SPRINGFIELD -- Illinois Attorney General Lisa Madigan doesn't mind giving a struggling financial sector a good kicking when it's down.
Madigan yesterday
announced a "co-ordinated statewide effort to assist homeowners facing foreclosure and curb abuses in the lending industry."
The Democratic attorney general said "tens of thousands of Illinoisans" face losing their homes due to problems in the subprime mortgage market, which serves mostly minority customers. Illinois foreclosures rose 55 percent to 72,455 last year and will grow again in 2007.
Madigan said avoiding a crisis required representatives from "local government, lenders, regulators and housing advocates" to work together to implement solutions.
But so far Madigan's biggest solution has been to propose a two-pronged legislative clampdown on (remaining) lenders and brokers in Illinois' subprime market. Her proposals are being sponsored by Rep. Dan Burke.
The first part of Madigan's legislative package tightens regulations on lenders and brokers operating in the subprime mortgage market. The second will further restrict lenders from foreclosing on delinquent loans by amending the state's Foreclosure Act.
If Madigan's laws pass, brokers and lenders will need to, among other things, verify a borrower's ability to pay, stop charging prepayment penalties and quote borrowers monthly costs like tax and insurance. They must also provide in writing any promises to refinance.
Lenders aiming to foreclose must provide a complete payment history of the note or a "missing note affidavit" with the foreclosure complaint. They must also provide a notice of borrower's legal rights and a balance sheet on the home before foreclosing.
Madigan will also convene two "foreclosure prevention summits" over the next few months with "invitees from government, industry, legal, and non-profit organizations."
The first will focus on financial counseling for troubled borrowers while the second will identify legal resources for those facing home loss.