Public Act 094-0822
 
SB2349 Enrolled LRB094 18521 LCT 53849 b

    AN ACT concerning mortgages.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 1. Short title. This Act may be cited as the
Mortgage Rescue Fraud Act.
 
    Section 5. Definitions. As used in this Act:
    "Distressed property" means residential real property
consisting of one to 6 family dwelling units that is in
foreclosure or at risk of loss due to nonpayment of taxes, or
whose owner is more than 90 days delinquent on any loan that is
secured by the property.
    "Distressed property consultant" means any person who,
directly or indirectly, for compensation from the owner, makes
any solicitation, representation, or offer to perform or who,
for compensation from the owner, performs any service that the
person represents will in any manner do any of the following:
        (1) stop or postpone the foreclosure sale or the loss
    of the home due to nonpayment of taxes;
        (2) obtain any forbearance from any beneficiary or
    mortgagee, or relief with respect to a tax sale of the
    property;
        (3) assist the owner to exercise any right of
    reinstatement or right of redemption;
        (4) obtain any extension of the period within which the
    owner may reinstate the owner's rights with respect to the
    property;
        (5) obtain any waiver of an acceleration clause
    contained in any promissory note or contract secured by a
    mortgage on a distressed property or contained in the
    mortgage;
        (6) assist the owner in foreclosure, loan default, or
    post-tax sale redemption period to obtain a loan or advance
    of funds;
        (7) avoid or ameliorate the impairment of the owner's
    credit resulting from the recording of a notice of default
    or the conduct of a foreclosure sale or tax sale; or
        (8) save the owner's residence from foreclosure or loss
    of home due to nonpayment of taxes.
    A "distressed property consultant" does not include any of
the following:
        (1) a person or the person's authorized agent acting
    under the express authority or written approval of the
    Department of Housing and Urban Development;
        (2) a person who holds or is owed an obligation secured
    by a lien on any distressed property, or a person acting
    under the express authorization or written approval of such
    person, when the person performs services in connection
    with the obligation or lien, if the obligation or lien did
    not arise as the result of or as part of a proposed
    distressed property conveyance;
        (3) banks, savings banks, savings and loan
    associations, credit unions, and insurance companies
    organized, chartered, or holding a certificate of
    authority to do business under the laws of this State or
    any other state or under the laws of the United States;
        (4) licensed attorneys engaged in the practice of law;
        (5) a Department of Housing and Urban Development
    approved mortgagee and any subsidiary or affiliate of these
    persons or entities, and any agent or employee of these
    persons or entities, while engaged in the business of these
    persons or entities;
        (6) a 501(c)(3) nonprofit agency or organization,
    doing business for no less than 5 years, that offers
    counseling or advice to an owner of a distressed property,
    if they do not contract for services with for-profit
    lenders or distressed property purchasers, or any person
    who structures or plans such a transaction;
        (7) licensees of the Residential Mortgage License Act
    of 1987;
        (8) licensees of the Consumer Installment Loan Act who
    are authorized to make loans secured by real property; or
        (9) licensees of the Real Estate License Act of 2000
    when providing licensed activities.
    "Distressed property purchaser" means any person who
acquires any interest in fee in a distressed property while
allowing the owner to possess, occupy, or retain any present or
future interest in fee in the property, or any person who
participates in a joint venture or joint enterprise involving a
distressed property conveyance. "Distressed property
purchaser" does not mean any person who acquires distressed
property at a short sale or any person acting in participation
with any person who acquires distressed property at a short
sale, if that person does not promise to convey an interest in
fee back to the owner or does not give the owner an option to
purchase the property at a later date.
    "Distressed property conveyance" means a transaction in
which an owner of a distressed property transfers an interest
in fee in the distressed property; the acquirer of the property
allows the owner of the distressed property to occupy the
property; and the acquirer of the property or a person acting
in participation with the acquirer of the property conveys or
promises to convey an interest in fee back to the owner or
gives the owner an option to purchase the property at a later
date.
    "Person" means any individual, partnership, corporation,
limited liability company, association, or other group or
entity, however organized.
    "Service" means, without limitation, any of the following:
        (1) debt, budget, or financial counseling of any type;
        (2) receiving money for the purpose of distributing it
    to creditors in payment or partial payment of any
    obligation secured by a lien on a distressed property;
        (3) contacting creditors on behalf of an owner of a
    residence that is distressed property;
        (4) arranging or attempting to arrange for an extension
    of the period within which the owner of a distressed
    property may cure the owner's default and reinstate his or
    her obligation;
        (5) arranging or attempting to arrange for any delay or
    postponement of the time of sale of the distressed
    property;
        (6) advising the filing of any document or assisting in
    any manner in the preparation of any document for filing
    with any court; or
        (7) giving any advice, explanation, or instruction to
    an owner of a distressed property that in any manner
    relates to the cure of a default or forfeiture or to the
    postponement or avoidance of sale of the distressed
    property.
 
