More Legal Aid Funds for Distressed Homeowners and Tenants

The funds from February's $25 billion national settlement are being distributed as we speak.  Back in August, $4.7 million were given towards assistance for distressed homeowners and tenants in Cook County.  A few weeks back, $4.5 million were earmarked for foreclosure assistance in Winnebago County, and northern and central Illinois generallly.  Shortly thereafter, $1.4 million was awarded to provide legal assistance to renters in the Chicago area. 

 

The attorney general plans on distributing $20 million towards legal aid.  As more funds become available, the organizations receiving them are hiring attorneys to assist distressed homeowners and tenants.  If you are facing foreclosure, help may be just around the corner! 

 

Unrecorded Declaration Provides Sufficient Notice Under Illinois Condominium Property Act

A recent case, Seth v. Aqua at Lakeshore East, 2012 IL App (1st) 120438 (September 26, 2012), provides insight on how courts interpret the portion of Section 22 of the Illinois Condominium Property Act (the "Condo Act") requiring that developers present a copy of the condominium declaration to buyers purchasing new condominiums. 

In 2006 and 2007, the plaintiffs in Seth signed contracts to purchase units in a new development, Aqua at Lakeshore East.  The condominiums were scheduled to be delivered in December of 2010.  When they signed their contracts, plaintiffs received a Property Report with the proposed condominium declaration as an exhibit.  The Property Report stated that the developer had a right to modify the condominum documents in certain respects. 

In September of 2009, the developer recorded the condominum declaration.  It was not identical to the condominum declaration that had been previously presented to the plaintiffs.  There were seven additional units, and the units had different percentage interests assigned to them.

A few months later, the plaintiffs filed suit.  While their allegations were specific, the reality is that the economy had changed drastically since they initially signed their contracts, and perhaps they no longer wanted to purchase the condominiums.  Whatever their motives, plaintiffs claimed, among other things, that their contracts were void because the developer did not provide them with a recorded declaration.  The trial court ruled that the defendant should have provided a recorded declaration, and since it did not, the plaintiffs could rescind their contracts. 

The developer appealed, citing Section 22 of the Condo Act and setting forth a number of fairly logical and practical reasons why it was not required to provide a recorded declaration before the project was complete.  The appellate court stated that they would not focus on whether the developer or the trial judge intepreted the Condo Act correctly.  Rather, they decided that since plaintiffs had actual knowledge of the unrecorded declaration, that was functionally equivalent to the document being recorded.  The presentation of the unrecorded declaration was sufficient under Section 22 of the Condo Act. 

The Condo Act has a provision for how amendments to a condominium declaration must be handled, and, as the trial court pointed out, the plaintiffs had knowledge of that too.  As long as changes are consistent with the requirements of the Condo Act, the fact that the declaration was modified is insufficient to nullify the sales contracts.

Mortgage Rates May Increase in Illinois!

We just found out recently that Illinois has the highest foreclosure rate in the country.  Well, now homebuyers may have to pay the price for that.

Fannie Mae and Freddie Mac want to increase the fees charged for the mortgages they acquire in Illinois and four other states.  In all five states where Fannie Mae and Freddie Mac are trying to increase fees, foreclosures take an inordinately long time.  In Illinois, for example, the average foreclosure takes well over 500 days.  Fannie Mae and Freddie Mac feel that they need to recoup the increased costs they suffer as a result of this lengthy foreclosure process in Illinois, Connecticut, Florida, New Jersey and New York.

Fannie Mae and Freddie Mac are increasing some of their fees nationwide effective December 1, 2012.  The fees for Illinois and the four other states with long foreclosure processing times, however, are in addition to the nationwide increase that will take effect towards the end of this year. 

If the new plan takes effect, it will kick in on January 1 of next year.  Illinois homebuyers will be charged an upfront fee of 0.15 percent of their loan amount on condominiums, townhomes, single-family homes, and even apartment buildings up to four units.  For every $200,000 in loans, the increased fee will translate to $42 annually.  This fee is anticipated to be less than the fee that will be paid by homebuyers in Connecticut, Florida, New Jersey and New York.

The fees are not a done deal yet.  The Federal Housing Finance Agency is still weighing the pros and cons.  So maybe we won't end up with extra fees in Illinois after all.  Or, maybe, we'll end up with even greater fees than the ones they anticipate now.  It remains to be seen.

Illinois Has Highest Foreclosure Rate in the Country!

According to date recently posted by RealtyTrac, Illinois had the highest foreclosure rate in the nation in August 2012.  Nearly 18,000 Illinois homes received a foreclosure notice in August; approximately 8,600 of those were new foreclosures, meaning the lender just initiated the foreclosure in August.

