Sub2 = Class2 Felony in IL?

Question

Recent changes to the Illinois Mortgage Rescue Fraud Act (see https://www.ilga.gov/ftp/Public%20Acts/104/104-0553.htm and https://ilga.gov/Legislation/ILCS/Articles?ActID=2795&Ch...) seem to make purchasing sub2 illegal. Assuming anyway that the mortgage is delinquent more than 30 days or in forecourse and the investor "solicits" the homeowner. Which would seemingly apply to nearly all investor related transactions. Specifically, Section 50(b)(10) states that all liens must be extinguished or the investor must assume "all liability" for the lien being foreclosed without without violating the terms of the mortgage. Simply ignoring the due-on-sale clause is now considered criminal mortgage rescue fraud.  A Class 2 Felony. Anyone else have a different take?

Rick H. · Answer

The problem with doing a lease option, especially with someone experiencing financial difficulties, is that any judgment liens against them will attach to the property.

Chris Seveney · Answer

@Shiloh Lundahl  - agree like the lease options a lot better. Much cleaner. One thing we do based on attorney feedback is make sure the lease and the option are two separate documents. Also have the lease allow us to sublease it

Shiloh Lundahl · Answer

I like lease option contracts because they can be similar to subject to, but the deed doesn't transfer so it doesn't trigger a lot of these issues.

For those well versed in both lease options and subject to, what issues could arise from just doing an option agreement that can't be mitigated in the option agreement itself? Let's exclude Texas from this conversation because they have different anti-lease option laws there.

Ken M. · Answer

Washington State has had a law on the books that it's a felony to approach someone who may or thinks they may get into foreclosure unless they are a lawyer or a real estate agent or mortgage lender. I don't have it memorized, I 've posted it before, but it was a couple years before Morby said he had the attorney general of California's approval. (Yikes!) Yep. He said that. The video is still up at Youtube. What he in reality had was a guy from one of the districts of California for an interview and twisted it as he so often does.

Anyway, foreclosures, subject to, crossing the freeway at rush hour, "ya gotta know what yer doin'"

Henry Lazerow · Answer

Nope I have been realtor on VA and FHA non owner occupant assumptions. It’s allowed. You may need talk to management though, for one deal they said no and then later said your right that is allowed and it closed. The lenders do not make much on assumptions so getting them to go along is a pain.

Glen Olson · Answer

This is not correct.  VA loans can be assumed by non-owner occupied buyers.  The person assuming the loan does not need to be a veteran either, despite what some lenders might think.  The point of clarification is that the eligibility for the VA loan must remain with the original buyer if the purchaser is not going to occupy the home.  That means that if they have an outstanding loan balance of $300,000 even though a new person assumes the loan, that $300K goes against the seller's total VA eligibility.  Eligibility amount varies by county but standard is currently $832,750 total.  In this scenario, the seller would only be able to use $532,750 more VA eligibility to buy their next home.

Rick H. · Answer

@Henry Lazerow My understanding is that conventional loans cannot be assumed and FHA, VA, and USDA only by individuals who intend to occupy. Am I missing something?

Rick H. · Answer

Interesting. I guess it really is just all who you know.

Henry Lazerow · Answer

Just do an assumption which releases the homeowner of any liability, I have closed two of those for clients in the last year. Not every deal allows it but if have the capital to fill the gap there are many opportunities.

Sub2 = Class2 Felony in IL?

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