Ninety Day Foreclosure Stay for Veterans

Good news for veterans facing foreclosure! Effective January 1, 2011, if you are a veteran and a defendant in a foreclosure suit, you have the right to request a 90-day stay of the foreclosure proceedings. In order to qualify for the 90-day stay, you must have been deployed at some point in the 12 months preceding the foreclosure suit. Moreover, your deployment must have been for combat or for a combat-support posting.

So long as you meet those requirements, the court must grant you a 90-day stay. Any other rights you have as a veteran will not be affected. With any luck, 90 days may be enough to get you back on track with your mortgage payments or work out a loan modification!

New Fees to Fund Foreclosure Counseling and Costs to Municipalities

It is widespread knowledge that foreclosures have become increasingly rampant. More and more homeowners are fighting to keep their homes. As various loan modification and loan assistance programs emerge, mortgage and foreclosure counseling is often a prerequisite to qualify. To defray the costs associated with counseling, the Illinois legislature recently passed a bill that requires the plaintiffs in all foreclosure suits to pay an additional $50 fee. The resulting funds collected will be applied for the benefit of counseling programs.

Some homeowners are unable to keep their homes no matter how hard they try. Once these homes are vacated, they often become targets of crime. Other times, they begin to look neglected and rundown. Water and sewer bills aren't paid. More and more cities and towns in Illinois need funding to assist in the costs associated with foreclosed and vacated homes. The legislature recently enacted a law requiring the purchaser of residential property to pay a tax of $1 for every thousand dollars (or fraction thereof), if the property is bought at a judicial sale. Mortgagees, judgment creditors, and other lienholders are exempted from this tax. The funds collected as a result of this tax will be passed on to municipalities.

Illinois Homeowners Emergency Assistance Program

Effective this last summer, the Illinois Housing Development Authority was granted the right to assist qualified Illinois homeowners with their mortgage payments. Under the Illinois Homeowners Emergency Assistance Program, the Illinois Housing Development Authority may grant up to three mortgage payments to qualified homeowners in need.

The mortgage payments are for first lienholders only. This means that if you are looking for mortgage assistance towards secondary financing or a home equity line on your home, you are not eligible. Payments will be made directly to your lender, and cannot exceed $6000 or three of your regular mortgage payments, whichever is less. Funds can be applied towards principal, interest, taxes, and mortgage insurance. However, funds for this program are limited to a total of $3,000,000, and the program is only available until December 31, 2010.

So how do you qualify? Well, you must meet a number of criteria, such as:

1) The mortgage must be for your primary residence.
2) The bank must have commenced foreclosure proceedings, and be willing to stop and renegotiate the mortgage with you if the Illinois Housing Development Authority notifies the bank that you may be eligible for financial assistance from them.
3) You must attend HUD-certified counseling.
4) You must be a resident of Illinois.
5) You must agree to indemnify the Illinois Housing Development Authority from any damage that results from the payments they make to your lender.
6) Your household income must be less than 120% of the median income in your area.

If you feel you might qualify under this program, act now. Funds are limited!

Filing Foreclosures Against Deceased Borrowers

When filing a foreclosure suit against a deceased borrower, banks have generally filed in rem actions; in other words, banks have assumed that the foreclosure suit is based on the parcel of real estate for which mortgage payments have not been made. As a result, many banks have obtained default judgments against deceased borrowers, simply because the mortgagor is deceased and was thus never served.

In ABN-AMRO Mortgage Group, Inc. v. McGawhan, No. 107954 2010 WL 2222123 (Ill. Sup. Ct.), the Illinois Supreme Court rendered a decision that changed how banks must file foreclosure suits. The court determined that a foreclosure suit should not be an in rem proceeding. Rather, it should be a quasi in rem proceeding. In other words, the suit must be brought against an actual person, not just a piece of land. In lieu of the deceased, the deceased's personal representative must be named. If the deceased's personal representative is named in the suit, he must be served, and therefore, he will receive notice of the suit.

