Illinois House And Senate Pass Legislation Requiring Pre-foreclosure Notice To Be Sent By Mortgagee Becomes Effective Immediately
– Governor Expected To Sign Into Law Within 30 Days –

By Jill Rein, Esq., Managing Attorney, Pierce & Associates, P.C.

Status of Legislation
On January 13th SB 2513 was passed by both the Illinois House and Senate. The legislature now has 30 days from January 13th to send this bill to the Governor for signature. If the Governor signs the bill it will become law effective immediately. Accordingly you must put procedures in place to comply with this bill immediately upon it becoming law.

Summary of Legislation
SB2513 contains several amendments to Illinois law, including an amendment to the Illinois Mortgage Foreclosure Law which will affect you. A copy of the relevant portion of the new bill is attached hereto for your convenience. The new law requires mortgagees to send a Pre-Foreclosure Notice advising the borrower(s) of the right to counseling prior to any legal action.

The new pre-foreclosure notice requirement will apply to all loans secured by residential real estate unless the borrower has previously filed bankruptcy (during the pendency of the loan) or the real property is not the borrower’s principal residence. The notice must be in the exact form set forth in the statute and sent to the borrower(s) at the property address. The notice is only required to be sent once per loan, accordingly if the loan goes into default, a notice is sent and the default cured, a new notice will not need to be sent again if the loan goes back in to default.

Requirements of Bill/Content of Notice
Once a mortgage becomes delinquent by more than 30 days the mortgagee must send (via US mail) a notice advising the mortgagor that he or she may wish to seek approved housing counseling (content of notice set forth below and in attached bill). No foreclosure action may be instituted before, or within 30 days after, mailing the notice.

The notice must contain the following (a sample notice is attached):

• The date on which it was mailed
  
  
• The heading “GRACE PERIOD NOTICE” in 14-point bold type
  
  
• The following language in 14-point non-bold 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 30 DAYS FROM THE DATE OF THIS NOTICE TO OBTAIN APPROVED HOUSING COUNSELING. DURING THE GRACE PERIOD, THE LAW PROHIBITS US FROM TAKING ANY LEGAL ACTION AGAINST YOU. YOU MAY BE ENTITLED TO AN ADDITIONAL 30 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 PROVISIONAL REGULATION.

• The Department of Financial and Professional Regulation’s current consumer hotline (has not been released at this time)
  
  
• The Department of Financial and Professional Regulation’s website (http://www.idfpr.com)
  
  
• The mailing address of the mortgagee (this should be the address you want notices sent to at your company advising you that a counseling agency has been contacted by a borrower)
  
  
• The telephone number of the mortgagee (this should be the telephone number you want counseling agencies to call at your company to discuss workout options)
  
  
• The fax number of the mortgagee (this should be the fax number you want notices faxed to at your company advising you that a counseling agency has been contacted by a borrower)
  
  
• No other language than language substantially similar to the above can be included in the notice

If during the 30 day grace period set forth in the notice that you send, an approved counseling agency provides you written notice that the mortgagor is seeking approved counseling services, then no legal action can be taken for an additional 30 days from the date of the notice received from the counseling agency. Any notice from a counseling agency must be sent to the address or faxed to the fax number that you provide in your initial notice.

During this additional 30 day period the mortgagor or counselor may prepare and proffer to the mortgagee a proposed sustainable loan workout plan. The mortgagee must determine whether to accept the proposed sustainable loan workout plan. If the mortgagee and mortgagor agree then no legal action can be taken for as long as the workout plan is complied with by the mortgagor. Any plan, or modifications thereto, must be in writing and signed by both parties. If the mortgagee denies any plan legal action may proceed after this 30 day time period has expired.