On April 5, 2009, Governor Pat Quinn signed into law the Homeowner Protection Act. The New Homeowner Protection Act, which was passed unanimously by the General Assembly of the State of Illinois, gives homeowners who fall behind on their mortgage payments time to work with their lender to develop a plan that will allow them to stay in their homes.
The Homeowner Protection Act establishes a grace period of up to 90-days on mortgage foreclosures for homeowners that enter housing counseling. The Act requires that all lenders and loan servicers notify homeowners who are at least 30-days delinquent on their mortgage payments that they have 30-days to seek housing counseling to get their loan back on track. If a borrower enters housing counseling, they would receive an additional 30-day grace period on foreclosure in order to work out a payment plan or refinance option.
The New Senate Bill 2513 also provides a settlement agreement between six financial institution associations and several State agencies. The industry associations filed a lawsuit after former State of Illinois Governor, Rod Blagojevich, raised regulatory fees by 27% in Fiscal Year 2004, and then transferred the dedicated industry funds to the General Revenue Fund. The proposed settlement agreement would cap the regulatory fee increase at 13.5% and transfer $53 million of an estimated $70 million in fees to the General Revenue Fund.
Who does the new act applies to? The Act applies to all loans that have not entered the foreclosure process. All mortgage lenders and loan servicers in the state must comply with this law. The law is set to expire two years after being signed by the Governor.
Important points of the Act and their impact
Initial notice to borrowers: Lenders cannot proceed with a foreclosure action suit prior to advising borrowers of their rights under the Act and within the initial grace period of 30 days from the date of notice of delinquency. Once that 30‐day period is up, the lender shall send a notice via certified mail to the borrower that they have 30 days to seek counseling, and then an additional 30 days to complete a sustainable loan workout plan.
Who provides counseling? Borrowers will work with non-profit housing counseling agencies that follow U.S. Department of Housing and Urban Development (HUD) guidelines and that are recognized by the Illinois Department of Financial and Professional Regulation. Follow the link for a list of HUD-approved counselors in you area... click here.
How much does housing counseling cost? HUD-approved agencies typically do not charge a fee. However, they may charge a reasonable fee so long as the fee does not place a hardship on the consumer. A consumer cannot be turned away because of an inability to pay. Agency fee schedules are subject to review by HUD during periodic monitoring.
If an agency chooses to charge fees, it must:
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Provide counseling without charge to persons who cannot afford the fees.
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Charge fees that are equivalent to the level of services provided and reasonable and customary for the area.
Sustainable loan workout plans includes: Borrowers will work with counselors to develop a sustainable loan workout plan that will enable the borrower to stay current on mortgage payments for the foreseeable future, taking into account the borrower's income and existing and foreseeable debts.
What will the sustainable workout plan do? 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, or (6) refinancing into a new affordable loan.
Are there any income limits? There are no income, asset or credit requirements to receive the protections of this law. It is important to remember that thislaw does not guarantee any particular outcome for a borrower. It simply provides time and resources for a borrower to fairly negotiate a plan with their lender to stay in their home.
What if a homeowner wants to move to a new counselor? A borrower is free to change housing counselors and housing counseling agencies as he or she develops a sustainable loan workout plan. However, the 30-day grace period will not restart with each new counselor.Supporters who have slipped in favor of this legislation in the past:
- Housing Action Illinois
- Neighborhood Housing Services
- The City of Chicago
- The Office of the Attorney General
- Chicago Urban League Development Corporation
- Springfield Works/Springfield Urban League
- Citizen Action/Illinois
- NID‐Housing Counseling Agency
- Spanish Coalition for Housing
- Central Illinois Debt Management and Credit Education, Inc.
- Illinois Assistive Technology
- METEC
- Advocates for Access
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