    Section 10. Distressed property consultant contract terms.
    (a) A distressed property consultant contract must be in
writing and must fully disclose the exact nature of the
distressed property consultant's services and the total amount
and terms of compensation.
    (b) The following notice, printed in at least 12-point
boldface type and completed with the name of the distressed
property consultant, must be printed immediately above the
statement required by subsection (c) of this Section:
"NOTICE REQUIRED BY ILLINOIS LAW
     ...............................(Name) or anyone working
    for him or her CANNOT:
        (1) Take any money from you or ask you for money until
    ........................................ (Name) has
    completely finished doing everything he or she said he or
    she would do; or
        (2) Ask you to sign or have you sign any lien,
    mortgage, or deed."
        (c) A distressed property consultant contract must be
written in the same language as principally used by the
distressed property consultant to describe his or her services
or to negotiate the contract, must be dated and signed by the
owner, and must contain in immediate proximity to the space
reserved for the owner's signature a conspicuous statement in a
size equal to at least 12-point boldface type, as follows:
        "You, the owner, may cancel this transaction at any
    time until after the distressed property consultant has
    fully performed each and every service the distressed
    property consultant contracted to perform or represented
    he or she would perform. See the attached notice of
    cancellation form for an explanation of this right."
    (d) A distressed property contract must contain on the
first page, in a type size no smaller than that generally used
in the body of the document, each of the following:
        (1) the name and address of the distressed property
    consultant to which the notice of cancellation is to be
    mailed; and
        (2) the date the owner signed the contract.
    (e) A distressed property consultant contract must be
accompanied by a completed form in duplicate, captioned "NOTICE
OF CANCELLATION," which must be attached to the contract, must
be easily detachable, and must contain, in at least 12-point
boldface type, the following statement written in the same
language as used in the contract:
"NOTICE OF CANCELLATION
............................
(Enter date of transaction)
     You may cancel this transaction, without any penalty or
obligation, at any time until after the distressed property
consultant has fully performed each and every service the
distressed property consultant contracted to perform or
represented he or she would perform.
    To cancel this transaction, mail or deliver a signed and
dated copy of this cancellation notice, or any other written
notice to:
..................(Name of distressed property consultant) at
...........................(Address of distressed property
consultant's place of business)
    I hereby cancel this transaction on ...............(Date)
.....................................(Owner's signature)".
    (f) The distressed property consultant shall provide the
owner with a copy of a distressed property consultant contract
and the attached notice of cancellation immediately upon
execution of the contract.
 
