SB2981 93RD GENERAL ASSEMBLY

LRB093 19407 BDD 47205 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
SB2981

Introduced 2/6/2004, by Kimberly A. Lightford

SYNOPSIS AS INTRODUCED:

20 ILCS 3805/7.24i new
30 ILCS 105/5.625 new

Amends the Illinois Housing Development Act. Creates the Homeowner's Emergency Mortgage Assistance Program. Provides that the Illinois Housing Authority or not-for-profit corporations designated by the Authority may make payments on mortgages for single-family residences under certain circumstances. Sets the requirements for the application for mortgage assistance. Requires a mortgagor to make monthly payments to the Authority or designated agency when receiving mortgage assistance. Provides for the repayment of mortgage assistance by the mortgagor. Amends the State Finance Act to create the Emergency Mortgage Assistance Fund. Effective immediately.

FISCAL NOTE ACT MAY APPLY

HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning housing.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Housing Development Act is amended by adding Section 7.24i as follows:

(20 ILCS 3805/7.24i new)

Sec. 7.24i. Homeowners' Emergency Mortgage Assistance Program.

(a) The Authority shall administer the Homeowners' Emergency Mortgage Assistance Program.

(b) Definitions. In this Section:

"Chairman" means the Chairman of the Illinois Housing Development Authority (IHDA) or the Chairman's duly appointed designee, who must be an employee of IHDA.

"Fund" means the Emergency Mortgage Assistance Fund created in this Section.

"Single family residence" means a structure maintained and used as a single family dwelling unit located in Illinois. Even if a dwelling unit shares one or more walls with another dwelling unit, it is a single family residence for the purpose of this Section if it has direct access to a street or thoroughfare and does not share hot water equipment, heating facilities, or any other essential facilities or service with any other dwelling unit.

"Gross household income" means the total income of a mortgagor, the mortgagor's spouse, children residing in the same residence as the mortgagor, and any other person living in the residence that is declared by the mortgagor as a dependent for federal income tax purposes.

"Housing expense" means the sum of the mortgagor's monthly maintenance, utility, and hazard insurance expenses, taxes, and required mortgage payments, including escrows.

"Fund" means the Emergency Mortgage Assistance Fund created in this Section.

"Mortgage" means a secured consensual interest or lien created by a real estate mortgage, a trust deed on real estate, or the like.

"Net effective income" means the gross household income of the mortgagor less city, State, and federal income and social security taxes.

"Household" means 2 or more persons residing together or a person living alone.

(c) Homeowners' Emergency Mortgage Assistance Program.

(1) In general. The Authority shall establish a program to provide homeowners alternatives to foreclosure by providing for temporary emergency mortgage payments on mortgage loans secured by single-family residences when:

(A) the mortgagor is an existing participant of the program prior to default, as described in item (B) of this subsection, and has paid a participant fee of $5 per year to be deposited into the Fund in accordance with rules adopted by the Authority;

(B) the mortgagor is in default by at least one full monthly installment due under the terms of the mortgage after the application of all, if any, partial payments that have been accepted by the mortgagee but not yet applied to the mortgage account;

(C) the mortgagor is suffering financial hardship through no fault of the mortgagor that renders the mortgagor unable to correct the default within 60 days after receiving proper notice from the mortgagee of the default;

(D) the mortgagor will likely be able to resume full mortgage payments not later than 18 months after the earliest date that assistance payments are provided under this Section and the mortgagor will likely be able to pay the mortgage in full by its maturity date or by a later date agreed upon by the mortgagee;

(E) the property in default is the mortgagor's principal residence;

(F) the mortgagor has applied for assistance in accordance with this Section and rules adopted by the Authority for this Section; and

(G) the mortgagor's gross household income does not exceed 100% of area median income adjusted for family size as identified by the U.S. Department of Housing and Urban Development.

(2) Effect of finding of ineligibility. If, after reviewing an application for assistance submitted under subsection (e), the Chairman determines that the mortgagor has not met the conditions of eligibility described in paragraph (1) of this subsection, the mortgagor is prohibited from re-applying for assistance under this Section until the expiration of a 6-month period beginning on the date of that determination unless there is a material change in the financial circumstances of the mortgagor.

(3) Determination of financial hardship. In determining whether a financial hardship is incurred through no fault of the mortgagor, the Chairman may consider all necessary information including the mortgagor's employment record, credit history, and current income. Assistance may be granted in no-fault circumstances including, but not be limited to:

(A) loss of job of a member of the household;

(B) salary, wage, or earnings reduction of a member of the household;

(C) injury, disability, or illness of a member of the household;

(D) divorce or separation in the household;

(E) death of a member of the household; or

(F) major unanticipated household expense.

