Qualifying borrowers are those who would be unable to secure a mortgage approval under the financial institution’s normal lending guidelines, typically due to reasons such as credit blemishes, lack of credit history, high debt-to-income ratio, or lack of sufficient down-payment.

The objective of the program is to keep Illinois homebuyers and homeowners in traditional lending rather than resorting to a predatory lender. The program enables lenders to approve mortgages that they would like to approve but would otherwise have to reject.

Participation Guidelines

The Treasurer’s mortgage guarantee program is governed by Illinois statute, 15 ILCS 520/7. In addition, all lenders participating in this program must also comply with Article V of the IL Residential Mortgage License Act of 1987 (205 ILCS 635). 

The statutory requirements under 15 ILCS 520/7 are as follows:

1. The borrowers must be Illinois citizens.
2. The home being purchased or refinanced must be located in Illinois.
3. The borrower cannot otherwise qualify for a home loan under the financial institution’s prevailing credit standards without the incentive of the 10% guarantee.
4. The 10% guarantee may be used for the purchase of a home.
5. The 10% guarantee may be used to refinance existing home loans when the borrowers have failed to make payments on a home loan as a result of a financial hardship due to circumstances beyond their control and where there is a reasonable prospect that they will be able to resume full mortgage payments. The following factors shall be considered by the financial institution to determine whether the financial hardship is due to circumstances beyond the control of the borrowers:
   • Loss, reduction or delay in the receipt of income because of the death or disability of a person who contributed to the household income;
   • Expenses actually incurred related to uninsured damage or costly repairs to the mortgaged premises affecting its habitability;
   • Expenses related to the death or illness in the borrower’s household or of family members living outside the household that reduce the amount of household income;
   • Loss of income or a substantial increase in total housing expenses because of divorce, abandonment, separation from a spouse, or failure to support a spouse or child;
   • Unemployment or underemployment;
   • or Loss, reduction, or delay in the receipt of federal, state or other government benefits, or participation by the homeowner in a recognized labor action such as a strike.

   In order to determine whether there is a reasonable prospect that the borrower will be able to resume mortgage payments, the financial institution shall consider factors including, but not limited to, the following factors:

   • A favorable work and credit history;
   • The borrower’s ability and history of paying the mortgage when employed;
   • The lack of an impediment or disability that prevents reemployment;
   • New education and training opportunities;
   • Non-cash benefits that may reduce household expenses; 
   • and Other debts.
6. The 10% guarantee can be used for loans in amounts that do not exceed the amount of arrearage on a mortgage and that are extended to enable a borrower to become current on the mortgage obligation.
7. Home loan is defined as a loan for which:
   • The principal amount of the loan does not exceed 50% of the conforming loan size limit for a single-family dwelling as established by the Federal National Mortgage Association (Fannie Mae);
   • The borrower is a natural person;
   • The debt is incurred by the borrower primarily for personal, family or household purposes;
   • The loan is secured by a mortgage or deed of trust on real property upon which there is located or there is to be located a structure designed principally for the occupancy of no more than four families;
   • and the property will be occupied by the borrower as the borrower’s principal dwelling.
8. A home loan is not an open-end credit plan or a reverse mortgage transaction.

Finally, notwithstanding any provisions found in Article V of the IL Residential Mortgage License Act of 1987, lenders participating in this program will follow the following underwriting guidelines:  

1. The borrowers’ income may not exceed 115% of HUD’s median family income for the area in which the home is located.  The income limit is based on the number of people in the household and HUD updates this amount annually.  
2. Loans including negative amortization are not eligible for this program.
3. The Treasurer’s 10% guarantee is valid for five years.  If a loss triggers payment under the Treasurer’s 10% guarantee, the payment will come from the Treasurer’s collateral pledge fund.
4. In the case of foreclosure, payment of no more than the pledged amount shall be made to the financial institution
5. In the case of foreclosure, payment pursuant to the Treasurer’s guarantee is only to occur if the financial institution realizes a loss.  The Treasurer’s payment shall not exceed the amount of the loss.
6. No participating institution may receive more than 5% of the collateral pledge fund (recalculated every six months due to interest accumulation).  Financial institutions may request to obtain greater than 5% of the collateral pledge fund. 
7. The 10% guarantee may only be used for home loans for an owner-occupied one to four unit primary residence on non-leased land, taxed as real estate property by the county in which the property is located.

How to Become a Participating Lender

1. Submit the pledge of collateral agreement.
2. Submit the program application on behalf of your borrower.
3. The Treasurer’s Office will review the application and notify you in writing of your approval. Applications are typically processed within five business days.

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