Illinois Law Requires Notice of Right to Seek Foreclosure Counseling; Creates 30-Day Grace Period
On April 5, Illinois Governor Pat Quinn signed SB 2513, an omnibus bill containing provisions requiring mortgage lenders to notify borrowers in default for 30 days or more of the borrower’s right to seek housing counseling, which will provide a 30-day grace period during which the mortgage lender may not initiate foreclosure proceedings. The bill does not apply to borrowers who have sought relief under any bankruptcy law. Counseling will be either free or cost a very small amount that will not create a hardship for the borrower, and will be provided by non-profit housing counseling agencies that are both HUD approved and recognized by the Illinois Department of Financial and Professional Regulation. Counseling will aim to result in a “sustainable workout loan plan” (Plan) approved by both the mortgage lender and the counselor to permit the lender to remain in a home. The Plan may include, but is not limited to (i) temporary suspension of payments, (ii) lengthened loan term, (iii) lowered or frozen interest rate, (iv) principal write down, (v) repayment plan to pay the existing loan in full, (vi) deferred payments, or (vii) refinancing into a new, affordable loan. The Plan must be agreed upon in writing by both the lender and borrower, and it will remain in effect so long as the mortgagor is compliant with its terms. The bill is effective immediately.