Bulletin: IL2007001

Date:
December 21, 2007
To:
All Illinois Issuing Offices
RE:
Legislative Update

Dear Associates:

2007 LEGISLATIVE UPDATE
Illinois

1. Eminent Domain Act
Public Act 94-1055; Effective January 1, 2007

Summary: Codifies the Illinois Supreme Court rule set out in Southwestern Illinois Development Authority v. National City Environmental, LLC, 199 Ill.2d 225 (2002). The Act makes taking of land more difficult if private ownership or control of the property will follow the taking. The Act also establishes a sliding scale of different types of taking cases. In each type of case, the Act imposes a burden of proof on the government to establish the validity of the taking.

Note: The Act does not apply to the taking cases associated with the O’Hare Airport expansion project. Condemnation cases for this project will proceed under the previous law.

2. Mechanic Liens on Rental Construction Equipment
Public Act 95-274, Effective August 17, 2007

Summary: Creates a new mechanics lien for rented equipment used in construction by a contractor or subcontractor, to the extent that "the equipment is used on or about the site of the improvement."

Exempts construction on single-family residence and multi-family residences with fewer than 12 units in a single building.

3. Contractor Prompt Payment Act
Public Act 95-567, Effective August 31, 2007

Summary: Creates the Contractor Prompt Payment Act, providing statutory protection for non-payment to contractors and subcontractors in private construction projects. Similar state and local "prompt payment laws" appear around the country (Mostly in the public project context); however, this is the first Illinois law that provides a statutory remedy, in addition to a breach of contract claim, in a private construction contract.

Specifically, under the new law, all construction contracts are "deemed" to provide a 15 calendar day deadline for approval and payment of "payment applications" such as invoices, bills, etc. A payment application is "deemed approved" 25 days after the owner receives the payment application unless the owner provides before that date a written statement of the amount withheld and the reason for the withholding. The same terms apply under a contractor-subcontractor relationship.

If payment is not made in a timely manner, the delinquent party is liable for the amount of the payment plus 10% annual interest, provided that the interest cannot be duplicative of the interest charged under the Mechanics Lien Act. In addition, a contractor or subcontractor who is not paid as required by the Act is entitled to suspend performance without penalty until the payment is made, provided that the suspending party first gives seven calendar days’ written notice to the defaulting party.

The Act exempts contracts involving public funds and contracts for single family residences or multiple family residences with 12 or fewer units in a single building.

4. Electronic Filings by Corporations with Secretary of State

Summary: Amends the Business Corporation Act of 1983, the General Not For Profit Corporation Act of 1986, and the Limited Liability Corporation Act, to provide the following:

ELECTRONIC FILING. Documents or reports transmitted for filing electronically must include the name of the person making the submission. The inclusion shall constitute the affirmation or acknowledgement of the person, under penalties of perjury, that the instrument is his or her act and deed or the act and deed of the limited liability company, as the case may be, and that the facts stated therein are true. Compliance with this Section shall satisfy the signature provisions of Section 1.10, 101.10 and 5-45, respectively of this Act, which shall otherwise apply.

5. Uniform Real Property Electronic Recording Act
Public Act 95-472, Effective August 27, 2007

Summary: Creates the Uniform Real Property Electronic Recording Act (URPERA) to provide that a recorder may receive, index, store, archive, and transmit documents eligible to be recorded in the recorder’s land records in the form of electronic documents, subject to certain requirements. The new Act further provides that, if another law requires, as a condition to recording, that a document be an original, on paper or in another tangible medium, or in writing, the requirement is satisfied by an electronic document that otherwise satisfies the URPERA. It also provides that if another law requires that a document be signed as a condition to recording, that requirement is satisfied by an electronic signature. It also provides that if another law requires, as a condition to recording, that a document or signature be notarized, acknowledged, verified, witnessed, or made under oath, that requirement is satisfied if the appropriate electronic signature and other required information is attached to or logically associated with the document or signature.

The URPERA also creates a new Illinois Electronic Recording Commission that will adopt standards to implement the Act. The Commission will consist of the Secretary of State (or his designee), along with 7 County Recorders ("no more than 4 of whom are from one political party, representative of counties of varying size, geography, population, and resources"), 3 representatives from the land title profession, 3 representatives from lending institutions, and 1 attorney, all appointed by the Secretary of State.

6. Identity Theft and Financial Crimes Statute of Limitations
Public Act 95-548, Effective August 30, 2007

Summary: Lengthens the statute of limitations from five years to seven years for financial crimes, identity theft, and crimes involving the misappropriation of real property exceeding $100,000 in value.

7. Title Insurance
Public Act 95-570, Effective August 31, 2007

Summary: Amends the Title Insurance Act to declare that parties involved in a residential real estate sales have the right to choose the title insurance company and title insurance agent that will provide them with title insurance.