    Section 15. Rescission of distressed property consultant
contract.
    (a) In addition to any other legal right to rescind a
contract, an owner has the right to cancel a distressed
property consultant contract at any time until after the
distressed property consultant has fully performed each
service the distressed property consultant contracted to
perform or represented he or she would perform.
    (b) Cancellation occurs when the owner gives written notice
of cancellation to the distressed property consultant at the
address specified in the distressed property consultant
contract.
    (c) Notice of cancellation, if given by mail, is effective
when deposited in the mail properly addressed with postage
prepaid. Notice by certified mail, return receipt requested,
addressed to the address specified in the distressed property
consultant contract, shall be conclusive proof of notice of
service.
    (d) Notice of cancellation given by the owner need not take
the particular form as provided with the distressed property
consultant contract and, however expressed, is effective if it
indicates the intention of the owner not to be bound by the
contract.
 
    Section 20. Waiver of a distressed property consultant
contract.
    (a) Any waiver by an owner of the provisions of Section 10
or 15 is void and unenforceable as contrary to public policy.
    (b) Any attempt by a distressed property consultant to
induce an owner to waive the owner's rights is a violation of
the Act.
 
    Section 25. Distressed property conveyance contract. A
distressed property purchaser shall enter into every
distressed property conveyance in the form of a written
contract. Every distressed property conveyance contract must
be written in letters of a size equal to at least 12-point
boldface type, in the same language principally used by the
owner of the distressed property to negotiate the sale of the
distressed property, must be fully completed, signed, and dated
by the owner of the distressed property and the distressed
property purchaser, and must be witnessed and acknowledged by a
notary public, before the execution of any instrument of
conveyance of the distressed property.
 
    Section 30. Distressed property conveyance contract terms.
Every contract required by Section 25 must contain the entire
agreement of the parties, be fully assignable, and survive
delivery of any instrument of conveyance of the distressed
property. Every lease entered into pursuant to a contract
required by Section 25 is terminable at will by the distressed
property owner, without liability. Every contract required by
Section 25 must include the following terms:
        (1) the name, business address, and the telephone
    number of the distressed property purchaser;
        (2) the address of the distressed property;
        (3) the total consideration to be given by the
    distressed property purchaser or tax lien payor in
    connection with or incident to the sale;
        (4) a complete description of the terms of payment or
    other consideration including, but not limited to, any
    services of any nature that the distressed property
    purchaser represents he or she will perform for the owner
    of the distressed property before or after the sale;
        (5) a complete description of the terms of any related
    agreement designed to allow the owner of the distressed
    property to remain in the home such as a rental agreement,
    repurchase agreement, contract for deed, or lease with
    option to buy;
        (6) a notice of cancellation as provided in this
    Section;
        (7) the following notice in at least 12-point boldface
    type, if the contract is printed, or in capital letters, if
    the contract is typed, and completed with the name of the
    distressed property purchaser, immediately above the
    statement required by this Section:
"NOTICE REQUIRED BY ILLINOIS LAW
        Until your right to cancel this contract has ended,
    ..................(Name) or anyone working for
    ...................(Name) CANNOT ask you to sign or have
    you sign any deed or any other document. You are urged to
    have this contract reviewed by an attorney of your choice
    within 5 business days of signing it."; and
        (8) if title to the distressed property will be
    transferred in the conveyance transaction, the following
    notice in at least 14-point boldface type if the contract
    is printed, or in capital letters if the contract is typed,
    and completed with the name of the distressed property
    purchaser, immediately above the statement required by
    this Section:
"NOTICE REQUIRED BY ILLINOIS LAW
        As part of this transaction, you are giving up title to
    your home.".
 
    Section 35. Cancellation of a distressed property
conveyance contract.
    (a) In addition to any other right of rescission, the owner
of the distressed property has the right to cancel any contract
with a distressed property purchaser until midnight of the
fifth business day following the day on which the owner of the
distressed property signs a contract that complies with
Sections 25 and 30 or until 8:00 a.m. on the last day of the
period during which the owner of the distressed property has a
right of redemption under the Illinois Mortgage Foreclosure Law
or the Property Tax Code, whichever occurs first.
    (b) Cancellation occurs when the owner of the distressed
property delivers, by any means, written notice of cancellation
to the address specified in the distressed property conveyance
contract.
    (c) A notice of cancellation given by the owner of the
distressed property need not take the particular form as
provided with the distressed property conveyance contract.
    (d) Within 10 days following receipt of a notice of
cancellation given in accordance with this Section, the
distressed property purchaser shall return, without condition,
any original contract and any other documents signed by the
owner of the distressed property.
 
