How Does The Foreclosure Process Work In Illinois?
November 4, 2022
When you can’t pay your mortgage on time, you start to panic. How much time do I have to get caught up? What happens when a foreclosure is filed? How soon can they sell my house, and what can I do to stop them? What follows is a description of the process of foreclosure and how to answer these questions.
WHAT IS THE GENERAL FORECLOSURE TIMELINE?
Mortgage payments are generally due on the first of each month, but treated as on time as long as they are processed by the 15th of the month. If the payment is processed after 15 days, then you will be charged a late fee (banks make millions of dollars from these “late charges”).
Once the account goes into the second month of being unpaid, the mortgage account will become delinquent. The mortgagee is required to send a notice advising you that you have 30-day grace period to contact a housing counselor or seek loss mitigation; a second 30-day grace period is required before taking legal action. After a third payment is missed, the mortgagee will send notice that it is accelerating the entire loan, and that it intends to file a foreclosure.
If the home mortgage remains delinquent between 90 and 105 days, then the mortgage company will stop accepting payments and declare a default. The loan will then be transferred to the loss mitigation department (foreclosure department) and referred to a foreclosure law firm. The law firm may send you a letter regarding the delinquency and allow you time to pay the back payments and additional fees and costs. The mortgage company or its attorney must also serve a notice of the right to reinstate the loan at least 30 days before filing a foreclosure.
If attempting to cure the default, you must come up with the full amount owed in one payment (i.e. payment plans will not be an option). The law firm will conduct a title search to determine what parties will be the defendants in the foreclosure lawsuit. The cost of the title search, attorneys’ fees, and other fees will be added to the total amount owed.
Due to federal regulations, an actual foreclosure cannot be filed unless the borrower is more than 120 days delinquent.
THE FORECLOSURE PROCESS IN ILLINOIS
In Illinois, foreclosure is governed by 735 ILCS 5/-1106, 735 ILCS 5/15-1207 Code of Civil Procedure and is known as the Illinois Mortgage Foreclosure Law. The exact contents can be found at CIVIL PROCEDURE (735 ILCS 5/) Code of Civil Procedure.
Illinois is a judicial foreclosure state, which means that a lawsuit has to be filed and served upon the homeowner, anyone with a recorded lien on the property, and all possible tenants of the property. Recorded lien holders include junior (second) mortgages, judgment liens, and any tax lien holder, such as the IRS. Once the foreclosure is filed, homeowners generally receive several letters from lawyers and others offering various services.
Service of the summons is accomplished in one of two ways: via a personal service upon the borrower or anyone in the household above the age of 13, or by publication if the mortgagee is unable to effectuate personal service. The homeowner has 30 days to respond after being served with the foreclosure.
The homeowner can, of course, file an answer denying various allegations and/or raise affirmative defenses, if any. Also, the homeowner can file various forms of discovery and/or admissions. The answer and discovery are best done by an experienced lawyer. When answers, affirmative defenses, and discovery is filed, the foreclosure process can be dramatically slowed and frequently takes years to reach a conclusion.
If the homeowner does not file any answer, then the mortgage company will proceed to a default judgment. If the homeowner filed an answer but did not raise any issues, then the mortgage company will proceed to a summary judgment; either way, the result will likely be a judgment of foreclosure. However, before a judgment can be entered, the mortgagee must show that they offered meaningful assistance to the homeowner. This is generally accomplished by appending help resources to the lawsuit.
The judgment will include multiple charges totaling at least $3,500. Since January 1, 2014, the judgment can also include a deficiency clause, meaning the homeowner would still owe money after the house is sold if the auction price does not cover the full amount owed. During this entire process, the homeowner can generally reinstate the mortgage by paying all amounts due. As time goes by, this amount increases dramatically.
WHAT IS A JUDICIAL OR SHERIFF’S SALE?
The next step is to schedule a judicial sale with at least 30 days’ notice. Homeowners generally receive several letters from lawyers and others offering various services, but time will be running out.
After the judicial sale, the mortgage company must file a motion to confirm the sale. Most frequently, this is presented within a day or two of the sale. Once the sale has been conducted, the mortgage company or other successful bidder will own the house. There is, however, one rare exception to this, which is that if the mortgagee was the purchaser at the sales and the judicial sales price was less than the total amount to redeem, then the homeowner will have a special right of redemption.
The new owner will ask the prior homeowner to vacate the premises within 30 days, and sometimes they will offer cash for the keys. If the prior homeowner does not move out, then a forcible detainer will be filed, which will give the prior homeowner a certain number of days to move or else be evicted by a sheriff.
WHAT OPTIONS DOES A HOMEOWNER HAVE TO DEFEND AGAINST FORECLOSURE?
As a homeowner, you have various rights, and it’s important that you know how to use them in order to defend yourself against foreclosure. In most cases, people cannot provide a lump sum payment to fully catch up on the mortgage or offer a repayment plan acceptable to the mortgagee.
The most effective way to save one’s home is by filing for Chapter 13 bankruptcy. This will provide you with a reasonable method of repaying the mortgage arrearage. The time period can be as long as 60 months, and the plan often reduces the payment to other debts. A Chapter 13 bankruptcy can be filed any time after a delinquency up to the day before the judicial sale, but the sooner the better.
If Chapter 13 bankruptcy is not a practical option for you, then you can defend the foreclosure by filing an answer to the complaint along with various forms of discovery to be sure that the amounts demanded are accurate.
WHAT ARE SOME OTHER POSSIBLE SOLUTIONS TO FORECLOSURE?
The following options may be explored during a Chapter 13 bankruptcy:
- If you have equity, you can perhaps sell your property and have the foreclosure dismissed.
- Mortgagees will seldom agree to a deed in lieu of a foreclosure if there are other liens on the property. If you offer this, do not wait more than a week or two to take a different form of action. If accepted, there will be a limited amount of time to vacate the premises.
- A short sale occurs when the sale of a property results in less money than the debt secured by liens on the property. If a short sale is accepted, be sure you have an experienced lawyer representing you, as there is a danger of the mortgagee sending you an IRS for 1099-C. A 1099-C triggers a phantom income for the shortfall, thereby requiring an income tax payment.
- Agreed judgments of foreclosure may be an option, and would include a waiver of any deficiency.
Our law firm has helped thousands of homeowners to save their homes. When facing foreclosure, please feel free to contact our office. We will be happy to go over your options, which include foreclosure defense, Chapter 7 bankruptcy, and Chapter 13 bankruptcy. Our advice is Complimentary and confidential.