Public Act 97-1164 (IL)

P.A. 97-1164 (SB0016); Effective Date: June 1, 2013

Statutes Amended: 20 ILCS 3805/7.30, 7.31; 720 ILCS 5/21-3; 735 ILCS 5/15-1219, 15-1503, 15-1504, 15-1504.1, 15-1508; 735 ILCS 5/15-1108 (new), 15-1200.5 (new), 15-1200.7 (new), 15-1505.8 (new); 765 ILCS 5/11.

 

On February 8, 2013, the Governor signed into law Public Act 97-1164, which amends the Illinois Housing Development Act to authorize the Illinois Housing Authority to establish and administer a foreclosure prevention counseling program. The policy rationale of this Act is based on reducing the negative costs associated with abandoned property, and the burden that the length of the foreclosure process in Illinois places on municipalities, lien-holders, and surrounding property owners. See 735 ILCS 5/15-1108.

The Act touches on many areas of the foreclosure process. One key aspect is that the Act overrules the Crane case by providing that the form of a mortgage has always been permissive and not mandatory. Moreover, the Act establishes an expedited foreclosure process for abandoned properties and, as a trade-off, creates enhanced responsibilities for the maintenance of abandoned properties for lien-holders and municipalities.

The details of the Act are outlined below:

765 ILCS 5/11of the Conveyances Act

The Conveyances Act is amended by declaring that the provisions "regarding the form of a mortgage are, and have always been, permissive, and not mandatory." Therefore, failing to follow the form, such as failure to state the interest rate or the maturity date, or both, “shall not affect the validity or priority of the mortgage, nor shall its recordation be ineffective for notice purposes regardless of when the mortgage was recorded.” This effectively overrules the Crane decision. Please see ATG's Underwriting Bulletin for an update on the procedure for handling approvals of mortgages over $700,000.

Abandoned Residential Property

The Act adds sections 735 ILCS 5/15-1200.5 and 15-1200.7, which defines “abandoned residential property.” There are many provisions in these sections, and it will be beneficial to review thoroughly so as to fully understand the scope of the definition. Generally, abandoned residential property is residential real estate that either: (1) is not occupied by any mortgagor or lawful occupant as a principal residence, or (2) is zoned for residential development and contains a structure that is empty or uninhabited and in need of maintenance, repair, or securing. In addition, the property either: (1) shows two or more of the designated conditions or characteristics listed in section 1200.5(b)(1), or (2) is zoned for residential development and is a vacant lot in need of maintenance, repair, or securing.

Section 1200.7 lists exceptions for who which properties shall not be considered abandoned residential property. Real estate is not considered abandoned residential property if: (i) there is an occupied building which is undergoing construction, renovation, or rehabilitation that is proceeding diligently to completion, and the building is in substantial compliance with all applicable ordinances and laws; (ii) there is a building occupied on a seasonal basis but is otherwise secure; (iii) there is a secure building with rental or sale signs; (iv) there is a building that is secure but is subject to ownership disputes; (v) there is a building that is secure and in substantial compliance with all ordinances and laws.

735 ILCS 5/15-1219 further states that "abandoned residential property" does not require the real estate to be occupied, or if zoned for residential development, improved with a dwelling structure.

Expedited Judgment Filing Process

735 ILCS 5/15-1505.8 is a new provision that gives the mortgagee an option to utilize the expedited judgment and sale procedure for abandoned residential real property, upon motion and notice. This expedited process includes court hearings to determine if the property is abandoned, notices to the mortgagor and any occupants of the property, and corresponding modifications to the report of sale and confirmation of sale procedures.

The Act states that the motion to expedite judgment and sale may be combined with or made part of the motion requesting a judgment of foreclosure. The motion must set forth the facts demonstrating that the real estate is abandoned. The hearing must be given priority by the court.

However, the court may not grant a motion for an expedited judgment and sale if the mortgagor, an unknown owner, or a lawful occupant appears in the action before or at the hearing and objects to a finding of abandonment. The Act also provides that the court cannot confirm the sale if the mortgagor, an unknown owner, or a lawful occupant appears in the action before or at the hearing, objects to a finding of abandonment, and presents sufficient evidence to the court to substantiate their claim that the property is not abandoned.

If the court finds that the property is abandoned, the court will immediately grant the motion and proceed to a trial of the foreclosure. If at any time before the confirmation of sale order is issued the mortgagor or a lawful occupant appears and presents evidence establishing that real estate was not abandoned, the court shall vacate the order.