The court's decision indirectly assists people in keeping their homes. If mortgage payments stopped after the borrower died, the banks will have to notify the deceased's personal representive. As a result of this notice, the deceased's heirs will have an opportunity to catch up on the payments (although the bank may not allow this if their borrower is no longer alive). If payments continued after the borrower died, but the family member who was making the payments eventually stops for any reason, the banks will have to notify the deceased's personal representative, who may then have an opportunity to rectify the situation. Either way, the Illinois Supreme Court's decision increases the chances that the deceased's loved ones will be able to keep their home.

New Rules for Lenders and Mortgage Brokers

Effective April 2011, the Federal Reserve Board will require mortgage brokers and lenders to adhere to new rules meant to protect consumers:

1. Lenders may only compensate mortgage brokers based on a fixed percentage of the loan amount. After April 2011, lenders cannot pay mortgage brokers based on the yield spread -- in other words, broker compensation cannot be based on the interest rate charged to the consumer. This is meant to discourage mortgage brokers from charging higher interest rates to their clients in exchange for greater compensation from lenders.

2. Homebuyers will have to be notified up front of any balloon payments due when the loan term expires.

3. If the loan is an adjustable rate loan, the lender must disclose what the buyer could end up owing after rate increases.

These new rules are meant to keep consumers from falling prey to unscrupulous lenders, and to give homebuyers more information about the loans they are signing up for. Since the rules do not kick in until April 2011, buyers should ask their lenders questions about these specific issues in the meantime.

Can you sue a contractor because you can't use your home?

Well, sure, you can sue for anything. The real question is can you win the lawsuit? What your chances are of winning will really depend on your individual case, and your attorney will be able to assist you in determining, overall, the merits of your lawsuit. Recent case law, however, can serve as a guideline in how you argue your case.

In Meyer v. Chicago Mechanical Services, Inc., (2010 Ill. App. LEXIS 203, 2nd District), the owner of a condominium hired the defendant to install an air conditioner in her unit. After mold accumulated in her unit, the condominium owner had to move out while repairs were made. The person living underneath her unit had to move out also. The two condominium owners sued the company that installed the air conditioner for damages based on the inconveniences associated with having to move out of their homes.

However, they lost the case -- not because the court felt that they had not suffered any inconvenience, but because of the way the plaintiffs framed their case. The court thought that the plaintiff's case should have focused on actual concrete damages, rather than on how sentimentally attached they were to their homes. For example, the court did not agree that the plaintiffs should get damages based on the fact that they did not get to sleep in their own beds.

In other words, the court was looking for something concrete, not something abstract. If you ever end up suing your contractor, make sure you keep that in mind!

Cook County Senior Homeowners Beware!

Up until now, in most situations, senior citizens who received a senior citizen's exemption on their real estate taxed continued to receive it annually. However, a new law signed last week changes that. Effective fall of 2011, the senior citizen's exemption in Cook County will not renew automatically. Rather, seniors age 65 and older will have to reapply on an annual basis.

How do you apply for the senior exemption? You should receive your application in the mail, which you will have to complete and send back to the Cook County Assessor along with copies of your driver's license and property tax bill. If, for some reason, you do not receive the form in the mail, you will have to contact the Cook County Assessor's office to request a copy of the form.

Approximately 280,000 seniors will be affected by this change. Last year, the savings received by seniors for the senior exemption ranged from approximately $150 to $850. If you are eligible for the senior exemption, make sure you remember to apply for it, or you could face higher tax bills in the years to come!

7% Cook County Homeowners' Exemption Extended!

Many Cook County homeowners were worried that they would lose the 7% real estate tax cap this year (it was set to expire). Fortunately, over the weekend the governor signed a bill extending the tax cap. Without this bill, Cook County homeowners would have faced larger real estate tax bills in the coming years.

The 7% cap allows homeowners to receive an increased exemption on their taxes, resulting in a lower tax bill overall. Because of the 7% cap, the assessed value of a home can be reduced by up to $20,000. Without the cap, the exemption could not be more than $6000.

Over the last few years, homeowners have come to expect this reduction. If you add these expectations to dropping real estate values and the current economy, a sudden increase in real estate taxes would certainly be unwelcome!

