SPRINGFIELD, IL â€“ Illinois State Senator Jacqueline Y. Collins (D-Chicago 16th) secured Senate passage this week of legislation that will extend by two years the part of state law that requires a judge to set aside a foreclosure sale if the bank disregards the existence of a loan modification agreement or the homeownerâ€™s request for a modification through a federal foreclosure assistance program.
â€œNearly fifty thousand Illinoisans have been able to keep their homes after receiving counseling and loan modifications,â€ said Collins, who sponsored legislation in the spring allowing Illinois homeowners to continue taking advantage of federal foreclosure programs that had been renewed for two additional years. â€œIt is essential to keep an enforcement mechanism in place so homeowners have an opportunity to reduce their monthly payments to affordable levels and stay in their homes.â€
The Home Affordable Modification Program, part of the federal Making Home Affordable package of foreclosure assistance options, allows homeowners threatened with foreclosure to make mortgage payments that fit within their budgets. Most loan modifications involve a lower interest rate, but more than half extend the repayment term, and almost a third involve principal forbearance. A related program, HAMP-PRA (Principal Reduction Alternative), allows for part of the loanâ€™s principal to be forgiven for some borrowers. The goal is to reduce the monthly payment to 31 percent or less of the homeownerâ€™s gross monthly income.
Under state law, if a financial institution fails to adhere to the rules of the federal program and proceeds with a foreclosure action even though the borrower has requested assistance through HAMP and/or complied with an existing loan modification agreement, the homeowner can ask a judge to invalidate the sale of the home. Collinsâ€™ legislation extends the sunset date on that provision from December 31, 2013, to December 31, 2015.
Senate Bill 1045, which passed without opposition in the Senate, is now under consideration in the House.