Tuesday, March 31, 2009

Coming Soon: Pre-Foreclosure Grace Period in Illinois

The week of January 12, 2009, both houses of the Illinois Assembly passed Senate Bill 2513. The bill makes several amendments to Illinois law, including amendments to the Illinois Mortgage Foreclosure Law imposing new pre-foreclosure requirements in Illinois. The governor is expected to sign the bill on Monday, April 6, 2009 and under its terms it will go into immediate effect. The foreclosure bar is referring to the bill as the "30-30-30 Law."

Applicability
The law will apply to all loans secured by residential real estate, except for loans for which any borrower has previously filed bankruptcy or for which the property is not the mortgagor’s principal residence. The law will apply only once per loan - that is, if a loan has previously gone into default and this bill was complied with, the requirements of the bill need not be complied with on a subsequent default.

Thirty Day “Grace Period Notice”
If a residential real estate loan falls into default by more than thirty days (the first 30), the mortgagee must send a “Grace Period Notice”. This notice must be a separate letter from any default or breach letter otherwise sent, but can be sent contemporaneously with other communications. No foreclosures can be filed once the law goes into effect unless the notice has previously been sent.

The Notice must be headed in 14 point type GRACE PERIOD NOTICE and must include the date that the notice was sent. The notice must also state in 14 point type:

“YOUR LOAN IS MORE THAN 30 DAYS PAST DUE. YOU MAY BE
EXPERIENCING FINANCIAL DIFFICULTY. IT MAY BE IN YOUR
BEST INTEREST TO SEEK APPROVED HOUSING COUNSELING.
YOU HAVE A GRACE PERIOD OF 30 DAYS FROM THE DATE OF
THIS NOTICE TO OBTAIN APPROVED HOUSING COUNSELING.
DURING THE GRACE PERIOD, THE LAW PROHIBITS US FROM
TAKING ANY LEGAL ACTION AGAINST YOU. YOU MAY BE
ENTITLED TO AN ADDITIONAL 30 DAY GRACE PERIOD IF YOU
OBTAIN HOUSING COUNSELING FROM AN APPROVED HOUSING
COUNSELING AGENCY. A LIST OF APPROVED COUNSELING
AGENCIES MAY BE OBTAINED FROM THE ILLINOIS
DEPARTMENT OF FINANCIAL AND PROFESSIONAL
REGULATION."

No other language should be included in the body of the “Grace Period Notice”, but it must also include the following information:
1) The consumer hotline number of the Illinois Department of Financial and Professional Regulation: 1 (877) 793-3470
2) The web address of the Illinois Department of Financial and Professional Regulation: http://www.idfpr.com/
3) The phone number for contacting the mortgagee.
4) The fax number of the mortgagee.
5) The mailing address of the mortgagee.
The notice must be send via first class U.S. Mail and addressed to the borrower at the property address securing the loan.

(This 30 day grace period is the second "30" in the "30-30-30 Law".)


Second Thirty Day Grace Period
The law also imposes a second grace period which could extend up to an additional thirty days. (The third "30"referenced in the new law.) If at any time during the thirty day notice period described above, an approved counseling agency provides written notice to the mortgagee that the borrower is seeking approved counseling services, no foreclosure action can be initiated for thirty days after the date of the counseling agency notice. (An approved counseling agency is defined as a housing counseling agency approved by the U.S. Department of Housing and Urban Development.)During this thirty day it is expected that the counseling agency and the mortgagee will work on agreeing to a "sustainable loan workout plan” which can include, but is not limited to, (1) a temporary suspension of payments, (2) a lengthened loan term, (3) a lowered or frozen interest rate, (4) a principal write down, (5) a repayment plan to pay the existing loan in full, (6) deferred payments, or (7) refinancing into a new affordable loan.

The Effect of the Law
Once a mortgagee is regularly in compliance with the new law, it should not result in substantial delays to initiation of foreclosure proceedings as the required notices can be sent as soon as the loan is thirty days delinquent. However since the law will go into effect immediately upon signing, it could immediately result in delays of 30-60 days on all new Illinois mortgage foreclosure actions beginning next week.

Interestingly, even before the governor has signed the bill, another bill as been proposed which would extend the two grace period to 60 days. This bill, HB2004, was referred to the Rules Committee on March 17. If passed, I guess this will become the 30-60-60 Law...

5 comments:

Michael W. Huseman said...

Will the first default notice become a required attachment to the complaint?

Or will you have to at least allege that you sent it?

AttyBJM said...

Currently, there is no requirement that the notice be attached to the complaint.

I wouldn't be surprised, however, is some judges (particularly in Cook County) required evidence that it was sent be presented at judgment.

MDH said...

Does this only apply to owner-occupied property?

jim hub said...

yes i would also like to know if this is applicable to owner-occupied property? maybe you can also check on this http://www.stopforeclosureanswer.com/stopforeclosure/

Dee Son said...

One thing I have actually noticed is the fact there are plenty of fallacies regarding the lenders intentions if talking about foreclosure. One misconception in particular would be the fact the bank needs to have your house. The financial institution wants your dollars, not the house. They want the funds they loaned you with interest. Averting the bank will simply draw a new foreclosed summary. Thanks for your post.

Regards,
Dee
For Sale For Lease Pty Ltd
A property management prahran For Sale For Lease Proprietary Limited
Prahran, Victoria 3181
Australia