(4) Designated agencies. The Authority shall, by rule, establish a procedure to designate and approve Illinois not-for-profit corporations as agencies to assist in implementing the program. Agencies designated and approved under this paragraph shall provide assistance, at the direction of the Chairman, to eligible mortgagors.

(d) Notice of default.

(1) Any notice by a mortgagee sent to the mortgagor regarding a default payment must include a statement in large bold type substantially similar to the following: IF YOU NEED HELP PAYING YOUR MORTGAGE AND WANT TO AVOID PENALTIES, YOU MAY BE A PARTICIPANT IN THE STATE'S EMERGENCY MORTGAGE ASSISTANCE PROGRAM. TO DETERMINE YOUR ELIGIBILITY FOR ASSISTANCE CALL 1-8xx- (insert appropriate toll-free number) IMMEDIATELY. THIS DOES NOT CHANGE THE RIGHT OF YOUR LENDER TO ENFORCE THE MORTGAGE AGREEMENT.

(2) Except as provided in subsection (d)(1), nothing in this Section shall impose any additional duty or responsibility under this Section on the mortgagee. Failure by the mortgagee to provide the statement described in subsection (d)(1) shall not impair the ability of the mortgagee to collect any sums due on the note secured by the mortgage or enforce its lien rights in the property secured by the mortgage and shall not subject the mortgagee to any liability to the mortgagor.

(e) Application for assistance.

(1) The Authority may pay designated agencies a fee from the Fund, in an amount determined by the Chairman, for rendering assistance under this Section.

(2) Form; contents. An application for assistance under this Section shall be on a form prescribed, by rule, by the Chairman and shall include a financial statement disclosing all assets and liabilities of the mortgagor, whether singly or jointly held, and all household income regardless of source.

(3) Effect of misrepresentation. A mortgagor who intentionally misrepresents any material financial information in connection with the filing of an application for assistance under this Section may be denied assistance and required to immediately repay any amount of assistance received. The Authority must, by rule, establish a process for determining intentional misrepresentation and for the prompt appeal of positive determinations.

(4) Availability. An application for assistance under this Section may be obtained from a designated agency or any other financial counseling assistance agency that elects to make applications available.

(5) Determination on application. The Chairman must determine eligibility of a mortgagor for assistance under this Section not later than 60 days after receipt of the application of the mortgagor.

Not later than 5 business days after making the determination on an application for assistance, the Chairman shall notify the mortgagor and the mortgagee as to whether the application has been approved or disapproved.

(f) Assistance payments.

(1) Amount to bring mortgage current. If the Chairman or designated agency determines that a mortgagor is eligible for assistance under this Section, the Authority or designated agency shall pay to the mortgagee the full amount due to the mortgagee under the terms of the mortgage without regard to any acceleration under the mortgage, or the full amount of any alternative mortgage payments agreed to by the mortgagee and mortgagor on the date that the application is approved. This amount shall include the amount of principal, interest, taxes, assessments, ground rents, hazard insurance, mortgage insurance or credit insurance premiums, and reasonable attorneys' fees incurred by the mortgagee in relation to the arrearage.

(2) Monthly assistance payments. The Authority or designated agency shall make monthly mortgage assistance payments to the mortgagee on behalf of the mortgagor under this subsection in accordance with the terms of the note secured by the mortgage or any change in terms as agreed to by the mortgagee and mortgagor.

A mortgagor on whose behalf the Authority or designated agency is making the mortgage assistance payments must pay his or her monthly payments to the Authority or designated agency. The payments shall be in an amount that will not cause the mortgagor's total housing expense to exceed 35% of the mortgagor's net effective income. This is the maximum amount the mortgagor can be required to pay during the 18 months that a mortgagor is eligible for mortgage assistance. The mortgagor must make the payments at least 7 days before each mortgage payment is due under the mortgage.

The Authority or the designated agency shall send by the payment due date the total mortgage payment directly to the mortgagee along with a coupon or other account-identifying information regarding the mortgage, as required by the mortgagee.

(3) Review upon delinquency. If the mortgagor fails to pay to the Authority or designated agency any amounts due directly from the mortgagor under this subsection, not later than 15 days after the due date the Chairman or designated agency shall review the mortgagor's financial circumstances to determine whether a delinquency in payments due from the mortgagor under this subsection is the result of a material change in the mortgagor's financial circumstances since the payment amount was last determined. If the delinquency is not the result of a material change in the mortgagor's financial circumstances, the Chairman or designated agency may terminate future mortgage assistance payments. If the delinquency is the result of a material change, the Chairman or designated agency shall modify the mortgagor's required payments as the Chairman or designated agency determines. For one time only, and at the sole discretion of the Chairman, the delinquency incurred for non-financial reasons may be satisfied by the Authority if it appears that the payment will prevent foreclosure.