Practice Note: This requirement already is the law pursuant to various other state and federal statutory provisions.

8. Illinois Lawyers Trust Fund Accounts (IOLTA)
Amendment to Supreme Court Rule 1.15, Effective June 1, 2007

Summary: Amends the Illinois Supreme Court rule that requires lawyers to place client’s funds in escrow accounts for the purpose of funding the Lawyers Trust Fund of Illinois, which in turn funds indigent legal aid programs. In essence, the amendment requires financial institutions that accept IOLTA accounts to pay the same interest rates on IOLTA accounts as they pay on other accounts with similar balances and requirements.

9. Enhanced Regulation of Mortgage Brokers and Mortgage Bankers and Cook County Predatory Lending Database Program, Public Act 95-691, Effective June 1, 2008

Summary: Creates significant new "standards, duties, prohibitions and requirements" on mortgage brokers and mortgage bankers in Illinois, and extends the former "Predatory Lending Database Pilot Program" (also known as HB 4050, as enacted in the 94th General Assembly) to all of Cook County as a permanent program.

Among other things, this law requires licensees of the Residential Mortgage License Act of 1987 (i.e., mortgage brokers and mortgage bankers) to verify a borrower’s ability to repay a residential loan (based on a fully indexed rate assuming a fully amortizing repayment schedule for the full term of the loan), and it requires them to verify the borrower’s income and assets, thereby prohibiting origination of "stated income" loans. The bill also places strict limits on prepayment penalties for loans originated by licensees, requires timely notice of any material changes in terms of such loans, and creates an "agency" relationship between a licensee and the borrower that requires the licensee to act in the best interests of the borrower.

In addition, mortgages originated by mortgage brokers and mortgage bankers for residential real estate in Cook county will be reportable to the Illinois Department of Financial and Professional Regulation (IDFPR) if they include: (1) an adjustable rate during the first 3 years of the loan, (2) interest-only payments (on a closed-end loan), (3) negative amortization, (4) a prepayment penalty, or (5) points and fees that exceed 5 percent. In such cases, the IDFPR must require counseling by a HUD-certified agency for the borrowers, which cannot be waived by them. As with the former HB 4050, residential mortgages will not be accepted for filing by the Cook county Recorder of Deeds unless these requirements are met or the lender certifies that the mortgage loan is exempt from the provisions of the law.

Practice Notes: (1) Financial institutions will not be covered by the provisions in this bill when they are not originating a residential loan in Cook County through a mortgage broker.

(2) However, mortgage loans made by financial institutions that do not involve a mortgage broker, while exempt from this Program, still must file an "exempt Certificate" when recording their mortgages in order to have the recording accepted by the Cook County Recorder of Deeds.

(3) The following mortgage loans – even when originated by a mortgage broker or non-financial institution loan originator – are not covered by the Program: (a) loans otherwise covered by the program that were applied for prior to June 1, 2008 and closed on or after June 1, 2008, (b) loans secured by residential property with 5 or more units even if one unit is owner-occupied, (c) loans for commercial, industrial, governmental, or institutional property, (d) investment loans secured by residential 1-4 family non-owner occupied property, and (e) home equity loans that are not used to purchase an owner-occupied 1-4 residential property located in the program area. Keep in mind, however, that mortgages securing these categories of exempt loans still must be accompanied by an Exempt Certificate at the time of recording.

(4) The law also requires that a lis pendens filed on property in Cook County must be filed with the Illinois Department of Financial and Professional Regulation. A certificate of service affirming the filing with the Department must be recorded with the lis pendens. While it would seem logical that the lis pendens provisions of the Act are not meant to apply to mortgage loans that are exempt from the program (including mortgage loans made by financial institutions that do not involve a mortgage broker), at this time it is unclear whether this interpretation will be adopted by the Cook County Recorder of Deeds.

(5) The Illinois Fairness in Lending Act prohibits a lender from denying or varying the terms of a loan "on the basis that a specific parcel of real estate offered as security is located in a specific geographical area." 815 ILCS 120/3(a). While the law cannot force a lender to make residential loans in Cook County, nor can it require a lender to market its loan products in any particular county, it could be problematic for a lender who makes residential loans in the Northern Illinois region to deny an application from a resident located in Cook County for a loan product that it otherwise offers.

9. Foreclosure Possession
Public Act 95-262, Effective January 1, 2008

Summary: Amends the Code of Civil Procedure to provide that in a case of foreclosure where a tenant of the property that is subject to foreclosure is current on his or her rent, any order of possession must allow the tenant to retain possession of the property covered in his or her rental agreement for (1) 120 days after the notice of the sharing on the supplemental petition that has been properly served upon the tenants, or (2) the duration of his or her lease, whichever is shorter. This except for continued possession by the tenants only applied if the tenant continues to pay his or her rent in full during the 120 day period.

