Mortgage Law Roundup

Sharp  Thinking

No. 93     Perspectives on Developments in the Law from The Sharp Law Firm, P.C.   June 2013

For Abandoned Residential Real Estate …

“Fast Track” Foreclosure Bill Becomes Law

            Illinois residential real estate that has been abandoned now is subject to “fast track” judicial foreclosure procedures aimed at minimizing the blight effects which abandoned houses have been having during the usual foreclosure process.

            Findings Made:  P.A. 97-1164 made the changes and became law on June 1.  It amends the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1101 et seq., to find that “residential mortgage foreclosures and the abandoned properties that sometimes follow create enormous challenges for Illinois residents, local governments, and the courts, reducing neighboring property values, reducing the tax base, increasing crime, placing neighbors at greater risk of foreclosure, imposing additional costs on local governments, and increasing the burden on the courts of this State.”  It further finds that for “when a property is abandoned, the lengthy foreclosure process harms lien-holders, neighbors, and local governments, and imposes significant and unnecessary burdens on the courts”. 

            “Abandoned” Property Defined:  “Abandoned residential property” eligible for the fast-track provisions cannot be occupied by a lawful occupant as a principal residence, and can include incomplete structures in real estate developments if they are in need of maintenance, repair or securing.  In addition, two or more of the following conditions must exist for property with a structure:

            ►        incomplete construction leaving the building unsuitable for occupancy with no construction taking place for at least 6 months;

            ►        multiple windows boarded up, smashed through or unhinged;

            ►        doors smashed through, broken off, unhinged or continuously unlocked;

            ►        the property has been stripped of copper, other materials, or interior fixtures;

            ►        utility services to the property have been terminated;

            ►        a written statement of the mortgagor, his representative or assign, indicating a clear intent to abandon the property;

            ►        law enforcement has received a recent report of trespassing, vandalism or other illegal acts being committed at the property;

            ►        the property has been declared unfit for occupancy and ordered to be vacant by a court or other local authority;

            ►        local authorities have requested the securing or winterizing of the property due to it being declared an imminent danger to the health, safety and welfare of the public;

            ►        the property is open, unprotected and in danger of significant damage due to vandalism or weather.

            The two or more conditions need not exist for vacant lots zoned for residential development, but such lots must be “in need of maintenance, repair, or securing” for the fast-track provisions to apply.

            “Fast-Track” Processing:  The act provides an expedited judgment and sale procedure for property within its scope.  Upon motion and notice, including the conspicuous posting of notice on the property, the plaintiff may move to invoke that procedure, which motion is to be heard on an expedited basis.  If upon hearing the motion the court finds the real estate is abandoned, it is to “immediately proceed to a trial of the foreclosure.”  Expedited treatment shall not be granted if the mortgagor, unknown owner or lawful occupant appears and objects.  A fast-track judgment may be vacated prior to confirmation of the sale if such a person appears and shows that he has not abandoned the property.

            Following entry of judgment, abandoned property “shall be sold at the earliest practicable time.”  The act permits confirmation motions to be made prior to sale provided they are heard after the sale.  Confirmation hearings are to occur “at the earliest practicable time after conclusion of the sale.”  The act requires that notice of the confirmation be sent to local authorities and any known insurers. 

            Personal property left in the abandoned structure is deemed to be abandoned and may be given to charity or disposed of.

            New Fee Imposed:  The act imposes a special fee of up to $500 on residential real estate foreclosures filed from June 1 through the end of 2017.  The amount is dependent on the number of foreclosures the plaintiff has filed.  Proceeds go to an Abandoned Residential Property Municipality Relief Fund and the Foreclosure Prevention Program Fund.

No Cause of Action Under HAMP Found

            Yet another federal Court of Appeals has agreed with that portion of Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012), which holds that the Home Affordable Mortgage Program (“HAMP”) does not contain a federal private right to sue.  See Sharp Thinking No. 61 (April 2012), No. 82 (Jan. 2013). 

            However, Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769 (4th Cir. 2013), departed from Wigod in finding that no common-law contract or fraud claims were stated in the case before it.

            With reasoning reminiscent of Jackson v. Bank of Am. Corp., 711 F.3d 788 (7th Cir. 2013) (see Sharp Thinking No. 88 (April 2013)), the Spaulding court also rejected the plaintiff’s claim for negligent evaluation of the mortgage modification application. 

                                                                       John T. Hundley, 618-242-0246, Jhundley@lotsharp.com

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