New Mortgage Requirement for Loans Sold in the Secondary Market

Effective June 1, 2010, Fannie Mae and other investors have increased the requirements for a salable loan. Going forward:

1) Lenders are responsible for verifying the borrower's social security number.

2) Lenders must obtain documentation from the borrower, confirming that the borrower intends to use the purchased residence as his primary residence.

3) On the day of closing, lenders must confirmt that the amount of debt borrower has, the borrower's payment history, and the borrower's credit score is reconciled with the information the borrower provided when applying.

4) Loans cannot be originated, underwritten, or serviced by companies or people that are on HUD's Limited Denial of Participation List, or on the General Services Administration Excluded Party List.

Keep in mind that this does not mean that a residential loan cannot be made if it does not meet these requirements. You can obtain a residential loan that does not meet these requirements if it is not sold on the secondary market. Unfortunately, those loans are few and far between!

Home Buyer Tax Credit Closing Deadline Extended!

Good news for those homebuyers who were eligible for the home buyer tax credit but could not close by June 30, 2010! If you were unable to close by the deadline, you now have until September 30, 2010 to close your real estate purchase. Because of the backlog of mortgages, Congress decided to extend the deadline for closing.

Keep in mind, if you did not enter into a real estate contract by April 30, 2010, this extension will not help you. The extension is only for those who had a valid, binding real estate contract as of April 30, 2010.

Also, you must be otherwise eligible for the tax credit. In order to qualify for the first-time buyers credit of up to $8,000, you must not have owned a home in the last three years. For the existing homebuyer credit of up to $6,500, you must have owned your home for at least the last five years. Furthermore, the home must be your principal residence, and must cost less than $800,000. Vacation homes are ineligible for the credit. There are income restrictions also. Speak to your accountant and make sure you are eligible!

Problem Tenants in Your Condominium Association?

Associations frequently want to know what they can do when a unit owner rents out their condominium unit to someone who constantly violates rules. Well, assuming the association has not banned rentals altogether, there are a few options available:

1) If the condominium documents allow it, the association can assess fines to the unit for the various rule violations. Unit owners will not want to pay fines for problems their tenants are creating. In this way, unit owners are encouraged to deal more proactively with their tenants. Hopefully the unit owners can convince their tenants to comply with the association's rules, or if not, they can start the eviction process.

2) The condominium board can also terminate the lease. The Illinois Condominium Property Act allows condominium associations to terminate tenant leases, so long as the requirements of the Act are met (i.e. proper notice, eviction proceedings, etc.)

If you have problem tenants in your association, it is wise to address the problems early on, before it gets any worse!

Home Loans Based on Your Stock Portfolio?

Yes, you read right. It is possible to get a loan to buy a new home based on your stock portfolio. In other words, you may be able to get through the home-buying process without any appraisal of the home and other traditional mortgage paperwork.

In order to get approved for this type of loan, you must have a reasonably high net worth and a significant stock portfolio. The stock will be your collateral, instead of your new home. Of course, the loan will still have to be underwritten based on which stocks you own.

What's the plus side of a loan based on your stock portfolio? Well, there are actually quite a few positives: 1) If you find the right lender, the processing time may be a lot faster than for a traditional home loan; this is especially helpful if you want to close early; 2) Credit scores are not as much of an issue as with traditional mortgages -- that is not to say, however, that your credit score will not be taken into account; 3) The loan typically has a fixed interest rate, which is usually lower than a traditional mortgage rate; and 4) The loan is non-recourse.

Of course, there's a downside as well. What happens if the value of your stocks drop? You have to make up the difference with cash (or other outside financing). Also, you have no option to pre-pay the loan, so you have to work with the lender to find a term that you feel will best meet your needs!

