Monthly Archives: January 2012

New Illinois short sale law chopped to pieces

foreclosures-shortsales, Mortgages, Strategic Default

This video from one of my favorite movies (Monty Python and The Holy Grail) is symbolic of what happened to the new Illinois short sale law as it wound its way through the legislature. You’ve seen it.  King Arthur and the Black Knight get into a sword fight. King Arthur carves up the Black Knight  limb by limb, until nothing remains.  That’s pretty much what happened to this new statute just signed into law last week.

When I first saw that a new short sale law was working its way through the legislature, I hoped that it would help clear out the backlog of near-foreclosures and get the real estate market back on track. Initially, the new law required lenders to respond to a short sale offer in 30 days and it said that all approved short sales in Illinois must include a release of deficiency. California passed a law that prohibited deficiency claims on first and second mortgages not too long ago and I was hoping for a law similar to theirs. But as the law worked its way through the legislature over the past year, the forgiveness of deficiency was amended out of it and the requirement that the lender respond in 30 days was extended to 90 days.

As passed,  the law does one thing:  Requires the lender to respond to a short sale offer in 90 days. That’s it. And there’s no penalty if the lender doesn’t respond. Basically, the new law does nothing and that’s  not good at a time like this when so many homes are way, way underwater.

Monitoring strategic default cases in Illinois

foreclosures-shortsales, Strategic Default

Last year, I did a lot of phone consultations with clients about their underwater homes and condos.  About 80% of those I talk with have already decided to strategically default. They could continue to pay the mortgage, but choose not to,  because the property is $80k to $100k underwater.  Usually, they are   completely  freaked out that the lender will immediately seize their assets or garnish their wages.  Fear of the mythic deficiency judgment is deep and wide.

The reality of it is that deficiency judgments in Illinois are almost nonexistent, the lender will not take any of your assets ( unless you have a second mortgage), and frequently you will be paid the leave the property in a cash for keys arrangement at the end of the foreclosure.

Foreclosure is terribly confusing  and clients have a lot of questions through the process,  so I began offering to monitor the foreclosures of clients who wanted explanation and guidance through the case. I charge a fee of $50 per month billed to the client’s credit card. At the start of every month, I check the case status and email the client. If the client wants me to review court documents, I do that too. The client can cancel at any time.  This has worked out pretty well and it seems to ease the anxiety of those going through foreclosure.

Monitoring is most popular with clients who are trying to stay in the property until the end of the case. In Cook County, most lenders are waiting about 6 months from the first missed mortgage payment to file a foreclosure. After the case if filed,  the actual foreclosure case takes about  12 to 14 months, so it’s a long process.   Those that move out of the property early in the foreclosure process usually are not interested in having the case monitored.

In Cook County, the  status of court cases is listed on the clerk’s website under “Chancery.” You just type in your name and the case status pops up. But it’s hard to interpret what’s going on in the case, so the raw data is of little use to most people. Lake County has no usable website and the other collar counties have sketchy websites  at best.

When the foreclosure is close to the end, the sheriff’s sale is scheduled. The problem is that the court websites don’t give any information on the sheriff’s sale. There are two mega-foreclosure law firms in Illinois that handle most of the foreclosures. Both of them are pretty responsive and will answer questions and will respond to calls or emails. One has a site that gives great, up- to-date information on the sheriff’s sale, but the other large firm has no website with sheriff’s sale information. Copies of motions and other court documents are always mailed to the homeowner in all foreclosures cases, so there is no lack of communication.  It’s figuring out what the motion or hearing means that’s important.