the national average. Nationwide, one in four refinance loans made in 2005 was subprime, according to the Consumer Federation of America, a watchdog and policy group that tracks mortgage lending trends. By comparison, in the Midwest, subprime loans accounted for nearly one third (32.1 percent) of refinances originated that year. The numbers in some Illinois communities are even more unsettling.

In Peoria, for example, subprime loans made up 45.4 percent of the refinancings done in 2005.