SB2340, The Illinois Rescue Mortgage Fraud Act and Its Impact on Chicago Area Investors

Published On 2007-01-18
SB2340, The Illinois Rescue Mortgage Fraud Act and Its Impact on Chicago Area Investors

January 1st, 2007 marked the effective date of senate bill 2349, better known as the Illinois Mortgage Rescue Fraud Act.

The ‘Mortgage Rescue Fraud Act’, if you have not heard of it already, is Illinois Attorney General Lisa Madigan's reactionary piece of legislation to confront the growing problem of fraudulent foreclosure rescuers. The act itself

is comprised of 16 pages spelling out who is affected by the legislation and various guidelines and disclosures for those affected.

I have personally heard a tremendous amount of misinformation about what the bill does and does not say, so I strongly recommend taking the 20 minutes it takes to read the bill, and consult with an attorney if the bill pertains to your business.

This act specifically targets two groups, "distressed property purchaser", and "distressed property consultant." "Distressed property purchaser" is defined as someone who buys a distressed property in foreclosure and allows that person to retain an interest in the property and/or an option in the future to purchase back the property, i.e. lease option agreement, or works as a 'partner' with the distressed property owner in disposing of the distressed real estate i.e. equity agreements. The a ct spells out new disclosures that must be added to contracts, a 5 day right to cancel the contract, and the 82% rule which states the buyer must pay 82% of the market value of the property if the distressed property owner is unable to buy back the property at the end of the option period or at the time of conveyance of the property.

"Distressed property consultants" are those who offer to help negotiate liens or mortgages on behalf of the homeowners and charge a fee for such services, often times up front. I won't say too much about that except to read the bill if you do offer that service as it goes on at length about restrictions on such services.

If you are someone who invests in foreclosures by purchasing, outright, properties from homeowners in foreclosure, this bill does not in my opinion affect you. My only advice for all investors is to consult an attorney, use good contracts, disclose to the homeowner in writing everything you are doing and have them initial each point.