Foreclosure Law Signed by IL Gov

Illinois Governor Rod R. Blagojevich recently signed legislation to protect homeowners, whose homes are in danger of default or foreclosure, from dishonest mortgage default assistance companies.

The legislation limits the amount a “mortgage rescue” company can make if the homeowner re-purchases the home to 125 percent of the total outstanding debt the company paid on the home. And if the homeowner is unable to buy back the home, the company must pay the owner at least 82 percent of the fair market value for the home.

“It’s bad enough when homeowners are at risk of foreclosure,” Gov. Blagojevich said in a recent press release. “But it’s a nightmare when the very same companies they hired to help them save their home end up cheating them out of their most valuable asset.”

Instrumental in the legislative changes, Illinois Attorney General Lisa Madigan, recently sued three “mortgage rescue companies” for charging homeowners to negotiate with mortgage companies and failing to perform the service, stripping equity from the homes, and in some cases selling the home without the homeowner’s knowledge, as reported at MortgageDaily.com.

Effective January 2007, the law requires that the default assistance companies provide full written disclosure that outlines “the exact nature of the distressed property consultant’s services and the total amount and terms of compensation.”

A cancellation policy must also accompany the contract allowing the homeowner to rescind the conveyance transaction within five business days, the law states, with an unlimited rescission period for the consultant contract until after services are performed by the consultant.

The new law also prohibits “a distressed property purchaser from entering a contract for distressed property” unless the owner has the ability to repay the purchaser or make payments to the purchaser for the home; and increases the penalties for violations of the Act.

Gov. Blagojevich also signed two other bills that effective January 2007 will require the Cook County Recorder of Deeds to notify homeowners by postcard when a quitclaim deed has been filed, and that signatures on any deed or other document transferring property are notarized.