New Disclosure Rules for Illinois Residential Real Estate Sales

It wasn't too long ago that the Radon Disclosure became a requirement for every residential sale in Illinois. Now, the Radon Disclosure has been modified. What's new? Well, 1) If you're selling a condo or co-op on the third story or higher, you no longer need to provide a Radon Disclosure at all; 2) If you are a seller and your home previously had elevated radon levels which have since been mitigated, you will have space to disclose this on the Radon Disclosure; and 3) A new Radon Disclosure form is now available and should be used whenever a Radon Disclosure is necessary.

There is a also a new Illinois Residential Real Property Disclosure form available! Again, this new form should be used in all Illinois residential transactions. There is one primary difference between the old disclosure and the new one -- now the seller is required to disclose whether or not he is aware if the property has been used as a meth lab in the past.

Real estate agents and for sale by owner homeowners beware -- the law requires the use of the new forms! If you don't have them already and are in the process of selling a house, make sure you obtain and complete these forms right away!

New FHA Rules Taking Effect Soon!

Many first-time homebuyers turn to FHA loans these days. After all, FHA loans have lower down payment requirements, and first-time homebuyers don't always have a lot of cash to put down. New FHA regulations, while making the business of lending a bit safer for the FHA, will certainly affect first-time homebuyers, who often have lower credit scores and less money.

What is the FHA doing? Specifically, it's making the following changes:

1) The up-front mortgage insurance premium (UFMIP) will be raised to 2.25%, up from 1.75%, effective April 5, 2010.

2) If the borrower's credit score is 580 or below, the minimum down payment will be increased to 10% of the purchase price of the home. Note that if the borrower's credit scroe is above 580, the current requirement of only a 3.5% down payment stands.

3) Sellers can only provide a maximum of 3% in closing cost credits. Previously sellers were allowed to provide up to 6% in concessions (though in practice, this was rare).

New EPA Rules for Remodeling of Pre-1978 Homes

If you own a home built before 1978, there may be lead-based paint present in your home. Granted, you may have been through numerous remodeling projects, and you may have brand new drywall or paneling. However, unless you've had your home tested and confirmed that it is now lead-free, you have no way of confirming whether there is lead-based paint in your home or not.

The U.S. Environmental Protection Agency (the EPA) has issued new rules, which will take effect on April 22, 2010. If you are doing any remodeling work in your pre-1978 home after that date, you may only hire contractors that are certified by the EPA. Specifically, the EPA will be certifying contractors in practices that are "lead-safe". Of course, if the paint in your house is not being touched, then you may use any contractor you wish. However, most remodeling work does require at least some paint or touch-up. Therefore it is most likely you will have to hire a contractor certified by the EPA.

This new EPA rule applies not only to homes, but to schools and child care centers built before 1978 also, so long as children under the age of six are present in those schools and child care centers. However, the new rule does not apply to minor maintenance, or repairs where less than six square feet of lead-based paint is disturbed. If the work is on the outside of the home or school, the rule only applies if more than twenty square feet of lead-based paint is disturbed.

In order to avoid accidental lead poisoning, anyone with a home built before 1978, or anyone who has children in a school built before 1978, should be diligent to make sure that any lead-based paint present in their home or school does not endanger the health of their family!

How HAFA Can Help You

If you qualified for a loan modification and were unable to work out a plan you could afford, and you otherwise qualify under the Home Affordable Foreclosure Alternative Program (HAFA), you should know what you can expect for participating in the program.

First and most important, you will have a plan for completing a short sale or deed in lieu of foreclosure. Many short sales languish for months. Often buyers get fed up and walk out of the deal, just waiting for the seller's lender's response. HAFA is expected to speed up the short sale process; prior to listing the property, homeowners will receive pre-approved terms for their short sales.

Second, and also important, you will be released from liability for any portion of the debt that is not paid. In other words, if you bought your home with a $300,000 mortgage, and sold the home for $250,000 in a HAFA-approved short sale, you will not be liable for the $50,000 balance to your lender.

Third, if you are able to complete a short sale or deed your home to the bank in lieu of foreclosure, you will receive $1500 towards your moving costs.

Of course, your bank is not required to sign up for HAFA, but banks that do sign up receive some incentives also. Namely, the bank can get $1000 towards covering their administrative costs. If the bank is a secondary lienholder and agrees to relinquish its lien, the bank can get up to $3000 of government monies through a matching program.