Over 90% of the homes receiving foreclosure notices last month were in the Chicago area.  Of those homes, most were in Cook County.  4,842 Cook County homes received their first foreclosure notice last month.  Another 2,210 Cook County homes received a notice that their home was now foreclosed and scheduled for auction.  Lastly , 2,035 Cook County homes were repossessed by lenders.

Overall, there was a whopping 42% increase in foreclosure activity between August 2011 and August 2012.  Foreclosure activity increased nearly 30% in just one month, from July 2012.  What does this mean?  Expect an influx of foreclosures on the market in the coming months!

Religious Use Real Estate Tax Exemptions for Religious Property Only

A recent case, Franciscan Communities v. Hamer, 2012 IL App (2d) 110431 (August 28, 2012) clarified that only the religious portion of a property, the owners of which are seeking to reduce taxes based on the religious use real estate tax exemption, qualifies for such an exemption.  

The plaintiff in this case, Franciscan Communities, owns a retirement home in Lindenhurst, Lake County, Illinois.  To live at this retirement community, an individual must pay an entrance fee (90% of which is refundable), coupled with a monthly service fee.  In 2007, the entrance fees ranged from $127,596 to $332,608.  The monthly fees ranged from $1,248 to $4,741. In 2007, the retirement home earned gross revenues of $17.4 million.  The retirement home has a dedicated chapel.  The plaintiff requested a religious use tax exemption in 2007and was denied. The denial eventually brought this matter before the appellate court. 

The court found that while the retirement home certainly had a religious component, advancing religion was not the home's fundamental goal.  Evidence showed that the retirement home engaged in marketing activities to induce more seniors to move in at market rates, thereby increasing revenues.  The court affirmed that the Lake County Board of Review, the Illinois Department of Revenue, and the administrative law judge who heard the appeal were all correct in denying the religious use tax exemption, and that only the portion of the property actually used for religious purposes -- in this case, the chapel -- could benefit from the exemption.

Due Inquiry Necessary Prior to Serving Notice of Foreclosure via Publication

A recent case, Citimortgage, Inc. v. Cotton, 2012 IL App (1st) 102438 (August 28, 2012), highlights the important of proper service on the defendant mortgagor in a foreclosure case.  Mr. Cotton was a City of Chicago fireman who had a loan with CitiMortgage on a five-unit residential building in Chicago.  The building went into foreclosure, and the process server hired by the lender attempted service on Mr. Cotton ten times at the building.  He later filed an affidavit that he had attempted service ten times and was unable to serve Mr. Cotton.  The bank had an alternate address for Mr. Cotton as well, also at an apartment building.  Another process server eventually filed an affidavit that he had attempted to serve Mr. Cotton nine times at the alternate address, and was unable to serve him there either.  Citimortgage then obtained permission from the court to serve the defendant via publication, and published in the Chicago Daily Law Bulletin.  Some time thereafter, the building was foreclosed.

Subsequently, Mr. Cotton filed a motion to vacate the judgment, but the trial court denied it.  Mr. Cotton then appealed.  Among other things, he claimed that service by publication should be quashed because prior to notice by publication, the plaintiff must conduct due inquiry.  Mr. Cotton claimed that while the bank may have been diligent (assuming that they did in fact attempt to serve him 19 times), they did not conduct due inquiry and did not even use the information they had readily available to them when attempting to serve him.  For example, they knew where he was employed, but they did not try to serve him there.  They knew who his attorney was, but they did not attempt to contact his attorney either.  Mr. Cotton also presented affidavits from his neighbors, as well as visual evidence, contradicting the process servers' affidavits that they had visited Mr. Cotton's two known addresses.

Based on the evidence presented by Mr. Cotton, the appellate court stated that the trial court should have allowed a hearing on whether service by publication was proper, and remanded the case.

The moral of the story depends on who you are:  If you're a lender, make sure you conduct "due inquiry" prior to serving a mortgagor via publication.  If you're a homeowner who is being or has been foreclosed, you may have some rights if service was not proper.

Legal Assistance Funding for Cook County Homeowners

In February, the federal goverment and state attorney generals announced a $25 billion settlement with five large national banks for "robosigning" foreclosure paperwork.  Illinois is receiving a portion of that money, somewhere betwen $1 - $1.5 billion.  Our state attorney general announced her intention to distribute $20 million of the settlement funds for legal aid, and the first funds are finally filtering through.

 

The Legal Assistance Foundation will receive about $4.7 million of the settlement funds.  This money is intended to expand legal services to distressed tenants and homeowners in Cook County.  Specifically, the Legal Assistance Foundation hopes to have twenty attorneys and paralegals working on cases involving distressed homeowners and tenants.  They also plan to conduct seminars designed to provide legal traning in foreclosure defense and bankruptcy.  Lastly, they hope to work with teh courts to improve the Cook County Foreclosure Mediation Program.