Mortgage Foreclosure Primer

Caption Placed Here
Confidential Foreclosure Primer

Confidential Foreclosure Primer

The Process

  • Illinois foreclosures governed by Illinois Mortgage Foreclosure Law (735 ILCS 5/15)
  • Takes on average 9 months, but can take as long as 24 months in some counties
  • Abbreviated for non-residential and abandoned residential (735 ILCS 5/15-1200)

Steps in the Case

  • Record the Lis Pendens with Recorder
  • File Complaint with the Clerk of Court
  • Serve Summons via a Sheriff or Posting
  • File Motion for Default Judgment
  • Reinstatement Period Expires
  • Redemption Period Expires. Later of
    • Service+90 days
    • Service + 7 Mo. or
    • Jdgmnt + 3 Mo.
  • Conduct the Foreclosure Sale
  • Get Foreclosure Sale Confirmed
  • Right to Possession Expires. Confirmation + 30 days
  • Eviction by Sheriff of Named Parties
  • Recording of Foreclosure Deed

Implications of Foreclosure

  • Homeowners lose their home
  • Loss of equity by homeowner
  • Deficiency Judgment if personal service
  • Borrowers’ credit severely damaged


  • A default begins with the 1st missed payment and dates to that initial missed payment
  • If a 2nd payment is missed the lender must send written notice advising borrowers they have 30 days to contact a housing counselor and that, if a housing counselor is contacted, then the lender will extend another 30 day grace period prior to taking legal action
  • If a 3rd payment is missed the lender must send written notice of accelerationinforming the borrowers that it intends to foreclose and will forward the file to an Attorney

Specifics of the Foreclosure Process Under the IMFLThe Complaint

  • Most Common: Illinois Short Form (IMFL 15-1504(a)) – not required but easier
  • Even if the Short Form was used, make sure the dots are connected
    • The original borrower? The original lender?
    • Has borrower gotten married; divorced; died?
    • How does original lender relate to current plaintiff?
    • Is the chain of title intact? Or are there gaps?
  • Note: (New) Illinois Supreme Court Rule 113(i) relates to deceased borrowers where no probate estate was opened and directs that the court shall appoint a special representative, if a party so moves.
  • What does the Short Form contain?
  • Names of Plaintiffs and Defendants
  • Original Mortgage, Note as Ex. A,B (¶2)
  • Instrument Type (mortgage, etc.) (¶3A)
  • Date of original Mortgage (¶3B-D)
  • Mortgagor, Mortgagee Names (¶3B-D)
  • Recording location, date, doc# (¶3E, F)
  • Mortgagor title interest (¶3G)
  • Original Mortgage Amount (¶3H)
  • Legal, common address, PIN (¶3I)
  • Default date, balance, per diem (¶3J)
  • Present Property Owner(s) (¶3K)
  • Others named and their interests (¶3L)
  • Deficiency against whom (¶3M)
  • Capacity of Plaintiff to bring suit (¶3N)

NoteIf it’s not the original lender, Plaintiff must establish standing here.

See e.g. 735 ILCS 5/2-606 writings on which Complaint is based (assignments, allonges, etc.) must be attached

  • Basis for shortened redemption (¶3O)
  • Was right of redemption waived (¶3P)
  • Facts in support of Attrny’s Fees (¶3Q)
  • Is a receiver sought? If so, why? (¶3R)
  • Satisfaction w/o Sale (15-1402)? (¶3S)
  • All affected Defendants/Parties(¶3T)
  • Prayer for relief

Note: On its face Short Form seems deficient under fact pleading standards but is deemed sufficient

  • The Complaint should be verified or have an affidavit attached (IMFL 15-1506(a)(2))
  • (New) Illinois Supreme Court Rule 113Foreclosure complaint must now attach all endorsements and allonges as well as the Note and Mortgage.

Service of Summons

  • Summons and Complaint must be served along with notice advising homeowner of rights, including reinstatement and redemption
  • Who must be a party?
    • Technically only parties to the mortgage are necessary parties (IMFL 1501(a), 1504) but:
    • Junior Lienholders (judicial, mechanics, etc.), tenants, unknown owners, unknown occupants, and non-record claimants are also included. If not named, their interests are not foreclosed and title has not been cleared. IMFL 1504, BCGS v. Jaster, 299 Ill.App.3d 700.