If you are having trouble with your loan payments, look into HAFA to see if you qualify! For a list of criteria to qualify for HAFA, click here.

Do You Qualify for Short Sale Assistance Under the HAFA Program?

The new Home Affordable Foreclosure Alternative Program, or HAFA, is meant to assist homeowners who are eligible for a loan modification but cannot work out a payment plan they can afford. Instead of being foreclosed, HAFA assists such homeowners with the short sale or deed in lieu of foreclosure process. HAFA is voluntary, and lenders are not required to sign up for it. Do you qualify under HAFA? Here's a checklist to see if you do:

1) Your loan is a Freddie Mac or Fannie Mae loan.  However, you may qualify even if it is NOT a Freddie Mac or Fannie Mae loan.
2) Your bank or servicing company signed up to participate in the Home Affordable Modification Program (HAMP) by December 31, 2009, AND your bank has also since signed up to participate in HAFA.
3) The property in question is your primary residence.
4) Your loan is the first mortgage on the property.
5) You took out the loan before January 1, 2009.
6) Your unpaid balance is less than $729,750.
7) Your monthly mortgage payment is exceeds 31% of your gross income.
8) Your loan is already in default, OR default is reasonably foreseeable.

Craigslist Not Liable for Fair Housing Act Violations

As you may already know, Craigslist is a popular site on which people can post, among other things, homes or other real estate for rent or sale. Unlike an ordinary newspaper advertisement, Craigslist content is published almost immediately after a user submits its ad to Craigslist online. Craigslist does not charge the user for this service.

However, Craigslist does not filter out advertisements based on the Fair Housing Act. A user can submit an ad with a statement such as "no minorities allowed" or "no children", and the ad will be published nonetheless. As a result, Craigslist was sued (Chicago Lawyers' Committee for Civil Rights Under the Law, Inc. v. Craigslist, Inc., 519 F.3d 666 (7th Cir. 2008)).

Although the plaintiff argued that Craigslist should be required to filter the ads, and that the ads were only posted because Craigslist exists, the court disagreed and found in Craigslist's favor. The court explained that Craigslist did not write the ads, and in an online context such as this one, Craigslist should not be considered the "speaker" of the words in the advertisement, nor even the publisher.

Bottom line -- Craigslist is not required to filter ads. If you see an advertisement for housing on Craigslist and it sounds discriminatory, it very well may be!

Condominium Insurer's Disclosure Requirements Limited to Condominium Only

What happens in a situation where you own a condo, have an insurance claim, and the insurance company sends out an inspector who discovers additional damage? Well, a lot hinges on where that damage is -- it is in your condominium or not? And it also depends on whether the damage, if outside your condo, caused the damage inside your condo.

A recent case, Fichtel v. The Board of Directors of the River Shore of Naperville Condominium Association, No. 2 07 1237 (Ill. App. Ct. 2nd Dist., April 21, 2009), illustrates this point. In Fichtel, the plaintiff condominium owner had water damage in her unit and filed an insurance claim. State Farm, her insurance company, sent out an inspector to investigate the claim. During the course of the inspection, the inspector entered the attic space above the plaintiff's unit to see if the water damage was coming from there. When he came out, he told the plaintiff that the water damage was not caused by a leaky roof. However, he did not tell the plaintiff that there was mold in the attic.

The attic was not part of the plaintiff's condominium unit and was not insured by State Farm. It was a common area, and so the inspector notified the condominium board of the mold in the attic. He also allowed the plaintiff's claim for water damage, which State Farm paid.

Later, the plaintiff sued State Farm along with the condominium association. The plaintiff alleged that State Farm had an obligation and an affirmative duty to disclose the mold to her. State Farm denied the plaintiff's allegations, and the court concurred with State Farm. The court's reasoning was that the mold was not in an area insured by State Farm, it did not cause the water damage in the plaintiff's condominium, the plaintiff's water damage claim was unrelated to mold, State Farm had no fiduciary duty to the plantiff (they were only her insurer), and State Farm was only doing what it was contractually obligated to do under its contract with the plaintiff -- that is, investigating her claim for water damage.