10. Code of Civil Procedure Amendments Regarding Various Judgment Creditors’ Rights
Public Act 95-661, Effective January 1, 2008

Summary: (1) Authorizes a judgment creditor to recover a corporate judgment debtor’s property on behalf of the judgment debtor for use of the judgment creditor by filing an appropriate petition within the creditor’s citation proceedings.

(2) Authorizes a court to compel a judgment debtor to resign memberships in exchanges, clubs or other entities.

(3) Authorizes a court to order the sale of a judgment debtor’s property by the debtor, a third party, or selling agent other than a county sheriff.

(4) If a court determines that any property held by a third party respondent is wages pursuant to Section 12-801 of the Code, requires the court to proceed as if a wage deduction proceeding has been filed and to enter such necessary and proper orders as would have been entered in a wage deduction proceeding.

(5) Authorizes a judgment creditor to recover expenses incurred by a law enforcement or court officer for enforcing a judgment, and expenses for those assisting a sheriff or other court officer in enforcing court orders.

(6) Authorizes the filing of a certified copy of a federal judgment order in any circuit court, which will be afforded recognition as if it were a judgment entered in any Illinois circuit court.

(7) Provides that the garnishable amount of 15% of the gross weekly wages is no longer a discretionary amount for a wage garnishment when that amount is less than the amount by which disposable earnings for a week exceed 45 times the minimum hourly wage.

(8) If an employer ceases to remit funds to a plaintiff pursuant to a wage garnishment order without a lawful excuse, requires the court, on plaintiff’s motion, to enter a Conditional Judgment against the employer for the balance due, after which the plaintiff may issue a Summons After Conditional Judgment. If the employer does not show cause why the judgment should not be a final judgment, the court must confirm the conditional judgment and make it final, plus court costs.

(9) If a plaintiff fails to provide a certification that states the amount of a judgment remaining unsatisfied after the end of the first full calendar quarter following the date of service of a wage deduction summons, then the employer must continue to withhold the funds but is not required to remit the funds to the plaintiff until the employer receives the certification. Any party to the wage deduction proceeding can ask the court to review the balance due.

(10) An employer is authorized to charge a judgment debtor a set fee of 2% of the amount required to be deducted under any wage garnishment order.

(11) If a defendant does not deliver to the sheriff chattel that is the subject of an order of replevin, and the plaintiff knows where the chattel is located, the court is authorized to have the sheriff use reasonable force to enter the defendant’s property to recover the chattel.

(12) If the chattel that is the subject of an order of replevin is a mobile home and is occupied by the defendant or other persons, the court is authorized to issue a forcible order directing the sheriff to remove the personal property of the defendant or occupants from the mobile home, provided "the defendant and unknown occupant are given notice of plaintiff’s intent to seek a forcible order and that execution of order is stayed for a reasonable time as determined by the court so as to allow the defendants and occupants to remove their property from the mobile home.

11. Uniform Commercial Code Filings
Public Act 95-446, Effective January 1, 2008

Summary: Amends Section 516 of Article 9 of the Uniform Commercial Code, 810 ILCS 5/9-516, to add two reasons why a recording office may refuse to accept a record: (1) where the filing office is unable to index the record because, in the record submitted, the debtor does not meet the definition of a transmitting utility, or (2) in the case of an initial financing statement or an amendment to a financing statement, the filing office believes in good faith that the document submitted for filing is being filed for the purpose of defrauding any person or harassing any person in the performance of duties as a public servant. The filing may be refused only if the refusal is approved by the Department of Business Services of the Secretary of State and the General Counsel to the Secretary of State.

12. Illinois Radon Awareness Act
Public Act 95-210, January 1, 2008

Summary: A seller of residential real property in Illinois must provide to the buyer a pamphlet published by the Illinois Emergency Management Agency ("IEMA") entitled "Radon Testing Guidelines for Real Estate Transactions" (or an equivalent pamphlet approved by the IEMA), along with the Illinois Disclosure of Information on Radon Hazards. The act excludes various transactions, such as transfers ordered by a probate court in administration of an estate, transfers from a mortgagor to a mortgagee by deed in lieu of foreclosure or consent judgment, and transfers from one co-owner to another co-owner.

13. Financial Exploitation Sentencing Guidelines
Public Act 95-569, Effective June 1, 2008

Summary: Amends the Unified Code of Corrections to provide that when a defendant is sentenced, the judge may consider it to be an aggravating factor if the crime was committed against an elderly, disabled, or infirm person, or if such a person was taken advantage of while in a family or fiduciary relationship with the person to be sentenced.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None