    Section 40. Notice of cancellation of a distressed property
conveyance contract.
    (a) The contract must contain in immediate proximity to the
space reserved for the owner of the distressed property's
signature a conspicuous statement in a size equal to at least
12-point boldface type, if the contract is printed, or in
capital letters, if the contract is typed, as follows:
        "You may cancel this contract for the sale of your
    house, without any penalty or obligation, at any time
    before ................................(Date and time of
    day). See the attached notice of cancellation form for an
    explanation of this right."
        The distressed property purchaser shall accurately
    enter the date and time of day on which the cancellation
    right ends.
    (b) The contract must be accompanied by a completed form in
duplicate, captioned "NOTICE OF CANCELLATION" in a size equal
to a 12-point boldface type, if the contract is printed, or in
capital letters, if the contract is typed, followed by a space
in which the distressed property purchaser shall enter the date
on which the owner of the distressed property executes any
contract. This form must be attached to the contract, must be
easily detachable, and must contain in at least 12-point type,
if the contract is printed, or in capital letters, if the
contract is typed, the following statement written in the same
language as used in the contract:
"NOTICE OF CANCELLATION
...........................
(Enter date contract signed)
    You may cancel this contract for the sale of your home,
    without any penalty or obligation, at any time before
    ....................(enter date and time of day). To
    cancel this transaction, mail or deliver a signed and dated
    copy of this cancellation notice to
    .......................(Name of purchaser) at
    .............................................. (Street
    address of purchaser's place of business) NOT LATER THAN
    ................................ (Enter date and time of
    day).
     I hereby cancel this transaction on ............... (Date)
    ............................................... (Seller's
    signature)".
    (c) The distressed property purchaser shall provide the
owner of the distressed property with a copy of the contract
and the attached notice of cancellation immediately at the time
the contract is executed by all parties.
    (d) The distressed property purchaser shall record the
contract with the recorder of deeds in the county where the
distressed property is located within 10 days of its execution,
provided the contract has not been canceled.
    (e) The 5 business days during which the owner of the
distressed property may cancel the contract shall not begin to
run until all parties to the contract have executed the
contract and the distressed property purchaser has complied
with all the requirements of this Section.
 
    Section 45. Waiver of a distressed property conveyance
contract. Any waiver of the provisions of Sections 35 and 40
are void and unenforceable as contrary to public policy, except
that a consumer may waive the 5-day right to cancel provided in
Section 35 if the property is subject to a foreclosure sale
within the 5 business days and the owner of the distressed
property agrees to waive his or her right to cancel in a
handwritten statement that is signed by all parties holding
title to the distressed property.
 
