Recently, in a rare display of bipartisanship, the Illinois House and Senate passed—almost unanimously—an amendment to the Illinois Residential Mortgage License Act, 205 ILCS 635/1-1 et al. (IRMLA). On July 23, 2015, Governor Bruce Rauner officially signed Public Act 99-0113 into law. Public Act 99-0113 amends and clarifies the IRMLA, explicitly stating that mortgage loans “brokered, funded, originated, serviced or purchased by a party who is not licensed…shall not be held to be invalid solely on the basis” of the lack of license. The Act further states that it is “declarative of existing law,” giving the amendment retroactive effect.
As we have written in a previous article, the Second District Appellate Court’s 2014 decision in First Mortgage Co. v. Dina, 2014 IL App (2d) 130567 cert. denied, 386 Ill. Dec. 475, altered the landscape of mortgage foreclosures across Illinois. That decision, interpreting the IRMLA, held that a mortgage originated by a lender not licensed under the IRMLA is void ab initio. Since Dina was handed down, there have been a seemingly endless influx of challenges by foreclosure defendants to the enforceability of their mortgages. While many of these challenges have proven unsuccessful, a significant number of mortgages have been vulnerable to invalidation and foreclosure litigation has been tied up throughout the State. We believed Dina was wrongly decided given existing precedent, and it appears the Illinois Legislature agreed.
This amendment should put an end to all Dina challenges in Illinois courts. While there have been rumblings from foreclosure defense attorneys about possible retroactivity challenges, we do not anticipate such challenges gaining much traction. The Illinois Legislature rarely speaks with one voice, and their intent here is clear and unambiguous. Moreover, state court judges throughout Illinois have shown little enthusiasm for the Dina decision, and we anticipate they will gladly give the amendment its intended retroactive effect.
In short, mortgage services and investors can rest easier. There is no longer the threat of invalidation of a significant number of mortgages, and the influx of Dina cases should halt. The Illinois Legislature and Governor Rauner should be commended for recognizing the problem and promptly passing a solution.