      Note: Junior Lienholders that preserve their position when a senior lienholder forecloses jump the position of non-responsive junior lienholders. Mid America Federal Savings Bank v. Liberty Bank, 562 N.E.2d 1188.

      Note: Junior Lienholders that timely file a counter-claim can keep the foreclosure suit active and take over as lead plaintiff if the 1st mortgagee settles with the borrower, but the borrower does not come current with them.

    • Unknown Owners are people or entities that may have an unrecorded interest in the property. IMFL 1501(c).

      Note: According to 735 ILCS 5/2-413 and 5/2-206 service by publication is sufficient to give unknowns notice as long as Plaintiff produces an affidavit of diligence in attempting to determine their identities. Callner v. Greenburg, 33 NE 2d 437.

    • Non-Record Claimants are defined in IMFL 1210. The Complaint must contain a sufficient legal description to identify the property so non-record parties can identify it.

      Note: No inquiry is required to establish the sufficiency of notice by publication against non-record claimants. Applegate Apt. v. Commercial Coin, 657 NE 2d 1172.

    • Service on unknowns generally requires publication (once a week for 3 weeks) and must run at least 30 days prior to a default judgment is entered. Must be in a newspaper of general circulation. (IMFL 1502(c).

  • What if a party is in the military?
    • If serving overseas in the previous 12 months, Court must stay proceedings for 90 days
    • Increased foreclosure filing fee
    • Pay an additional $50 at filing to Foreclosure Prevention Program Fund

    See IMFL 15-1504 and Rule 113 – must attach Note with Endorsements and Allonges

File Lis Pendens

  • After Complaint is filed, notice via Recorder of Deeds (“Lis Pendens”) IMFL 15-1503
  • The Lis Pendens notice must be filed in the county in which the property is located
  • The result is to give constructive notice to all after-acquired interests of the action

The Hearing

    • Anybody can appear and become a party

      • Junior Lienholders should protect their positions, especially if there is equity in the property; even if the borrower is then in default
      • If other parties have filed a foreclosure action – whether mortgage or mechanic’s lien – then the cases should be consolidated or counterclaims filed
      • Tenant interests are not terminated by foreclosure as long as
        • Tenancy existed before the mortgage was given, Kelley/Lehr v. O’Brien, 194 Ill.App.3d 360 (2nd Dist. 1990); or
        • Tenant was not made a party to the proceedings, IMFL 15-1504(t); or
        • Plaintiff failed to comply with the 2009 Protecting Tenants at Foreclosure Act


      • : Leases entered into prior to foreclosure must be honored until concluded
    • Mediation is now statewide, although at the Circuit’s discretion. (New) Illinois Supreme Court Rule 99.1.
    • Defendant participation in mediation can delay proceeding for an extra 2 months
    • Most cases end in default because borrowers don’t appear or answer. Many do not understand that showing up is not enough.

Note: See notice requirements and other changes in (New) Supreme Court Rule 113(d):

Notice Required. In all mortgage foreclosure cases where the borrower is defaulted by court order, a notice of default and entry of judgment of foreclosure shall be prepared by the attorney for plaintiff and shall be mailed by the Clerk of the Circuit Court for each judicial circuit. The attorney for plaintiff shall prepare the notice in its entirety and deliver to the Clerk of the Circuit Court one copy for filing and one copy for mailing within two business days after the entry of default. The Clerk of the Circuit Court shall mail within five business days after the entry of default, by United States Postal Service, a copy of the notice of default and entry of judgment of foreclosure to the address(es) provided by the attorney for the plaintiff in an envelope bearing the return address of the Clerk of the Circuit Court and file proof thereof. The notice shall be mailed to the property address or the address on any appearance or other document filed by any defendant. Any notices returned by the United States Postal Service as undeliverable shall be filed in the case file maintained by the Clerk of the Circuit Court. A Sample Notice is provided in the Rule.

