Collins: Legal protections for homeowners seeking loan modifications extended until 2015
CHICAGO, IL – Illinois State Senator Jacqueline Y. Collins (D-Chicago 16th) heralded the signing last week of legislation that renews judicial protections for homeowners for the next two years. State law requires a judge to set aside a foreclosure sale if the bank disregards an existing loan modification agreement or the homeowner’s request for a modification through a federal foreclosure assistance program. The provision was scheduled to expire tomorrow, but once the federal program was extended, Collins saw the need to maintain state-level protections for the borrowers who take advantage of it.
“I am extremely pleased that Illinois is renewing its commitment to a program that has helped nearly fifty thousand homeowners and their families stay in their homes,†said Collins. “Faced with job loss, medical debt, falling property values or other obstacles, many of our neighbors are still in need of assistance and deserve the protection of the courts as they endeavor to make their payments and keep 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 loan’s principal to be forgiven for some borrowers. The goal is to reduce the monthly payment to 31 percent or less of the homeowner’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. Collins’ legislation extends the sunset date on that provision to December 31, 2015.
