NAPERVILLE, Ill. (12/13/12)--The Illinois General Assembly (IGA) last week passed SB16, a measure that establishes a "fast-track" expedited foreclosure process to address the issue of abandoned residential properties in Illinois. After nearly two years of negotiations, the Illinois Credit Union League (ICUL) played a key role in advancing the legislation.
The bill, which will be sent to Illinois Gov. Pat Quinn for his signature, balances the interests of consumers, lenders and local governments and provides a solution for abandoned properties, ICUL said.
Key elements of SB16 include:
Establishment of a "fast-track" expedited foreclosure process. The fast-track concept has been a key focus and a fundamental priority for ICUL. The league worked with sponsors to "fine-tune" the mortgage foreclosure process to make it more efficient and expedient, and avoid provisions that penalize lenders (and, ultimately borrowers) through increased fines and penalties. SB16 accomplished those goals by allowing lenders to shorten the foreclosure process for abandoned properties by roughly 18 months. As a result, lenders will obtain title to these properties more quickly and assume responsibility under applicable ordinances to maintain and secure them, which will be good for neighbors, neighborhoods, and local governments, ICUL said. Lenders also will acquire properties that are less damaged and deteriorated and that can be sold for more, and they will save 18 months of costs, such as property taxes, insurance and loan-servicing fees. The negotiated language includes a more efficient foreclosure process for lenders and protections for consumers, ICUL said.
Funding for remediation of abandoned property and pre-foreclosure counseling. An additional residential foreclosure filing fee will provide support for local governments and struggling homeowners. Institutions that have filed 175 or more foreclosures during the preceding calendar year will pay a $500 fee, those with 50-174 foreclosures will pay $250, and institutions with less than 50 foreclosures will pay $50. Most credit unions and community banks will pay the $50 fee, ICUL said. The fees are expected to generate about $41 million, with $28 million going toward abandoned property clean-up, and the remainder for housing counseling for homeowners. The fees will be remitted by the court clerks to the State Treasurer. The Illinois Housing Development Authority will then draw upon the funds to make grants to local communities and housing counseling agencies statewide.
Bankruptcy relief provision. SB16 also contains language that clarifies that a portion of the Conveyances Act is permissive, not mandatory, so it cannot be used to affect the validity or priority of a properly recorded mortgage by a trustee in bankruptcy. That provides a benefit to every Illinois credit union by protecting against the avoidance of mortgage liens in bankruptcy proceedings, ICUL said.
Additional provisions of the bill clarify the method of delivering foreclosure notices to municipalities, and require delivery of the notices to Chicago aldermen. The measure also directs lenders to notify the insurance company for the property, after confirmation of the property's sale. Further, the bill protects lenders and their agents from criminal and civil liability when entering, securing or maintaining abandoned residential property.
Foreclosure has been an overarching focus during the 2011 and 2012 spring sessions of the IGA. Although it was widely acknowledged by lawmakers that credit unions were not the cause of the crisis, many measures were introduced to address the issue. SB16 represents a compromise solution that will not only benefit credit unions but also the citizens of Illinois, ICUL said.
"SB 16 received the support of the Illinois Attorney General, the Speaker of the House, and both chambers of the Illinois General Assembly," said Stephen R. Olson, ICUL executive vice president and general counsel. "Throughout the process, the excellent reputation and respect credit unions have earned with legislators were very apparent. The support of Illinois credit unions played a key part in helping to pass this critical measure."