Summary Judgment. Even if borrowers respond, where there is no genuine issue of material fact summary judgment is appropriate as long as the Plaintiff can produce the original note, mortgage (along with assignments), and evidence of default via affidavit. If it can, then the borrower has the burden of proving their affirmative defenses or counter-claim (if any).

Issues of Material Fact. Where the Complaint is verified, stock “lacks sufficient information” responses are insufficient to defeat a Motion for Summary Judgment. Likewise, an unverified Answer is insufficient when the Complaint is verified. When the Answer is verified, the borrowers may only “deny” allegations when they have a good-faith basis for doing so – no more blanket denials. However, borrowers may attempt to attack the affidavit(s) attached to the Motion for Summary Judgment.

Note: See changes to requirements for Loss Mitigation Affidavits in (New) Illinois Supreme Court Rule 114:

Rule 114: Loss Mitigation Affidavit

  1. Loss Mitigation. For all actions filed under the Illinois Mortgage Foreclosure Law, and where a mortgagor has appeared or filed an answer or other responsive pleading, Plaintiff must, prior to moving for a judgment of foreclosure, comply with the requirements of any loss mitigation program which applies to the subject mortgage loan.
  2. Affidavit Prior to or at the Time of Moving for a Judgment of Foreclosure. In order to document the compliance required by paragraph (a) above, Plaintiff, prior to or at the time of moving for a judgment of foreclosure, must file an affidavit specifying:
    1. Any type of loss mitigation which applies to the subject mortgage;
    2. What steps were taken to offer said loss mitigation to the mortgagor(s); and
    3. The status of any such loss mitigation efforts.
  3. Form of Affidavit. The form of the affidavit shall be as set forth below in Form 1, or shall be in a form specified by amendment to this rule, but, in any case, shall contain the information set forth in paragraph (b) above. (Sample affidavit is in the Rule.)
  4. Enforcement. The court may, either sua sponte or upon motion of a mortgagor, stay the proceedings or deny entry of a foreclosure judgment if Plaintiff fails to comply with the requirements of this rule.

Note: See changes to the requirements for Prove-Up Affidavits in Rule 113

  1. Requirement of Prove-up Affidavits. All plaintiffs seeking a judgment of foreclosure, under section 15-1506 of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1506), by default or otherwise, shall be required to submit an affidavit in support of the amounts due and owing under the note when they file any motion requesting a judgment of default against a mortgagor or a judgment of foreclosure.
  2. Content of Prove-up Affidavits. All affidavits submitted in support of entry of a judgment of foreclosure, default or otherwise, shall contain, at a minimum, the following information:
    1. The identity of the affiant and an explanation as to whether the affiant is a custodian of records or a person familiar with the business and its mode of operation. If the affiant is a person familiar with the business and its mode of operation, the affidavit shall explain how the affiant is familiar with the business and its mode of operation.
    2. An identification of the books, records, and/or other documents in addition to the payment history that the affiant reviewed and/or relied upon in drafting the affidavit, specifically including records transferred from any previous lender or servicer. The payment history must be attached to the affidavit in only those cases where the defendant(s) filed an appearance or responsive pleading to the complaint for foreclosure.
    3. The identification of any computer program or computer software that the entity relies on to record and track mortgage payments. Identification of the computer program or computer software shall also include the source of the information, the method and time of preparation of the record to establish that the computer program produces an accurate payment history, and an explanation as to why the records should be considered “business records” within the meaning of the law.
  3. Additional Evidence. The affidavit shall contain any additional evidence, as may be necessary, in connection with the party’s right to enforce the instrument of indebtedness.
  4. Form of Prove-up Affidavits. The affidavit prepared in support of entry of a judgment of foreclosure, by default or otherwise, shall not have a stand-alone signature page if formatting allows the signature to begin on the last page of the affiant’s statements.

    Sample Affidavits are provided in the Rule.

  • Finally, while rare the case could actually go to trial: which will be like any other civil trial. Allegations deemed sufficient from using the short form, must be proven at trial. Think of it as a breach of contract suit – contract, breach, and damages are what have to be shown.

