Illinois Governor Signs Mortgage Rescue Fraud Act

Gov. Rod Blagojevich of Illinois signed Senate Bill 2349, the Illinois Mortgage Rescue Fraud Act, which will regulate mortgage foreclosure rescue deals starting January 1, 2007. Rescue fraud is a type of predatory lending in which mortgage consultants strip the equity of vulnerable homeowners. The Sargent Shriver National Center on Poverty Law, Legal Assistance Foundation, Woodstock Institute, National Training and Information Center, Housing Action Illinois, Chicago CRA Coalition, and other nonprofit advocate groups have been working on this bill with Atty Gen. Lisa Madigan’s office.

The bill targets two principal types of rescue schemes. One involves “distressed property consultants” that offer phantom help to homeowners—usually a promise to “buy them time” or “save the home” by negotiating with the homeowners’ creditors. In the other type, a “distressed property purchaser” acquires the deed of the distressed property by misleading the homeowner into an unmanageable rental agreement.

The mortgage rescue bill requires that (1) distressed property consultants or purchasers provide homeowners with a written contract that lays out all the terms of the sale and makes it clear that the home is actually being sold; (2) the homeowner has the right to cancel the contract for five business days after it is executed by all parties; (3) prior to sale of the property, the purchaser must make a determination that the homeowner has the ability to make rental payments and buy the house back; and (4) the purchaser must pay the homeowner at least 82 percent of the fair market value of the home if the homeowner is unable to buy back the home.

For additional information regarding S.B. 2349, visit the Illinois General Assembly webpage or contact Ian Gardiner of the Shriver Center.