On August 22, 2017, Governor Rauner signed Public Act 100-0268 (“the Act”) into law, effective January 1, 2018. The Act amends the Residential Mortgage License Act of 1987 by enacting Section 5-8.5 entitled “arrearage payments.” 205 ILCS 635/5-8.5. The first part of the Act provides that “ when a mortgagor is in arrears more than one month, no [mortgagee] shall refuse to accept any payments offered by the mortgagor in whole month payment amounts. . . such payments shall be applied to the unpaid principle balance in the manner provided in the [mortgagee’s] mortgage with that mortgagor.” This part of the Act seems to incentivize the mortgagor—who is in default on its monthly payment more than a month, and who cannot come up with all the past due payments—to at least make one full monthly payment instead. In such case, the mortgagee cannot refuse to accept the payment because it would not cure the default, since the payment would amount to less than the entire amount owed. The mortgagee must apply the payment toward the unpaid amount in accordance with the terms of the mortgage. This provision of the Act seems to encourage the mortgagee to work with the mortgagor by accepting a payment for less than the entire amount owed, and, thereby providing the mortgagor with a bit more time to obtain additional funds in order to bring its respective mortgage up to date; thus, in effect, slowing down the acceleration of the entire debt due and owing, and the probable arrival of the “foreclosure-train.”
The extent to which the first part of the Act will produce an intended effect—for the parties to work together in hope of curing a default—will depend on the exercise of the parties’ rights protected in the second part of the Act. The second part states that “[n]othing in this Section shall be construed to otherwise impair the ability of the [mortgagee] to enforce its rights under the mortgage with that mortgagor; nothing in this Section shall be construed to otherwise impair the obligations of the mortgagor under the mortgage with the [mortgagee].” Under this part of the Act, the rights of the parties contained in their respective mortgage and promissory note will not be impaired by the first part of the Act. Thus, in a hypothetical scenario, if the mortgagor fails to make more than one payment, and the mortgagee under the terms of the mortgage informs the mortgagor of the acceleration of the entire debt due and owing, can the mortgagee refuse to accept a payment covering only one month but less than the entire amount owed? It is plausible to conclude that the mortgagee may do so in the exercise of its rights under the mortgage.
This hypothetical situation certainly invites doubts as to the extent of how much of the intended-practical-effect the Act will have on the interested parties, and if anything, whatever effect it may produce will seemingly depend on the good-will of the parties themselves.
If you have any questions, please contact Michael Sadic, Associate Attorney, at (312) 263-0003 ext. 2112, firstname.lastname@example.org.