It was controversial when it took effect, and it remained controversial until public officials decided enough was enough – roughly a little more than a year later. But House Bill 4050 (renamed Public Act 94-280) is now null and void, which should be a relief to real estate investors and prospective homebuyers looking for bargain property in south Chicago.

Responding to the public outcry of legislative redlining, equal protection violations, and racial discrimination against minority residents living in certain Chicagoland areas, Illinois Gov. Rod Blagojevich suspended the law on January 19, 2007.

A statement released by Dean Martinez, Secretary, Department of Financial and Professional Regulation, explained the decision to suspend the law by stating, “the Secretary received and reviewed information that suggests that the prior designation may be detrimental to the Pilot Program’s purpose, namely, to curb predatory lending practices in areas with high rates of foreclosure on residential home mortgages.”

For legitimate investors looking to help homeowners in distress, the law’s suspension is welcome news. Although its intent was to reduce foreclosures in certain blighted areas in Chicago, the law stirred up a public outcry from the get-go due to the pilot program zeroing in on 10 zip codes chosen for their high foreclosure rates,  but heavily populated by minority communities — especially African Americans and Hispanics.

The law required prospective homeowners to undergo financial counseling before obtaining a mortgage, as well as supplying personal information to their lender that would be entered into a state government database. Plus, the law applied only to state-chartered lenders not federally-chartered lenders.

With HB 4050 effectively dead, homeowners — some of whom have taken out second and even third mortgages on their properties — need help to get out of a potentially disastrous financial situation. As we move forward in 2007, with the local market in the doldrums, this would be one of those areas around the nation that it would be worthwhile for investors to keep up to date on.