Hardship Letters are Hard

In the wake of the housing bubble, many homeowners have sought various non-foreclosure remedies from their lenders. These range from loan modifications to short sales and deeds in lieu of foreclosure.

In almost all instances, the loss mitigation department of the lender will require, among other things, that the delinquent borrower produce a "hardship letter". Google the term and you will find LOTS of examples. In fact, there is one very common one that seems to be repeated over and over on many sites. Here's an old but excellent article on how "Not to write a Hardship Letter". The article actually picks apart this "common" hardship letter and explains what a bank loss mitigation specialist is looking for when they read a hardship letter.

Will County Foreclosure Mediation

Just hours ago, the Illinois Supreme Court announced a program that will use mediation as a means of possibly reducing the burden of foreclosures in Illinois. The program will begin in the Circuit Court of Will County. Court has proposed this new program as a way to prevent vacant and abandoned homes and to keep families in their homes. The program will require any residential foreclosure complaint to be scheduled for mandatory pre-mediation. The mediation will focus on determining, with an outside mediator, whether or not a loan modification or other resolution can be found. If not, the mediation can be used to facilitate a consent foreclosure or the waiver of any deficiency against the borrower. Lenders will be required to participate in the program in food faith or face sanctions, including the possible dismissal of the foreclosure.

The program will be paid for by an increase in plaintiff's filing fees for each foreclosure from $276 to $426.

Relief for Tenants when Landlord is Being Foreclosed

Effective January 1, 2008, the State of Illinois has enacted Public Act 095-0262 amending 735 ILCS 5/15-1701 of the Code of Civil Procedure to allow tenants a right of possession during a foreclosure. Under the old law, tenants could be evicted shortly after the entry of an order for possession in the foreclosure action.

Under the new law, in the case of a foreclosure where a tenant is current on his or her rent, an order for possession entered in a supplemental petition for possession in the foreclosure must allow the tenant to retain possession of the property covered by the tenant's rental agreement for the shorter of: (1) 120 days following the notice of the hearing that has been properly served upon the tenant or (2) through the duration of the tenant's lease.

As a result, tenants will have at least the balance of their lease if less than 4 months remain or up to 4 months after they receive notice that their landlord is in foreclosure. Tenants will still have to pay their rent. The law provides the additional right to possession only if the tenant continues to pay rent in full during the 120 day period. In addition, the right only extends to a case of "foreclosure where the tenant is current on his or her rent". This can lead to a few questions.

Who is entitled to rent during the pendancy of the foreclosure action? Is it the landlord, the mortgage holder foreclosing the loan, or the court appointed receiver? Generally, payment should be made to the landlord. However, many landlords in arrears refuse to accept rental payments. In such a case, the tenant should be careful to tender the rent payment to the landlord. If the payment is denied, the tenant should tender the rent payment to the court appointed receiver and/or mortgage holder. In either case, the tenant should get a receipt for payment! If neither the court appointed receiver/mortgage holder or the landlord will accept the rent, the tenant should appear in court and attmept to have the court order one of the parties to the suit to accept the rent.