DANVILLE — Giving credit where credit is due has proven to be more than a catchphrase for those involved in the Danville real estate market.

Home-sellers here say prices are as inviting as ever following the area’s transition to a post-manufacturing economy and the recent national real-estate market meltdown.

However, bank loan departments everywhere continue to lend only stringently in the aftermath of that meltdown, which this year brought down Vermilion County’s oldest bank and most recently Chicago-based Corus.

Federal regulators Friday took over Corus upon discovering 44 percent of the bank’s assets were delinquent due to bad loans to property developers.

“The loan process is a lot more complicated than it was,” said Deb Fridy, president of the Danville Area Board of Realtors. “If you’re buying, you just have to know up front you’ll need to be patient.”

She said while credit is available for qualified buyers, the qualifying process has tightened on everything from traditional loans to those guaranteed by the Federal Housing Authority.

“I don’t think there’s much creative financing going on right now,” she said. “It’s all pretty cut and dried.”

“Banks right now are taking all precautions,” said Linda Koch, president of the Illinois Bankers Association.

“Banks want to lend in their local communities and it stimulates the economy. It’s just harder now.”

She said the markets had seen slight stabilization in recent months due to the elimination of sub-prime lenders blamed for starting the chain reaction and thanks to federal Troubled Asset Relief Program money that produced much-needed capital.

“That capital did help and they (lending institutions) put it to good use,” she said.

“(The money) certainly was not used to bail out the industry. Ninety-four percent of high-risk mortgages were made by ‘non-banks.’”

Locally, Danville has fared better than the state and country when it comes to the mortgage foreclosure rate during the last year, according to a report prepared by First American CoreLogic.

From July of last year, Danville’s foreclosure rate rose from 1.7 percent to 2 percent, compared to the current state average of 2.6 percent — up from 1.8 percent — and the national average of 2.8 percent — up from 1.59 percent.

Mortgages delinquent by 90 days or more make up 5.10 of local loans, which compares favorably to state and national averages of around 7 percent.

Last year the rates were 4.2 percent in Danville and around 4 percent nationally and in Illinois.

“As long as the unemployment rate keeps increasing, we’re going to see foreclosures,” said Debbie Borgwoald, Danville Area Board of Realtors manager and spokeswoman.

“But it seems the sub-prime meltdown has come to an end.”

What its worth

Koch said community-based loans are harder to come by these days due to the general economic downturn and because investment “value” is still a moving target.

“Nobody seems to know the value of collateral,” she said. “The value of property is so fluid and uncertain.”

That’s something Dan-ville-based property appraiser Matt Long knows well.

“Really, your house is only worth what somebody is going to offer you for it,” he said.

“We arrive at our value based on what other things are selling for.”

The 10-year appraiser said he doesn’t think the question of “value” will be settled for years to come as the real-estate market, both nationally and locally, continues to correct itself.

“Things went down a lot faster than they’ll come back, that’s for sure,” he said.

“It didn’t all happen overnight. What got us into this problem was thinking that everybody should be a homeowner, no matter what. They actually put pressure on the banks to lend. It’s a direct result of government intervention.”

For now, local Realtors are touting the low prices and hoping potential homebuyers qualify for the loans they seek.

In fact, many sellers now insist on pre-qualification to make sure ultra-cautious banks sign off on the deal first.

“It’s still all based on credit,” said Bill Grubb, incoming president of the Danville Area Board of Realtors, “and you still have to have good credit.”

In the meantime, said Fridy, “There are a lot of good buys out there.”

She said Danville’s real estate market hasn’t escaped national factors, but they have been minimized here as shown in the national foreclosure numbers.

“It turns out to be good for homebuyers because when there’s a foreclosure,” she said, “a lot of the time a bank is willing to accept less money for it.”

But buying a foreclosed property is “a long, complicated process,” she added.

“It takes a lot more time than a normal transaction. I know people who have gotten good deals, but it’s not necessarily an inviting process.”

Over-stimulated

Some in the real-estate and banking industries worry the actions of a few will lead to an overreaction by the federal government and too much recovery-smothering regulatory intervention.

The IBA is on record as being against two federal proposals being considered, one of which would create a national consumer-protection division with oversight of the 16,000 U.S. lending institutions.

The other, called “cram-down” legislation, would force banks to forgive billions of dollars in outstanding consumer debt in an effort to reduce foreclosures.

“Every bank in Illinois supports strong and effective consumer protection,” Koch said.

But, “There is no need for a new bureaucracy. It can be done far faster and more efficiently through existing regional entities.”

She said the most effective legislation would reign in payday loan, mortgage and finance companies, not saddle banks with more regulation.

“That’s where the focus should be,” she said.

A state-level banking-industry “insider” who asked not to be identified in this story said the problems experienced by now-defunct First National Bank of Danville were a perfect example of why banks shouldn’t be lumped in with financial institutions that need correcting.

He said failed investments caused by the damaged economy, not bad loans, were to blame for the local bank’s failure.

Long said he is worried about the future of the local appraising industry as deals have already been struck between New York’s attorney general and federal loan giants Fannie Mae and Freddie Mac to create a national Home Valuation Code of Conduct.

The code would make lenders responsible for appraisals, which critics say is unfair because the banks sell those higher-risk loans to the national lending programs and would be less-inclined to seek a quality appraisal.

“I’ve already seen some sloppy appraisals around here,” he said.

“It’s a conflict of interest because all the banks have to worry about is filling out a form.”

Great unknown

And as if the banking and housing industries haven’t gone through enough, there is one more threat on the horizon that many fear.

There is wide concern commercial loans made before the “crash” and coming due in the next 18 months will lead to a similar disaster for businesses small and large.

The worry is, in light of devalued property and tighter credit standards, many of those companies will not be able to afford new financing or roll over old loans.

“Commercial loans on property are coming due,” Koch said.

“It’s something we are bracing for.”