I know that there are a whole bunch of new laws that have either been approved or are being lobbied for currently in Illinois that are prohibiting the small investor in one way or anther. I was wondering if any of you have heard of anything recent to be aware of as investors when getting into deals, especially with sub2 and lease options. Or of any good websites or other sources where such information can be found. Any advice or info is greatly appreciated. Thanks!
MORTGAGE RESCUE FRAUD
PREVENTION ACT
SENATE BILL 2349
Senator Collins – Rep. Colvin
The Issue
Home foreclosures are on the rise in Illinois, due in part to the explosive growth of predatory mortgage lending. According to the National Training and Information Center, mortgage foreclosure filings in Cook County jumped from 8,006 to 17,248 between 1996 and 2002. After dropping slightly in 2003 and 2004, filings were projected to hit a record high of 17,600 in 2005.
The self-styled “mortgage rescue” industry has grown in direct proportion to the number of homes that are at risk of foreclosure. Although mortgage rescuers promise to save the homes of financially distressed homeowners, they too often add insult to injury, either by charging exorbitant fees for services never rendered or by stripping the equity from the property and leaving the homeowners with nothing.
The Mortgage Rescue Fraud Prevention Act provides protections to homeowners such as:
Distressed Property Consultant Protections
• Distressed property consultants must provide homeowners with a written contract listing all services.
• The consultant contract must contain a right to cancel at any time.
• The consultant cannot receive any compensation until all services have been performed.
Distressed Property Purchaser Protections
• Distressed property purchasers must provide homeowners with a written contract that lists the terms of the
sale and makes it clear that the home is actually being sold.
• The homeowner has the right to cancel the sales contract for five business days after it is signed.
• Prior to sale, the purchaser must make a determination that the homeowner has the ability to make rental payments and to buy the home back.
• The purchaser must pay the homeowner at least 82% of the fair market value of the home.
• A homeowner who remains in the home under a rental agreement has the right to cancel the rental agreement
at any time.
• The purchaser must record the purchase contract with the county recorder of deeds, so that any subsequent purchaser is put on notice.
• A violation of this Act is a violation of the Consumer Fraud Act. Distressed property purchasers in violation of the Act are subject to criminal penalties as well.
Da Wiz
Appreciate the response. More info than I expected, you really are the Da Wiz!
My only question now is about having to pay at least 82% percent of the fair market value of the home:
What about wholesale and rehab deals where often you are buying the homes for much cheaper? Or am i not understanding that correctly?
Unfortunately you are understanding it correctly…you have to pay at least 82% of appraised value. As a result the profits will not be there on most deals resulting in the property going to sale.
You may say to yourself “but this makes no sense…who does this law help?”. For starters, the loophole in selling undervalue is that it doesn’t apply if you use a Realtor (which speaks to how powerful the Realtor lobbyists are in IL).
Secondly, because of the interest rate restrictions place on the lending community, we can no longer do foreclosure bailout loans or any loan on residential property over 13%.
To make matters even more interesting there is legistlation that was preliminarily passed allowing commercial Banks to now sell and manage property. The 82% rule does not apply to them (once again great lobbyists).
So for the homeowner in IL in foreclosure the only option is pay your arrears or lose your property. The only way to profit is to buy at the sheriff sale or buy from a realtor.