Defenses to Foreclosure

  • Force-placed Insurance: Situation where a lender purchases insurance believing that the homeowner let theirs lapse, and if in fact the homeowner has their own insurance the homeowner does not have to pay for force placed insurance.
  • Tax Sale: Real estate taxes are unpaid and sold, the buyer should not have to pay any increased costs if the buyer made all time mortgage and escrow payments and responded to all lender inquiries
  • Lost Payments: When a loan is so sold or transferred and payments are not applied properly
  • Failure to accelerate the Note: If the loan documents require notice of acceleration, and notice is not sent the foreclosure can be defeated
  • Suit after Assumption: If the original Mortgagor sells the property without a release there will be personal liability in a foreclosure action. The original mortgagor should be dismissed without adverse credit consequences.
  • FHA-Insured Loans: FHA loans have special requirements. These include a notice of counseling mailed to the homeowner within 45 days of default, a face to face meeting with the borrower within 90 days of default, and a notice of available counseling. If these rules are not complied to there is an affirmative defense.
  • Accepting Payments after Foreclosure: If the lender accepts payments after filing foreclosure and there is no bankruptcy this may be a defense to the foreclosure.
  • Truth –in Lending and HOEPA Violations: the original documents must be reviewed to see if there were any violations.
  • Fraud, Abuse, Collusion: Must be proven and may be used as an equitable defense to foreclosure.
  • Fair Debt Collection Practices Act: All Fair Debt Collection Practices must be followed by the attorneys who file foreclosure papers for they are debt collectors

    Note: Not a defense, but can help to give rise to a claim of damages or statutory claim

    • Failure to attach note and mortgage to complaints: Note and mortgage must be attached to the complaint or the complaint can be struck.
    • Incorrect Notice or Service: Information must be accurate (mistakes can invalidate Order)

Foreclosure Judgment and Order of Sale

  • Following default, summary judgment, or trial, a Judgment of Foreclosure and Order of Sale must be entered consistent with IMFL 15-1506:
    • Last dates for redemption and/or reinstatement
    • Provide for seller other than county sheriff
    • Ruling made pursuant to the prayer for relief


  • Payment of past due amounts- the total that is owned including all principal, interest, escrow, costs and fees to make the account current


  • Redemption is the payment of all amounts that are due to the lender, principal, interest, fees, and costs
  • If the property is residential the redemption period ends 7 months from the date the lender was served or 3 months from the date of the judgment

Judicial Sale

  • If the rights to reinstate and redeem are expired the lender may sell the home by judicial sale
  • Notice must be given to all parties who have appeared and that were not found in default
  • This must also be served in the newspaper for 3 weeks, and must be posted between 7 and 45 days prior to the judicial sale
  • The Lender can credit bid up to the amount of their judgment. Any amount less than the judgment is a deficiency.
  • The procedures for the sale vary some by county. In Will County, the sale occurs at the courthouse on Wednesdays. Judgment creditors specify an opening bid. Any 3rd party bidders must put up 10% of their bid (cash or certified funds) and pay the balance within 24 hours. The sale is an auction, open to the public and publicized according to IMFL 15-1507(c)
  • IMFL 15-1507(c) the sale can occur any day after the redemption period has passed. Publication of the sale must be published in a paper of general circulation for the county where the property is located. The notice must be published once a week for 3 consecutive weeks. The notice cannot be published more than 45 days before the sale and not less than 7 days before the sale. Also parties not in default must be sent notice via regular US mail. (It’s generally best to mail notice even if defaulted. See your local rules.)
  • If a sale is continued (not held), republication is not needed if less than 60 days.
  • Remember than a low sale price does not render a sale invalid.
  • The selling officer will produce a Certificate of Sale and send it to the Plaintiff. This document is generally recorded.
  • The sale is not complete until confirmed by the Court; so the Plaintiff must petition the Court to confirm the sale.
  • The Court will confirm the sale unless per IMFL 15-1508(b)

    1. Notice was deficient
    2. The terms of sale were unconscionable
    3. The sale was conducted fraudulently
    4. Justice was not otherwise done.

