Governor Pat Quinn signed into law the Homeowner Protection Act, which gives homeowners who fall behind on their mortgage payments time to work with their lender to develop a plan that will allow them to stay in their homes. This new law creates a 90-day moratorium on home foreclosures and strengthens existing provisions protecting homeowners from exploitation by mortgage rescue fraud.

Specifically, the legislation seeks to protect homeowners in default from being victimized by consultants who offer them get-rich-quick schemes to save their homes. New language also caps fees charged by private sector lenders to homeowners and bans attorneys not licensed in Illinois from providing mortgage rescue services.

· The lender must send the mortgagor (borrower) an additional warning by certified mail and cannot foreclose for at least 30 days after the warning is mailed.

· During this 30-day “window” the borrower has the right to seek approved mortgage counseling.

· If the borrower seeks counseling, he or she will have an additional 30-day grace period to work out a mortgage refinancing plan.

· This stays foreclosures for an additional 30 days on top of the 30 day grace period

Who does this apply to? The Act applies to all loans that have not entered the foreclosure process. All lenders and loan servicers in the state must comply with this law. The law is set to expire two years after being signed by the Governor.

Who provides counseling? Borrowers will work with non-profit housing counseling agencies that follow U.S. Department of Housing and Urban Development (HUD) guidelines and that are recognized by the Illinois Department of Financial and Professional Regulation.

Sustainable loan workout plans: Borrowers will work with housing counselors to develop a sustainable loan workout plan that will enable the borrower to stay current on mortgage payments for the foreseeable future, taking into account the borrower's income and existing and foreseeable debts.

What will the sustainable workout plan do? A sustainable loan workout plan may include (1) a temporary suspension of payments, (2) a lengthened loan term, (3) a lowered or frozen interest rate, (4) a principal write down, (5) a repayment plan to pay the existing loan in full, or (6) refinancing into a new affordable loan.

This new law has already affected the number of new foreclosure listings taking place at the county level, with much lower numbers than usual.