Michelle L. Fellows
GR Review

The Illinois legislature amended the Mortgage Foreclosure Act on April 6, 2009 to provide additional safeguards for homeowners in Illinois who face foreclosure of their mortgages.  This amendment applies only to residential real estate that is the primary residence of the mortgagor and the notice outlined herein is only required once during the term of any mortgage.  In addition, this amendment does not impact loans made after the effective date of the amendment, nor if the mortgagor has sought relief under the Bankruptcy Code.  These amendments are not permanent and will automatically terminate on April 6, 2011.

This is somewhat good news for homeowners facing foreclosure because the length of action by the mortgagee has been extended, providing an additional 30- or 60-day grace period for the mortgagor to pursue a workout plan.  The amended Act provides that:

·        For all mortgages delinquent more than 30 days, the mortgagee must now send a notice by first-class mail to the mortgagor advising that he or she may wish to seek housing counseling before any foreclosure proceeding can commence.  No foreclosure action may be taken before this notice is sent, and legal action is stayed for 30 days after the notice is mailed.  The amended Act defines what information must be contained in the notice, and it may be combined with a counseling notification required under federal law.  The notice must be sent to the common address of the residential real estate secured by the mortgage.

·        If an approved housing counseling agency sends written notice to the mortgagee during the 30-day stay period, advising that the mortgagor is seeking its services, another 30-day stay is created after the date of that notice.  During this new stay, the mortgagor or counselor or both may submit a loan workout plan to the mortgagee.  If the mortgagee accepts this plan, it prohibits any foreclosure action as long as the mortgagor complies with the agreed upon plan.  If the mortgagor does not comply with the plan, the mortgagee may enforce the contract.  The plan and any modifications must be in writing and signed by both parties.

It is important to note that housing counseling agencies must be approved by the U.S. Department of Housing and Urban Development.  The amended Act also allows the Secretary of the Department of Financial and Professional Regulation to certify other persons or entities as approved counseling agencies if there are shortages in a particular geographic area.  However, only not-for-profit housing counselors will be certified by the Department of Financial and Professional Regulation.

Michelle Selig is a Partner in the Real Estate Group.  She may be reached via email at mselig@gouldratner.com or at 312.899.1668.