    Section 50. Violations.
    (a) It is a violation for a distressed property consultant
to:
        (1) claim, demand, charge, collect, or receive any
    compensation until after the distressed property
    consultant has fully performed each service the distressed
    property consultant contracted to perform or represented
    he or she would perform;
        (2) claim, demand, charge, collect, or receive any fee,
    interest, or any other compensation for any reason that
    exceeds 2 monthly mortgage payments of principal and
    interest or the most recent tax installment on the
    distressed property, whichever is less;
        (3) take a wage assignment, a lien of any type on real
    or personal property, or other security to secure the
    payment of compensation. Any such security is void and
    unenforceable;
        (4) receive any consideration from any third party in
    connection with services rendered to an owner unless the
    consideration is first fully disclosed to the owner;
        (5) acquire any interest, directly or indirectly, or by
    means of a subsidiary or affiliate in a distressed property
    from an owner with whom the distressed property consultant
    has contracted;
        (6) take any power of attorney from an owner for any
    purpose, except to inspect documents as provided by law; or
        (7) induce or attempt to induce an owner to enter a
    contract that does not comply in all respects with Sections
    10 and 15 of this Act.
     (b) A distressed property purchaser, in the course of a
distressed property conveyance, shall not:
        (1) enter into, or attempt to enter into, a distressed
    property conveyance unless the distressed property
    purchaser verifies and can demonstrate that the owner of
    the distressed property has a reasonable ability to pay for
    the subsequent conveyance of an interest back to the owner
    of the distressed property and to make monthly or any other
    required payments due prior to that time;
        (2) fail to make a payment to the owner of the
    distressed property at the time the title is conveyed so
    that the owner of the distressed property has received
    consideration in an amount of at least 82% of the
    property's fair market value, or, in the alternative, fail
    to pay the owner of the distressed property no more than
    the costs necessary to extinguish all of the existing
    obligations on the distressed property, as set forth in
    subdivision (b)(10) of Section 45, provided that the
    owner's costs to repurchase the distressed property
    pursuant to the terms of the distressed property conveyance
    contract do not exceed 125% of the distressed property
    purchaser's costs to purchase the property. If an owner is
    unable to repurchase the property pursuant to the terms of
    the distressed property conveyance contract, the
    distressed property purchaser shall not fail to make a
    payment to the owner of the distressed property so that the
    owner of the distressed property has received
    consideration in an amount of at least 82% of the
    property's fair market value at the time of conveyance or
    at the expiration of the owner's option to repurchase.
        (3) enter into repurchase or lease terms as part of the
    subsequent conveyance that are unfair or commercially
    unreasonable, or engage in any other unfair conduct;
        (4) represent, directly or indirectly, that the
    distressed property purchaser is acting as an advisor or a
    consultant, or in any other manner represent that the
    distressed property purchaser is acting on behalf of the
    homeowner, or the distressed property purchaser is
    assisting the owner of the distressed property to "save the
    house", "buy time", or do anything couched in substantially
    similar language;
        (5) misrepresent the distressed property purchaser's
    status as to licensure or certification;
        (6) do any of the following until after the time during
    which the owner of a distressed property may cancel the
    transaction:
            (A) accept from the owner of the distressed
        property an execution of any instrument of conveyance
        of any interest in the distressed property;
            (B) induce the owner of the distressed property to
        execute an instrument of conveyance of any interest in
        the distressed property; or
            (C) record with the county recorder of deeds any
        document signed by the owner of the distressed
        property, including but not limited to any instrument
        of conveyance;
        (7) fail to reconvey title to the distressed property
    when the terms of the conveyance contract have been
    fulfilled;
        (8) induce the owner of the distressed property to
    execute a quit claim deed when entering into a distressed
    property conveyance;
        (9) enter into a distressed property conveyance where
    any party to the transaction is represented by power of
    attorney;
        (10) fail to extinguish all liens encumbering the
    distressed property, immediately following the conveyance
    of the distressed property, or fail to assume all liability
    with respect to the lien in foreclosure and prior liens
    that will not be extinguished by such foreclosure, which
    assumption shall be accomplished without violations of the
    terms and conditions of the lien being assumed. Nothing
    herein shall preclude a lender from enforcing any provision
    in a contract that is not otherwise prohibited by law;
        (11) fail to complete a distressed property conveyance
    before a notary in the offices of a title company licensed
    by the Department of Financial and Professional
    Regulation, before an agent of such a title company, a
    notary in the office of a bank, or a licensed attorney
    where the notary is employed; or
        (12) cause the property to be conveyed or encumbered
    without the knowledge or permission of the distressed
    property owner, or in any way frustrate the ability of the
    distressed property owner to complete the conveyance back
    to the distressed property owner.
    (c) There is a rebuttable presumption that an appraisal by
a person licensed or certified by an agency of this State or
the federal government is an accurate determination of the fair
market value of the property.
    (d) "Consideration" in item (2) of subsection (b) means any
payment or thing of value provided to the owner of the
distressed property, including reasonable costs paid to
independent third parties necessary to complete the distressed
property conveyance or payment of money to satisfy a debt or
legal obligation of the owner of the distressed property.
     "Consideration" shall not include amounts imputed as a
downpayment or fee to the distressed property purchaser, or a
person acting in participation with the distressed property
purchaser.
    (e) An evaluation of "reasonable ability to pay" under
subsection (b)(1) of this Section 50 shall include debt to
income ratio, fair market value of the distressed property, and
the distressed property owner's payment history. There is a
rebuttable presumption that the distressed property purchaser
has not verified reasonable payment ability if the distressed
property purchaser has not obtained documents of assets,
liabilities, and income, other than a statement by the owner of
the distressed property.
 
