IBA Compliance Connection

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An attorney contacted us on behalf of a residential mortgage loan customer who has not made any mortgage payments over the last year. The customer would like to take advantage of the Illinois Hardest Hit Program, which the attorney says will pay for the customer’s mortgage payments for two years if we waive all accrued late fees. Is that true? Can you provide any background information?

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It is possible, but certainly not guaranteed, that the Illinois Hardest Hit Program could provide up to 12 months of mortgage payments, while also covering the borrower’s 12 months of delinquent payments. However, the program would not provide two years of payments going forward.

The Illinois Housing Development Authority (IHDA) runs the program, which recently was reinstated (after previously running out of federal funding). With a new round of federal funding, IHDA began accepting applications from borrowers on August 1, 2016.

If a borrower qualifies for the program, IHDA may provide two benefits: (1) a one-time payment covering the existing delinquency, and (2) monthly mortgage payments for up to 12 months, subject to an overall cap of $35,000 in total assistance for one borrower. IHDA provides this assistance in the form of a five year loan, which will be forgiven unless the borrower sells the home or refinances the mortgage before the end of the five year term.

IHDA requires servicers to enter into servicer agreements, in part because it must send any monetary assistance directly to the servicer, not to the borrower. However, the servicer agreements impose other responsibilities on participating servicers, such as documentation and notification requirements, limitations on your foreclosure rights and late fees, and more. We recommend carefully reviewing IHDA’s Servicer Welcome Packet and FAQs, as well as the Servicer Participation Agreement itself, before agreeing to participate.

For resources related to our guidance, please see:

  • IHDA Illinois Hardest Hit Website
  • IHDA Illinois Hardest Hit FAQs