How Does The Foreclosure Process Work In Illinois?

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:

  1. If you have equity, you can perhaps sell your property and have the foreclosure dismissed.
  2. 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.
  3. 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.
  4. 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.

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