    Section 55. Civil remedies.
    (a) A violation of any of the provisions of this Act
constitutes an unlawful practice under the Consumer Fraud and
Deceptive Business Practices Act. All remedies, penalties, and
authority granted to the Attorney General or State's Attorney
by the Consumer Fraud and Deceptive Business Practices Act
shall be available to him or her for the enforcement of this
Act.
    (b) A consumer who suffers loss by reason of any violation
of any provision of this Act may bring a civil action in
accordance with the Consumer Fraud and Deceptive Business
Practices Act to enforce that provision. All remedies and
rights granted to a consumer by the Consumer Fraud and
Deceptive Business Practices Act shall be available to the
consumer bringing such an action. The remedies and rights
provided for in this Act are not exclusive, but cumulative, and
all other applicable claims, including, but not limited to,
those brought under the doctrine of equitable mortgage, are
specifically preserved.
 
    Section 60. Criminal mortgage rescue fraud. A person
commits the offense of criminal mortgage rescue fraud when he
or she intentionally violates any provision enumerated in
Section 50 of this Act.
 
    Section 65. Criminal penalties. A person who commits the
offense of criminal mortgage rescue fraud is guilty of a Class
2 felony.
 
    Section 300. The Consumer Fraud and Deceptive Business
Practices Act is amended by changing Section 2Z as follows:
 
    (815 ILCS 505/2Z)  (from Ch. 121 1/2, par. 262Z)
    Sec. 2Z. Violations of other Acts. Any person who knowingly
violates the Automotive Repair Act, the Automotive Collision
Repair Act, the Home Repair and Remodeling Act, the Dance
Studio Act, the Physical Fitness Services Act, the Hearing
Instrument Consumer Protection Act, the Illinois Union Label
Act, the Job Referral and Job Listing Services Consumer
Protection Act, the Travel Promotion Consumer Protection Act,
the Credit Services Organizations Act, the Automatic Telephone
Dialers Act, the Pay-Per-Call Services Consumer Protection
Act, the Telephone Solicitations Act, the Illinois Funeral or
Burial Funds Act, the Cemetery Care Act, the Safe and Hygienic
Bed Act, the Pre-Need Cemetery Sales Act, the High Risk Home
Loan Act, the Payday Loan Reform Act, the Mortgage Rescue Fraud
Act, subsection (a) or (b) of Section 3-10 of the Cigarette Tax
Act, the Payday Loan Reform Act, subsection (a) or (b) of
Section 3-10 of the Cigarette Use Tax Act, the Electronic Mail
Act, paragraph (6) of subsection (k) of Section 6-305 of the
Illinois Vehicle Code, Article 3 of the Residential Real
Property Disclosure Act, the Automatic Contract Renewal Act, or
the Personal Information Protection Act commits an unlawful
practice within the meaning of this Act.
(Source: P.A. 93-561, eff. 1-1-04; 93-950, eff. 1-1-05; 94-13,
eff. 12-6-05; 94-36, eff. 1-1-06; 94-280, eff. 1-1-06; 94-292,
eff. 1-1-06; revised 8-19-05.)
 
    Section 999. Effective date. This Act takes effect January
1, 2007.