(4) Period for assistance. Payments under this subsection may be provided for a period not to exceed 18 months, either consecutively or non-consecutively. The Chairman shall establish procedures for periodic review of the mortgagor's financial circumstances for the purpose of determining the necessity for continuation, termination, or adjustment of the amount of the payments.

(g) Repayment of assistance.

(1) Assistance loan. The amount by which the assistance payments made by the Authority or designated agency to the mortgagee exceeds the amount of payments made by the mortgagor to the Authority or designated agency are a loan by the Authority or designated agency to the mortgagor. The loan may be evidenced by any documents that the Authority determines, by rule, are necessary to protect the interests of the State.

(2) Repayment of assistance loan. Before making assistance payments under this Section on behalf of a mortgagor, the Authority or designated agency must enter into an agreement with the mortgagor for repayment of all mortgage assistance provided under subsection (f) plus interest as provided in paragraph (3) of this subsection. The agreement must provide for monthly payments by the mortgagor to the Authority or designated agency that:

(A) shall begin once the Chairman or designated agency has determined that continuation of mortgage assistance payments to the mortgagee is unnecessary; and

(B) shall be in an amount determined as follows:

(i) if the mortgagor's total housing expense is less than 35% of the mortgagor's net effective income, the mortgagor must pay to the Authority or designated agency the difference between 35% of the mortgagor's net effective income and the mortgagor's total housing expense unless otherwise determined by the Chairman or designated agency after examining the mortgagor's financial circumstances and ability to contribute to repayment of the mortgage assistance; or

(ii) if the mortgagor's total housing expense is more than 35% of the mortgagor's net effective income, repayment of the mortgage assistance shall be deferred until the mortgagor's total housing expense is less than 35% of the mortgagor's net effective income.

(C) Notwithstanding subparagraphs (A) and (B) of this paragraph, if repayment of mortgage assistance is not made by the date that the mortgage is paid in full, the mortgagor must make mortgage assistance repayments in an amount not less than the previous regular mortgage payment until the mortgage assistance is repaid.

(3) Interest. Interest shall accrue on all mortgage assistance payments made under this Section at the rate, determined monthly by the Chairman, equal to the then current average yield on outstanding 30-year bonds issued by the Secretary of the United States Treasury under Section 3102 of Title 31, United States Code and shall accrue only during the period in which the mortgagor is required to make repayment under this subsection.

(4) Lien to secure repayment of assistance. Repayment of amounts owed to the Authority or designated agency from a mortgagor shall be secured by a mortgage lien on the property and by any other obligation that the Authority may, by rule, require. The lien or other security interest of the Authority may not take priority over any other secured lien or secured interest in effect against the mortgagor's property on the date assistance payments begin. The Authority may allow subordination of the mortgage assistance lien only if the subordination is in the best interest of the homeowner and necessary to permit the mortgagor to obtain a home improvement loan for repairs necessary to preserve the property.

(5) Time for repayment. Payments under this subsection shall be made by the mortgagor to the Authority or designated agency not later than 14 days after each mortgage payment is due under the mortgage, or in the case of repayment after the mortgage has been paid in full, not later than the date the mortgage payments were due under the mortgage.

(h) Emergency Mortgage Assistance Fund.

(1) A special income-earning Fund is hereby created in the State treasury, known as the Emergency Mortgage Assistance Fund.

(2) All moneys paid into the Fund together with all accumulated undistributed income thereon shall be held as a special fund in the State treasury. The Fund shall be used solely for the purpose of providing assistance to mortgagors who are eligible under the requirements of this Section.

(3) Notwithstanding any other provisions of this Section, the payment of assistance from the fund shall be subject to the availability of funds, and no mortgagor shall have any vested right in the Fund as a beneficiary or otherwise. Before seeking assistance from the Fund, the mortgagor or beneficiary seeking assistance shall apply for assistance on a form provided by the Chairman. The form shall include any information the Chairman may reasonably require in order to determine that assistance is appropriate.

(4) The Authority may accept contributions made by banks and other lending institutions to satisfy their responsibilities under the federal Community Reinvestment Act of 1977.

(i) Adoption of rules.

(1) The Authority may adopt any rules necessary to implement, administer, and enforce this Section.

(2) In adopting rules concerning the collection of fees under subsection (c), the Authority may receive the assistance of the Department of Revenue to collect fees at the time income tax returns are filed or of the collector at the time property taxes are paid.

Section 10. The State Finance Act is amended by adding Section 5.625 as follows:

(30 ILCS 105/5.625 new)

Sec. 5.625. The Emergency Mortgage Assistance Fund.

Section 99. Effective date. This Act takes effect upon becoming law.