Illinois is set to become one of the first states to take up legislation designed to reform the foreclosure process to protect homeowners.

Illinois Attorney General Lisa Madigan, who drafted the bill, says the 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.

The measure, introduced this week, drew sponsorship from 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 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 JP Morgan 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, Madigan said.

 Putting law on the side of homeowners

"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 Collins.

The bill is aimed at ensuring 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,” Colvin.

"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 Flowers. "It is up to the state, with this legislation, to step in to protect these vulnerable residents.”

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.

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.