Most insurance policies are very specific -- they will only cover your condominium, not anything else. If you have any damage to your condominium and your insurance company's inspector investigates areas outside of your condominium for the cause, he is not obligated to disclose anything he finds that is not relevant to your claim. He is an inspector for the insurance company, not an inspector for you. If you are concerned that areas outside of your own condominium unit may be suffering damage, it is best for you to hire your own inspector to investigate.

Commercial Lease Drafting -- Repairs v. Replacements

If you are the landlord of commercial space, be extremely cautious when drafting your lease provisions with respect to repair and replacement of portions of the leased premises. Commercial tenants should also review their leases carefully to determine what they are responsible for. In order to avoid any potential disputes later, it is better to be clear upfront and delineate responsibilities in detail in a manner that is consistent with what both parties have bargained for.

Case in point: In Quincy Mall, Inc. v. Kerasotes Showplace Theatres, LLC, 903 N.E.2d 887 (Ill. App. Ct. 4th Dist., February 27, 2009), the commercial lease between the mall and the tenant, a theater, included a "general repair" clause with respect to the roof. Under the terms of that clause, the tenant was responsible for repairs to the roof. Eventually, the roof required replacement. When the mall failed to replace it in a timely manner, the theater informed the mall it would replace the roof and deduct the cost of the roof from its rent.

The court supported the tenant's position, because the lease did not contain a clear provision about roof replacement, only about roof repair. The lease stated only that the tenant was responsible for repairing the roof, not replacing it. Therefore the burden of replacing the roof remained with the landlord.

Bottom line -- When reviewing your commercial lease, make sure you understand exactly what your responsibilities are! When something breaks, you should know who needs to fix it.

Can a Tenant be Required to Obtain Insurance Against the Landlord's Negligence?

Sure, why not? A recent case, Clarendon American Insurance Company v. Prime Group Realty Services, Inc., Nos. 1 08 0791 and 1 08 1985 (Ill. App. Ct., 1st Dist.,March 26, 2009), specifically statest that if the landlord and tenant enter into a lease requiring the tenant to name the landlord as an additional insured, covering all losses, whether or not they occur as a result of the landlord's negligence, then the tenant must comply with the insurance provisions of the lease, or be in violation of the lease.

In the Clarendon case, the tenant argued that it was not fair for the tenant to have to procure and maintain insurance for the landlord's negligent acts. The court disagreed -- the terms of the lease were explicitly agreed to. Moreover, the court distinguished between insurance and indemnification. It is against public policy for a party to be indemnified for its own negligence. It is not, however, against public policy to have another party insure the negligent party against its own negligence.

When entering into any commercial lease, the insurance and indemnification provisions should be reviewed carefully and agreed to by all parties to prevent any misunderstandings, and hopefully, any litigation down the line!

Landlords and Recent Amendments to the Illinois Human Rights Act

As most landlords know, they cannot and should not discriminate against tenants or prospective tenants based on age, race, religion, gender, color, or family status. Pursuant to a recent amendment to the Illinois Human Rights Act, a new protected class is being added to that list -- people protected by orders of protection. Note this new law specifically applies to people who are actually protected by the order of protection, not to people the order of protection has been obtained against.

A landlord, or, for that matter, a seller of real estate, cannot discriminate against a potential tenant or buyer solely because they have an outstanding order of protection, whether that order of protection was issued by an Illinois court or an out-of-state court. As a landlord, if you enter into any leases, make sure that there is nothing in the lease that could violate the Illinois Human Rights Act. Lease provisions need not be directly in violation of the Illinois Human Rights Act -- any lease provision that could lead to eviction due to the actions of others (i.e. the person who the order of protection has been obtained against), should be reviewed carefully to prevent alleged violation of the Illinois Human Rights Act.

While many landlords may never find out if their tenant is the beneficiary of an order of protection, landlords that do find out must not discriminate against a tenant or proposed tenant as a result.