Looking over my recent blog posts and the traffic generated by my past posts on stopping foreclosures in Illinois, it would seem that more people than ever facing foreclosure have questions relating to the process. I primarily practice foreclosure defense and debt relief in McHenry County, Lake County, Kane County, and DuPage County, but this advice may be relevant in other counties and judicial circuits.
Basics of a residential mortgage loans in Illinois.
You have a mortgage, a second mortgage, and/or a home equity line of credit. The loan itself is documented by a promissory note by which you personally promise to repay the loan in a certain time period with certain finance charges (usually fixed or variable interest over the life of the loan with the occasional up-front finance charge). This loan must be repaid by making minimum timely payments. The failure to make the payments as called for by the terms of the note is an event of “default,” meaning that you breached the contract (and a promissory note is nothing more than a special type of contract). Although rare, the defense of payment—i.e. that you actually performed your payment obligations pursuant to the terms of the promissory note—occasionally comes up. If you actually have made all of your payments, that is the most effective defense to stop a foreclosure in Illinois. The burden is on you to prove that you actually made these payments (you can’t just walk in to court and prove that the bank did not receive your payments), so you will need some evidence other than your word to succeed on this defense.
The promise to repay the loan is secured by a mortgage. A mortgage is a document that grants the lender a lien on your real estate property. When it is alleged that you have failed to pay on your loan as called for in the promissory note, the mortgage will also grant the lender the right to foreclose on your property. Mortgages are fairly standardized across the country (Fannie Mae publishes forms that are used in 99.9% of mortgages), and defects in the drafting of these documents are rare. However, if you are interested in stopping your foreclosure, reviewing the mortgage attached to the foreclosure complaint is worth a shot.
If the promissory note and mortgage are in line, there are still defenses to your foreclosure case.
Notice requirements prior to filing a foreclosure complaint in Illinois.
Illinois has generous protections for home owners that must be completed before your lender can file a foreclosure suit against you. One of these protections is the obligation of your lender to give you a significant amount of advance notice prior to filing suit.
The first type of these notices is probably set forth in the promissory note (which will be attached to the complaint). Most promissory notes give the lender the right to “accelerate” the balance due on the note in the event of a default, which basically means that if you miss payments, instead of only being able to demand the past-due payments, the lender can demand that you pay the entire thing. Most promissory notes contain a provision that requires that the lender send you one or more written notices that your account is past due and that the lender will consider the balance to be accelerated if you do not bring the loan current within a certain number of days. If your promissory note contains this language (and it probably does) and if you did not receive such a notice from the bank in the manner set forth in the note, this is a potent defense to a foreclosure lawsuit. The argument is basically that the lender had an obligation under the contract created by the promissory note to give you notice, and the lender cannot strictly enforce the contract if it did not strictly adhere to the obligations imposed upon it by the contract.
Another notice is required by the Illinois Mortgage Foreclosure Law. Section 15-1502.5 of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1502.5) imposes an obligation on lenders to send you a “Grace Period Notice” alerting you of your right to seek housing counseling and forbidding the lender from initiating a foreclosure suit until that grace period has expired. Lenders occasionally forget to send the Grace Period Notice out, and if you did not receive such a notice that is another defense to your foreclosure case. As of the date of this blog post, this is still good law in Illinois, but it is currently scheduled for repeal on July 1, 2016. If you are reading this blog post after that date, you should check the statute to see if it is still good law.
A third notice is set forth in the Code of Federal Regulations and applies only to federally-insured mortgages. Title 24, Part 203.604 of the Code of Federal regulations (24 CFR 203.604) imposes an obligation on the lender for a federally-insured mortgage to have a face-to-face meeting with the borrower before initiating foreclosure proceedings. I have never defended a foreclosure case where the lender has actually complied with this obligation. Illinois courts will dismiss foreclosure cases based upon the failure of the lender to comply with this federal obligation. See, e.g., Bankers Life Co. v. Denton, 458 N.E.2d 203 (3d Dist. 1983). If you have a mortgage insured by HUD, and if your lender did not attempt to have a face-to-face meeting with you, you have a good chance to stop your foreclosure case.
Does the entity suing you have the legal right to?
The ability of a company or person to sue you is called “standing.” Even if you have in fact defaulted on your obligation to pay your mortgage, few entities have the right to drag you into court to obtain a judgment against you.
Standing (or, more importantly, the lack of it for the company suing you) used to be a much bigger issue in the heyday of residential mortgage foreclosures from about 2008 until 2014. Today? Not so much.
There used to be a big problem with lenders receiving the rights to a mortgage loan and executing the documents necessary to effectuate that transfer after the fact. In response to this issue, Illinois Supreme Court Rule 113 was added to our laws to govern the handling of foreclosure complaints. Effective as of May 1, 2013, all foreclosing lenders have to attach a copy of the promissory note as it exists at the time to their complaint. If the promissory note is not endorsed in blank or endorsed to the company suing you, it is readily apparent on the first reading of the complaint. As a result, pretty much every foreclosure case filed in Illinois since May 1, 2013 has included a properly-endorsed promissory note to the complaint.
The company suing you may make a mistake, so it is worth it to review the promissory note to determine whether the company suing you has the right to sue you. If this is the case, the company’s lack of standing to prosecute the lawsuit is another potent way to stop your foreclosure.
Can the company prove that you actually defaulted on your obligation to repay the loan?
If the upfront defenses of the lack of notice or standing are not present in your case, not all is lost. You can still force the company suing you to prove their case. The way to accomplish this is more technical than the other defenses, and I will not begin to explain it here. It usually involves some combination of written discovery (interrogatories, requests to admit, and requests for production of documents), oral discovery (depositions of bank officers), and the presentation of evidence in response to summary judgment. In the hands of experienced mortgage foreclosure defense attorneys, many cases can be won at this stage.
Is bankruptcy an option?
You have rights under the federal bankruptcy laws. If you are a good candidate for a Chapter 7 or Chapter 13 bankruptcy, you can either propose a plan to bring the mortgage current or discharge the debt you owe before or after the foreclosure case concludes. Bankruptcy is strong medicine that should not be taken lightly. If you are interested in talking about bankruptcy, give me a call to set up an appointment to chat about whether it is a good fit for you. Bankruptcy will temporarily stop a foreclosure case with the automatic stay set forth in the bankruptcy laws, and if your Chapter 13 plan is successful, it can end the entire case.
How I can help.
I have experience successfully defending residential and commercial foreclosure cases. In addition to the common defenses I have sketched out in this blog post, I have other tricks up my sleeve that I would not post publicly because the attorneys working for the banks can read this, too. I can help you short sell your house, apply for a loan modification, seek a deed in lieu of foreclosure, or present you other options that would enable you to stop your foreclosure case. In most cases, I can work out a predictable monthly payment plan with my foreclosure defense clients that will avoid you being sideswiped with a $2,000 bill after I need to do a lot of work for you in that month. If we can work out a monthly payment arrangement, it will almost certainly be less than the amount you were paying on your mortgage.
I am happy to sit down and speak with you at no cost or obligation to discuss whether we are a right fit for to help you stop your foreclosure. Give me a call at 815-317-5193 to set up an appointment.