Monday, June 21, 2010

FYI: Illinois to Enact Statewide HAMP Compliance Requirement; Local/County Mediation Requirements Starting

The Illinois legislature passed an amendment to its foreclosure statute allowing a borrower to undo a foreclosure sale if the borrower proves s/he applied for a HAMP loan modification, and that the property was nevertheless sold in material violation of the HAMP program guidelines.  Copies of the amendment and bill status are attached.  Illinois Governor Pat Quinn is expected to sign the legislation into law shortly, and the amendments should become effective on January 1, 2011.

Separately, two Illinois counties also are implementing mandatory foreclosure mediation programs.

Foreclosure Mediation Program - Cook County, IL (Chicago area)

The Cook County Mortgage Foreclosure Mediation Program provides free assistance to Cook County homeowners in foreclosure.  A copy of the Fact Sheet for the program is attached.  Although the program officially started in April of 2010, implementation is beginning now.

In order to qualify, the borrowers must:  (1) be residents of Cook County, Illinois; (2) have received a foreclosure summons from the Cook County Court; and  (3) live in the building in foreclosure – which may be a single-family home, single-family condominium or apartment building with four or fewer units. 

The qualified borrowers are directed to call the toll-free help line to schedule a free meeting with a housing counselorAfter meeting with a housing counselor, homeowners will have the opportunity to meet with an on-site attorney to discuss the housing counselor’s recommendations and prepare for a court date that will determine whether the foreclosure case can be mediated with the lender.

Program assistance is provided by the Chicago Bar Foundation, Illinois Housing Development Authority, The Chicago Community Trust, The Center for Conflict Resolution, the Chicago Legal Clinic and Chicago Volunteer Legal Services.

Foreclosure Mediation Program - Will County, IL (Joliet area, southwest of Chicago)

Similarly, the Will County mortgage foreclosure mediation program provides free assistance to Will County homeowners in foreclosure.  A copy of the announcement for the program is attached.  The program was announced on June 7, 2010, and is being set up for implementation now.

Under rules approved by the Illinois Supreme Court and promulgated by the Twelfth Judicial Circuit (Will County), all residential foreclosure actions are automatically scheduled for a mandatory pre-mediation conference within 60 days.  

Along with the summons, defendant borrowers will be given a form explaining the mandatory mediation program. The form will state that the case will be evaluated by an outside mediator for possible loan modification or other resolution. It will also state that if modification is not deemed feasible or if the borrower does not want to save the home, then mediation may still be used to assist the parties in discussing a consent foreclosure in which the lender will waive any deficiency against the borrowers.  The form also will advise the borrower to bring certain financial information, and will contain a list of local counseling agencies available to assist borrowers in foreclosure.  All financial information will be held in confidence by the mediator and not disclosed to any other party without the consent of the borrower.

An independent mediator will determine at the pre-mediation hearing whether the borrower meets initial criteria of having greater monthly income than expenses in order to qualify for a loan workout or modification. If the borrower does not meet the criteria or does not wish to keep the house, the mediator may seek to determine whether the borrower can deed the property to the lender or consent to a judgment waiving any deficiency judgment against the borrower.  If the borrower meets initial criteria for a loan modification or wishes to surrender the property in a consent foreclosure or other arrangement, the mediator will scheduled a mediation conference within 30 days.

At the mediation conference, a representative of the lender must appear in person with full settlement authority and participate in good faith in the mediation process. Failure to attend or to participate in good faith will result in sanctions by the court, including possible dismissal of the action. If the borrower fails to appear without excuse, the mediation will be terminated and the matter will be referred back to the trial court.  Any agreement will be reduced to writing and signed by the parties and their counsel.

The Circuit Court may retain jurisdiction of the case for a trial period. If the borrower fails to successfully modify the loan, or if no agreement is reached, the foreclosure will resume in the Circuit Court.

The Will County Chief Judge has compiled a list of qualified mediators, who are either retired judges or attorneys with a minimum of five years experience in the mortgage foreclosure field. Any mediator will be prohibited from practice in residential mortgage foreclosure proceedings in the Twelfth Circuit in any capacity, including bidders at the Sheriff’s sales. Mediators will be paid $150 for each file. To finance the program, the Supreme Court has authorized an increase in the filing fees paid by a plaintiff for all foreclosures in the Twelfth Judicial Circuit (Will County) from $276 to $426.

Let me know if you have any questions.  Thanks.


Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874


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