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.

Fannie Mae's new rules for post-shortsale buyers

Many people wonder "what is the effect of a short sale on the ability to get a loan in the future"?

Fannie Mae, the company that securitizes mortgage loans, making them more affordable and the entity largely responsible for the guidelines that regulate most conventional mortgages, has provided a bit of an answer. Fannie Mae has released announcement SEL-2010-05 which sets forth the new requirements for home buyers to obtain a new loan if they have participated in a "pre-foreclosure event" (ie. a pre-foreclosure sale, a short sale, or a deed in lieu of foreclosure). Until now, there was no policy on short-sales. The new regulations go into effect on July 1, 2010.

For borrowers with a pre-foreclosure event in their past, there will be a waiting period before a new loan can be obtained. The amount of downpayment provided by the borrower will affect the length of the waiting period. The periods are as follows:

20% downpayment - 2 years
10% downpayment - 4 years
less than 10% downpayment - 7 years

The waiting period begins upon the completion date of the pre-foreclosure event. In addition, after 2 years with 90% LTV and with extenuating circumstances, a lender may be able to obtain an exception to the waiting period.

Guidelines can change on a regular basis, but for know, property owners considering a short sale or a deed in lieu of foreclosure will at least have an idea of some of the consequences of the pre-foreclosure event.

Pre-Closing Possession

For one reason or another, a Buyer may need to take possession of real estate before a closing. For instance, if there is a "dry-closing" (ie. one where the lender fails to fund but all other parts of the closing are done and the lender's funding should take place shortly thereafter), a Seller may be willing to allow a Buyer to take early possession of real estate. Most attorneys disfavor pre-closing possession. Why? Mostly because of liability concerns. What if the deal fails to close? What if the Buyer discovers a condition in the property that causes the Buyer to decline to close? What if the Buyer burns down the property? What if the Buyer's property moved into the real estate is stolen?

A proper and well thought out pre-closing possession agreement can address some of those concerns. While granting possession only at the time of closing is preferable, sometimes pre-closing possession is necessary.

What happens if, having transferred possession, the property is destroyed? In such as case, the Illinois Uniform Vender and Purchaser Risk Act shall apply. Unless specifically disclaimed or modified, all real estate contracts in Illinois are subject to the Act.

The act provides first that when neither legal title nor possession of the real estate have been transferred, in the case that all or a material portion of the real estate are destroyed without purchaser's fault, the Seller can not enforce the contract against the Buyer.

The act makes provision, however, for pre-closing possession. When either legal title or possession of the real estate has been transferred, in the case that all or a material portion of the real estate are destroyed without Seller's fault, then in such a case, the Buyer is not relieved of the duty to purchase the real estate.

Thus, if a buyer takes pre-closing possession of a property and the real estate burns down, the Buyer is still on the hook to buy the property.

Sheriff Dart Fined for Slow Evictions

Cook County Sheriff Tom Dart who gained fame a few years ago by refusing to enforce evictions is foreclosure cases has been slammed by a Cook County Judge and ordered to pay a landlord $1400 for taking until February 16, 2010 to enforce an eviction order entered on August 24, 2009. That's about a six month wait. The Sheriff's office argues that manpower shortages, eviction backlogs, and a problem with the eviction order caused the delay.

Landlords are often surprised that it takes so long for the Sheriff to enforce an eviction. In my experience, the winter is always worse for evictions. Because of the holiday eviction moratorium and the delays caused by inclement weather, evictions in the winter used to back up quite a bit. These days, despite changes in the procedures at the Sheriff's office that allow for less time spent by the officers enforcing evictions, evictions take six to eight weeks in the good times and ten or eleven weeks during the winter.

Worse yet, the Sheriff's office has procedures in place to assist the elderly, disabled, and people with children with their move out. This sounds good in theory, but in practice, it adds a great deal of time to the process. There are bad apples out there among the ranks of both Landlords and Tenants, however, a Landlord with a mortgage can't afford to wait as long as it currently takes to get their tenants out.

Convenience Accounts in Illinois

Beginning on Janaury 1, 2010, a new law, the Illinois Banking Convenience Account for Depositors Act, went into effect. The law provides a new way to add another person to a bank account without making the account a gift or a pay on death with that other person. Illinois banking institutions may now offer "convenience accounts". The person establishing the account can designate another party who will have the right to deposit and withdraw from the account without the right to take over the account as a gift upon the death of the person establishing the account. This can be an effective tool for people who need help doing bills or doing bank transactions but who do not wish to have a co-owner or to remove the account from that person's other estate planning instructions. The law has a sunset provision, so it expires in 2015.