HB2004ham001 96TH GENERAL ASSEMBLY

Rep. André M. Thapedi

Filed: 3/17/2009

09600HB2004ham001 LRB096 05440 MJR 23776 a

AMENDMENT TO HOUSE BILL 2004

AMENDMENT NO. ______. Amend House Bill 2004 immediately above the enacting clause by inserting the following:

"WHEREAS, this amendatory Act of the 96th General Assembly may be cited as the Emergency Foreclosure Relief Act of 2009; and

WHEREAS, The last substantive amendments to the Illinois Mortgage Foreclosure Law were adopted in 1987; and, therefore, it is necessary to address the mortgage foreclosure crisis with effective polices, procedures, and legislation; and

WHEREAS, Mortgage foreclosure filings on residential properties have continued to grow at alarming rates in counties with 400,000 or more residents; and

WHEREAS, Mortgage default situations where the homeowner and lender cannot reach any type of agreement on a loan modification or short sale typically end up with a mortgage foreclosure lawsuit being filed; and

WHEREAS, Mortgage foreclosures on 2, 3, 4, 5, and 6-unit multifamily properties have the potential to both disrupt local rental markets and displace tenants even if those tenants are current on their monthly rents; and

WHEREAS, When property goes to a foreclosure auction, very few of those properties are being purchased by third-party investors; instead, the properties revert to the lender or investor in the mortgage on which the foreclosure has been filed; and

WHEREAS, Although the worst wave of foreclosures tied to the highest risk mortgages such as subprime hybrid adjustable rate mortgages (ARM) loans may have passed, there remain significant concerns about the financial condition of homeowners; the continued weakness in the local housing market, combined with the declining local and national economy, has led to increased default and foreclosure rates for Alternate A-paper and prime mortgages; therefore"; and

by replacing everything after the enacting clause with the following:

"Section 5. The Code of Civil Procedure is amended by adding Section 15-1502.7 as follows:

(735 ILCS 5/15-1502.7 new)

Sec. 15-1502.7. Emergency foreclosure relief.

(a) As used in this Section:

"Approved counseling agency" means a housing counseling agency approved by the U.S. Department of Housing and Urban Development.

"Approved Housing Counseling" means in-person counseling provided by a counselor employed by an approved counseling agency to all borrowers, or documented telephone counseling where a hardship would be imposed on one or more borrowers. A hardship shall exist in instances in which the borrower is confined to his or her home due to medical conditions, as verified in writing by a physician or the borrower resides 50 miles or more from the nearest approved counseling agency. In instances of telephone counseling, the borrower must supply all necessary documents to the counselor at least 72 hours prior to the scheduled telephone counseling session.

"Delinquent" means past due with respect to a payment on a mortgage secured by residential real estate.

"Department" means the Department of Financial and Professional Regulation.

"Loan workout plan" means a plan that the mortgagor and approved counseling agency reasonably believe shall enable the mortgagor to stay current on his or her mortgage payments for the foreseeable future when taking into account the mortgagor's income and existing and reasonably foreseeable debts. A sustainable loan workout plan may 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, (7) refinancing into a new affordable loan, or (8) a deed in lieu of foreclosure consistent with Section 15-1401 of this Law.

"Secretary" means the Secretary of Financial and Professional Regulation or other person authorized to act in the Secretary's stead.

(b) Except in the circumstance in which a mortgagor has filed a petition for relief under the United States Bankruptcy Code, no mortgagee shall file a complaint to foreclose a mortgage secured by residential real estate until the requirements of this Section have been satisfied.

(c) Except for mortgages secured by residential real estate in which any mortgagor has filed for relief under the United States Bankruptcy Code, if a mortgage secured by residential real estate becomes delinquent by more than 30 days, then the mortgagee shall serve via certified mail, return receipt requested, a notice advising the mortgagor that he or she should seek approved housing counseling. Notwithstanding anything to the contrary in this Section, nothing shall preclude the mortgagor and mortgagee from communicating with each other during the initial 30 days of delinquency or reaching agreement on a sustainable loan workout plan, or both.

No foreclosure action under Part 15 of Article XV of the Code of Civil Procedure shall be instituted on a mortgage secured by residential real estate before serving and complying with the notice described in this subsection (c).

The notice required in this subsection (c) shall state the date on which the notice was mailed, shall be headed in bold 14-point type "FORECLOSURE RELIEF NOTICE", and shall state the following 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 60 DAYS FROM THE DATE OF THIS NOTICE TO OBTAIN APPROVED HOUSING COUNSELING. DURING THE GRACE PERIOD, THE LAW PROHIBITS US FROM FILING A FORECLOSURE ACTION AGAINST YOU. YOU MAY BE ENTITLED TO AN ADDITIONAL 60-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."

The notice shall also list the Department's current consumer hotline, the Department's website, and the telephone number, fax number, and mailing address of the mortgagee. No language, other than language substantially similar to the language prescribed in this subsection (c), shall be included in the notice. Notwithstanding any other provision to the contrary, the grace period notice required by this subsection (c) may be combined with a counseling notification required under federal law.

Service of the notice required under this subsection (c) means depositing or causing to be deposited into the United States mail an envelope with first-class postage prepaid that contains the document to be delivered. The envelope shall be addressed to the mortgagor at the common address of the residential real estate securing the mortgage.

(d) Until 60 days after serving the notice required under subsection (c) of this Section, no legal action shall be instituted under Part 15 of Article XV of the Code of Civil Procedure.

(e) If, within the 60-day period provided under subsection (d) of this Section, an approved counseling agency provides written notice to the mortgagee that the mortgagor is seeking approved counseling services, then no legal action under Part 15 of Article XV of the Code of Civil Procedure shall be instituted for 60 days after the date of that notice. The date that such notice is sent shall be stated in the notice, and shall be sent to the address or fax number contained in the Foreclosure Relief Notice required under subsection (c) of this Section. During the 60-day period provided under this subsection (e), the mortgagor or counselor or both may prepare and proffer to the mortgagee a proposed loan workout plan. The mortgagee will then determine whether to accept the proposed loan workout plan within 30 days after receiving the proffered loan workout plan. If the mortgagee and the mortgagor agree to a loan workout plan, then no legal action under Part 15 of Article XV of the Code of Civil Procedure shall be instituted for as long as the loan workout plan is complied with by the mortgagor.

The agreed loan workout plan and any modifications thereto must be in writing and signed by the mortgagee and the mortgagor.

If the mortgagee opts not to accept the proposed loan workout plan, then the mortgagee shall notify the mortgagor and counselor of its decision, in writing, setting forth, with specificity, the reasons for rejecting the proposed loan workout plan within 30 days after receiving the proffered loan workout plan.

Upon written notice to the mortgagee, the mortgagor may change approved counseling agencies, but such a change does not entitle the mortgagor to any additional period of forbearance.

(f) If the mortgagor fails to comply with the loan workout plan, then nothing in this Section shall be construed to impair the legal rights of the mortgagee to institute legal action under Part 15 of Article XV of the Code of Civil Procedure.

(g) A counselor employed by a housing counseling agency or the housing counseling agency that in good faith provides counseling shall not be liable to a mortgagee or mortgagor for civil damages, except for willful or wanton misconduct on the part of the counselor in providing the counseling.

(h) There shall be no waiver of any provision of this Section.

(i) It is the General Assembly's intent that compliance with this Section shall not prejudice a mortgagee in ratings of its bad debt collection or calculation standards or policies.

(j) This Section shall not apply, or shall cease to apply, to residential real estate that is not occupied as a principal residence by the mortgagor.".