Illinois AG Madigan Files Legislation to Reform the Foreclosure Process to Protect Homeowners

Tuesday, November 16, 2010 - 17:17

Illinois Attorney General Lisa Madigan has filed legislation designed to reform the foreclosure process to protect homeowners. Madigan’s legislation is the first of its kind in the country to address revelations that major banks and mortgage giants recklessly “robo-signed” foreclosure fillings across the country. The bill would significantly tighten the requirements for affidavits filed in foreclosure proceedings to ensure their accuracy.
Sponsors of the bill during the General Assembly’s fall veto session are state Sen. Jacqueline Collins, and state Reps. Marlow H. Colvin and Mary Flowers, all of whom have worked closely with Madigan’s office in recent years to increase the protections for Illinois families facing foreclosure.
“Too often, Illinois families are struggling to pay their mortgages because banks put them into risky loans that they did not understand and could never afford. Now, we must make sure that banks are not violating the law as they try to take these families’ homes away,” Attorney General Madigan said. “This legislation is designed to ensure that banks and loan servicers cannot cut corners or ignore homeowners’ rights in the foreclosure process.”
The legislation was prompted after major loan servicers across the country, namely GMAC/Ally, Bank of America and JPMorgan Chase, admitted their employees signed inaccurate foreclosure documents in court. These employees may have approved thousands of foreclosures without personal knowledge of the facts involved and without verifying underlying loan information.
“As Illinoisans lose their homes, we have to continue to fight to put the law on their side so they don’t once again become the victims of fiscal gluttony,” said Sen. Collins.
The bill would ensure the integrity of foreclosure documents filed and that lenders are complying with the requirements of federal loan modification programs. It would also make sure each homeowner knows the amount they owe, who owns their loan, the terms of their original loan and whom they can contact. Specifically, the proposed legislation would:
►Ensure affidavits filed as part of the foreclosure process contain a detailed description of how the person who signed the affidavit has personal knowledge of the facts, including what he or she did to verify that the amount owed is accurate.
►Require that banks verify in writing all efforts they have undertaken to keep the homeowner in the home, including loan modification efforts.
►Require that banks provide a detailed summary of the borrowers’ payments to ensure the borrowers know why the foreclosure is happening and can contest the foreclosure if the banks’ payment history is inaccurate.
►Require that a bank prove that it holds the loan and has the right to foreclose.
“This legislation continues our aggressive work to implement laws that provide homeowners with assistance while holding lenders accountable,” said Rep. Colvin.
The legislation is part of the Attorney General’s response to the recent foreclosure document scandal. Madigan also has asked Washington lawmakers to support the re-introduction of legislation drafted by U.S. Sen. Richard Durbin, D-Ill., to permit bankruptcy court judges to reduce principal amounts on mortgages and thereby save homes.
“If banks and mortgage companies cannot produce the proper paperwork to verify a foreclosure needs to take place, they shouldn’t be kicking Illinois homeowners out of their homes in the first place,” said Rep. Flowers. “It is up to the state, with this legislation, to step in to protect these vulnerable residents.”
Immediately following reports questioning the integrity of foreclosures filed nationwide, the Attorney General issued letters to GMAC/Ally, Bank of America and JPMorgan Chase along with 23 other major loan servicers who work in Illinois demanding a halt to all pending foreclosures in Illinois, including post-foreclosure sales and evictions, unless they were able to demonstrate the filings were accurate.
Attorney General Madigan, along with the 49 other state attorneys general and 37 state bank and mortgage regulators, is also continuing a multi-state probe into the servicers and foreclosures filed in courts across the country. In Illinois, the filing of false court documents could be a violation of the state’s Consumer Fraud Act and other laws.
AG Madigan has been at the forefront of protecting Illinois homeowners during the mortgage foreclosure crisis and holding Wall Street banks accountable. In 2008, she led a nationwide $8.7 billion settlement with Countrywide over its predatory lending practices. The Attorney General has also filed suit against both Wells Fargo and Countrywide alleging widespread discrimination against African American and Latino borrowers, causing them to pay disproportionately more for their mortgages than other borrowers.
In Springfield, Ill., AG Madigan played a principal role in working to pass the High Risk Home Loan Act of 2003 and drafted the Mortgage Rescue Fraud Act of 2006, which was designed to deter scam artists from preying on vulnerable homeowners on the verge of foreclosure. The Attorney General also initiated and drafted the Illinois Homeownership Protection Act, a law that took effect in 2008 to tighten controls on brokers and lenders to prevent consumers from being unwittingly locked into questionable loan terms. In 2008, Madigan also initiated the Illinois Homeowners’ Rights Act.
For more information, visit www.IllinoisAttorneyGeneral.gov.

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