Notice Requirements

735 ILCS 5/15-1503 adds additional notice requirements when filing foreclosures. The Act still requires that a copy of the notice be sent by first class mail, postage prepaid, to the municipality or county in which the property is located in addition to publication online or at the main office. However, if the publication requirement is not met, the Act adds that a copy of the notice must be sent by first class mail, postage prepaid, to specific head officials in the county, city, village, or town where the real estate is located.

Additionally, in Chicago, regardless of compliance with the publication requirement, parties must within 10 days of filing the complaint or counterclaim (1) send by first class mail, a copy to the alderman of the ward in which the real estate is located; and (2) file an affidavit with the court attesting the fact that he notice was sent to the alderman. Failure to do so will result in dismissal without prejudice.

There are also specific notice requirements for properties that are allegedly abandoned under 735 ILCS 5/15-1508.8(l). The notice must be conspicuously posted at the property at least 14 days before the hearing. The Act provides font and type size specifications as well as a sample notice form.

Report of Sale and Confirmation of Sale

735 ILCS 5/15-1508(b) has been amended by adding sections (b-3) and (b-15). Section (b-3) gives the rules for the confirmation hearings of abandoned property. Motion for confirmation of the sale must be made, and notice given to the last known address of the mortgagor, before the sale. The hearing will then be held at the earliest practicable time after the sale, and upon posting at property address the notice required in section 15-1505.8. If the sale does not violate the rules set forth in section (b) it shall be confirmed. The confirmation order may also address the issues discussed in (b)(1-3). Section (b-15) provides that, with respect to residential real estate, a copy of the confirmation order shall be sent to the last known property insurer of the foreclosed property. Section (b-10) was also amended to require sending a copy of the confirmation order to the highest ranking office holder in a municipality if the municipality has not complied with the publishing requirements of their address.

Criminal Liability

The Act amends the Criminal Code by adding an additional action that qualifies as criminal trespass to real property. The offense now includes the intentional removal of a notice posted on abandoned residential real estate before the date and time set forth in the notice. 720 ILCS 5/21-3(a)(3.7). However, the Act also provides that a mortgagee or a mortgagee's agent is exempt from prosecution from criminal trespass for entering, securing, or maintaining an abandoned residential property and is not liable in a civil action for negligence or civil trespass. 720 ILCS 5/21-3(e-5).

Foreclosure Prevention Program Fund & Abandoned Residential Property Municipality Relief Fund

The filing fee for a foreclosure complaint remains at $50 and is still divided 2% to the clerk of the court for administrative fees and 98% to the Foreclosure Prevention Program Fund. The Act specifies that this fund is not subject to fiscal maneuvers that transfer monies out of the Fund to other state funds.

However, the Act adds an additional fee with respect to residential real estate. The amount of the fee is tiered based on the amount of foreclosure filings made by a plaintiff and its "affiliates" (defined at 735 ILCS 5/15-1504.1(c)).

  • Tier 1: 175 or more Illinois residential foreclosure complaints filed during the calendar year immediately preceding the date of the filing of the subject foreclosure complaint, the additional fee is $500.
  • Tier 2: At least 50 but no more than 174 Illinois residential foreclosure complaints filed during the calendar year immediately preceding the date of the filing of the subject foreclosure complaint, the additional fee is $250.
  • Tier 3: No more than 49 Illinois residential foreclosure complaints filed during the calendar year immediately preceding the date of the filing of the subject foreclosure complaint, the additional fee is $50.

The additional fee is divided as follows: 28% to the Foreclosure Prevention Fund, 70% to the Abandoned Residential Property Municipality Relief Fund, and 2% to the clerk of the court. This additional fee provision is only in effect until January 1, 2018.

The funds in the Abandoned Residential Property Municipality Relief Fund is divided as follows: 30% to Cook County to municipalities other than Chicago; 25% to Chicago; 30% to the counties of DuPage, Kane, Lake, McHenry, and Will; and 15% to counties other than Cook, DuPage, Kane, Lake, McHenry, and Will Counties. 20 ILCS 3805/7.30(b-1) & 7.31.

The funds will be used to assist the municipality or county with costs incurred for activities such as: cutting weeds or grass, trimming or removing trees or bushes, exterminating pests, removing garbage or graffiti, boarding up or closing off access to the general public, demolition, and repairing or rehabilitation of abandoned residential property. 20 ILCS 3805/7.31.

 

Bill Number: 
SB 16
Public Act or Public Law Number: 
PA 97-1164
By: ATG Underwriting Department | Posted on: Mon, 02/11/2013 - 2:28pm