Illinois Legislative Update

Illinois Legislative Update

The Illinois legislature amended the Code of Civil Procedure related to mortgage foreclosures, the Counties Code to add a section for a foreclosure property pilot program to be implemented in certain counties and amended certain provisions of its Residential Mortgage License Act (“Act”) related to licensing.  The Civil Procedure amendment is effective December 17, 2015; the rest of the legislation discussed in this memorandum is effective January 1, 2016.

 

ILLINOIS SENATE BILL 155

 

The section concerning the collection of the judicial sale fee for the abandoned residential property municipality relief fund was scheduled to repeal on March 2, 2016.  This section has been extended for one year, so that it becomes inoperative on January 1, 2017, and is repealed on March 2, 2017.

 

ILLINOIS SENATE BILL 1487

 

The county recorder in a county with a population of more than 3 million must establish a pilot program that permits documents to be recorded against a property in foreclosure by judicial order only.

 

Upon motion by the plaintiff in a foreclosure action, the judge shall issue an order barring any nonrecord claimants from recording an interest in the property in foreclosure without first obtaining court approval.

 

The order shall also prohibit the owner of the property from recording any document without court approval, except for court orders related to:

(i)                  the foreclosure case; or

(ii)                the property that were entered after the effective date of the order prohibiting recordation.  

 

The order shall expire on the date of the court order confirming the judicial sale of the property pursuant to a judgment of foreclosure unless renewed by order of the judge.

 

“Nonrecord claimant” means any person:

(i)                  Who has or claims to have an interest in mortgaged real estate;

(ii)                Whose name or interest, at the time a notice of foreclosure is recorded in accordance with state law, is not disclosed of record either by means of:

(1)    a recorded notice; or

(2)    a proceeding, which under the law as in effect at the time the foreclosure is commenced, would afford constructive notice of the existence of such interest; and

(iii)               Whose interest falls in any of the following categories:

(1)    right of homestead;

(2)    judgment creditor;

(3)    beneficial interest under any trust other than the beneficial interest of a beneficiary of a trust in actual possession of all or part of the real estate; or

(4)    mechanics’ lien claim.

No proceeding shall be deemed to constitute constructive notice of the interest of any nonrecord claimant unless in the proceeding there is a legal description of the real estate sufficient to identify it with reasonable certainty.

 

Upon inspecting the order and making a determination that the order is valid, the recorder shall record the court’s order as a separate document in the chain of title, after the notice of foreclosure.  The plaintiff must attach any necessary exhibits to fulfill statutory recording requirements.  The recorder may charge the standard recording fees when the order is presented for recording.

 

If a court order has been recorded as described above, a nonrecord claimant shall not record a document regarding the property without a certified court order.  A certified court order may be obtained by filing a motion in the office of the clerk of the court in which the action is pending.  The court shall issue a dated certified order indicating:

(1)   the type of document to be recorded;

(2)   the person or entity authorized to record;

(3)   the property index number of the property; and

(4)   the case number of the foreclosure.

 

The order must be presented in person to designated staff in the recorder’s office along with the document to be recorded.  The recorder shall not accept the recordings described above by mail or electronic submission.

 

A mechanics lien claimant, unit of government, or any duly appointed persons or entities acting as agents for a unit of government or judicial body shall not be required to obtain a certified court order in order to record a document on the property.

 

The recorder is authorized to inspect the photo identification of any person attempting to record a document on a title that is under a court order described above and may deny recordation to any person who refuses to provide proper photo identification.

 

Once the foreclosure is finalized and a new deed is issued, an official court order confirming the sale must be presented for inspection at the time of recordation of the deed as evidence of the expiration of the order prohibiting recordation.

 

The above requirement does not apply to a mortgagee or its agent that recorded the lis pendens notice of foreclosure.

 

If a document is recorded contrary to a court’s order and the recorder determines that the recorder’s office is responsible for the error, the recorder shall notify in writing the person recording the document, if possible, and if after 30 days’ notice (or 30 days after the recording when the recorder is unable to notify the filer) and that person fails to obtain the certified order required above, the recorder shall then record a new document clearly referencing the document number of the erroneous recording and indicating that it has been voided.   If feasible, the recorder shall watermark the erroneous recording as voided using the word “voided.”

 

Except in cases of willful or wanton misconduct, the recorder, or any agent or employee of the recorder, is immune from any liability for the above erroneous recording.

 

The program shall be considered a pilot program from January 1, 2016, to January 1, 2019. The recorder may end the pilot program earlier by sending a certified letter to the Chief Judge of the county if the recorder determines that either workforce challenges or computer hardware or software limitations have prevented the effective implementation and operation of the program.  The recorder shall enforce in good faith any frozen title requests initiated prior to canceling the pilot program.

 

ILLINOIS HOUSE BILL 3369

 

The revisions clarified that an individual or entity licensed under the Act (“Licensee”) must operate under the real names of the entity and individuals conducting the business but may, in addition, operate under an assumed name in accordance with Illinois law.

 

Properly completed renewal application forms and filing fees may be received by the Secretary of Financial and Professional Regulation (“Secretary“) 60 days prior to the license expiration date, but, to be deemed timely, the completed renewal application forms and filing fees must be received by the Secretary no later than 30 days prior to the license expiration date.  Failure to submit a properly completed renewal application form and fees in a timely fashion, absent a written extension from the Secretary, will result in the license becoming inactive (previously additional fees were assessed).

 

The provision stating that a license which is not renewed within one year of becoming inactive shall expire has been deleted.

 

The Secretary will obtain from the U.S. Department of Housing and Urban Development (“HUD”) HUD’s loan delinquency data (previously default claim rates for endorsements issued by HUD).  The Secretary will conduct, as part of an examination of each Licensee, a review of the Licensee’s loan delinquency data.  All references to “Default Data” have been changed to “Loan Delinquency Data.”