    Obviously #4 gives the court the most latitude

  • Order of possession will also be entered and stayed for 30 days
  • Personal liability for deficiency is established, and the order is the final order open for appeal and other motions

The (Closing or) Judicial Sale With 3rd Party Bidders

  • A 3rd party bidder is anyone other than the judgment creditor at the sale.
  • Only the judgment creditor can “credit bid”. All others must conform to the conditions of the sale, generally cash in full or 10% down (cash or certified funds) and the balance in 24 hrs.
  • 3rd Party bidders used to be rare; however, they have become more popular. Investors are looking at getting a good deal. Holding onto the property or renting it out.
  • Issues can arise where the Judgment of Foreclosure is silent on the terms or the terms differ from the conditions actually at the sale. World Savings v. AmerUs (1st Dist, Nov. 16, 2000)
  • IMFL 15-1509(a) grants the buyer a deed at confirmation.

Special Redemption

  • Under IMFL 15-1604 a Special Right to Redeem is a redemption that applies if the purchaser of a resident is the mortgagee and the sale price is less that the total amount of principal, interest, costs and attorney’s fees
  • The mortgagor has a right to redeem up to 30 days after the foreclosure sale by paying the sale price, all costs incurred by the mortgagee is due to sale and confirmed by the court

Foreclosure and Tenants

  • Tenants cannot have their right to possession terminated by the Order Approving Sale
  • Plaintiff must obtain a Supplemental Order of Possession or file a forcible entry and detainer action
  • A lease is still valid even after a foreclosure has been filed
  • If the plaintiff becomes the new owner as a result of a foreclosure the bank must notify the tenant
  • If the bank does not notify the tenant tee bank cannot demand rent
  • Before an eviction case can be filed the bank must serve the tenant with written notice to vacate giving the tenant at least ninety (90) days after their lease ends to move out of the building
  • If eviction is due to a building foreclosure the tenant’s eviction should be sealed by the court
  • If the tenant is a Section 8 housing Voucher holders, the bank is required to accept rental payments from the tenant and the Chicago Housing Authority (CHA)

New Legislation and Amendments

  • A copy of the notice must be sent by first class mail, postage prepaid where the property is located
  • Confirmation of sale must be sent where the property is located
  • Lender contact information must be given
  • The grantee or mortgagees name, street, mailing address, telephone must be listed
  • No foreclosure action may be brought until required notice is served on the mortgagors and notice period has expired
  • This notice period is 30 days from the mailing of the notice, or if an approved counseling agency provides written notice

    The Exceptions Are:

    • Property is non-residential
    • Mortgagor has previously filed for relief under the Bankruptcy Code
    • Real estate not occupied as mortgagor’s principal residence.


  • IMFL 15-1511 a foreclosure of a mortgage does not affect a mortgagee’s rights to obtain a personal judgment for a deficiency.
  • A deficiency is essentially the amount of the judgment less the amount that the property sold for at the sale. A deficiency is like any other judgment in Illinois and can get statutory judgment interest.
  • IMFL 15-1508(e) allows for the deficiency to be entered as part of the judgment confirming the sale.
  • The language in 15-1508(e) states the court shall enter a deficiency if requested in the complaint and proven in the report of sale. Lately Judges have been using the report of sale requirement to require banks to jump thru many hoops to get a deficiency. In many instances, banks have stopped asking for them. This depends on the judge. (There is a well-known judge in Will County that makes it very difficult for banks to get deficiencies.)
  • In many instances the sale will be confirmed, but damages (deficiency will be scheduled for a different time)
  • As part of the prove up for a deficiency a court may require: a copy of the complaint showing a deficiency was sought, certified appraisals (pre-mortgage and post-sale), loan history and affidavits, copy of the report of sale, etc… This will vary by county and sometimes even by judge. Cook County can also make it difficult for lenders to obtain a deficiency.
  • Remember a deficiency is only available against parties that were personally served. If only served by publication, no deficiency is available.
  • Don’t forget that a sale for less than the judgment amount triggers the special right to redemption under IMFL 15-1604. This gives the borrower an additional 30 days after the sale to redeem. However, the lender can still get an in rem deficiency against the property to protect their interest.
  • Note that an in rem deficiency can be turned back into an in personam deficiency if there is a subsequent action to enforce the deficiency.
  • Remember no personal deficiency can be sought or granted against a borrower who was discharged in bankruptcy (and did not reaffirm the debt).

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