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Illinois Foreclosure Process Summary

Illinois Foreclosure Process Summary

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Published by: ForeclosureGate.org Library on Mar 21, 2011
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Mortgage Foreclosure
Author: Attorney Desk Reference ManualLast updated: March 2005
 State Statutes Foreclosure Process Why it Matters Definitions Warning!!Options Workout Agreement Defenses to Foreclosure Tenants Judicial SaleInvestment Property Foreclosure Scams
 
General Information about Foreclosure (Fact Sheet) Contract for Deed Home Buyers' Rights and Obligations (Fact Sheet) Back to Housing Law Table of Contents Back to Attorney Desk Reference Manual Table of Contents 
State Statutes
Illinois Mortgage Foreclosure Law (IMFL),735 ILCS 5/15–1507,1508; 1602 Back to Top 
Foreclosure Process
The entire process in Illinois takes, on average, from the filing of the complaint to the eviction bythe sheriff, nine months. Foreclosure defense in court is seldom successful in defeating theforeclosure action but may prolong the foreclosure by as much as 24 months. If the property is notresidential or is abandoned, the process can be substantially shortened. The following is an outlineof a typical foreclosure case:
Default
Filing of Foreclosure
Personal Service of Summons
Foreclosure Judgment and Order of Sale
Reinstatement Period Expires
(90 days after personal service)
Redemption Period Expires
(7 months after personal service or 3 months after judgment,whichever is later)
Foreclosure Sale
Foreclosure Sale Confirmed
Right to Possession Expires (30 days after foreclosure sale confirmed)
 
Page 1 of 6Illinois Pro Bono | Mortgage Foreclosure3/20/2011http://www.illinoisprobono.org/index.cfm?fuseaction=home.dsp_Content&contentID=327
 
Eviction by Sheriff of Named Parties
Recording of Foreclosure Deed
Why It Matters
The homeowners risk the loss of their home (including any accumulated equity), a personaljudgment for the debt, and the loss of future credit, since a foreclosure judgment appears on creditreports.
Definitions
Default:
The date of the first missed payment.
Reinstatement:
Payment of past-due amounts, including all accumulated costs and fees, bringingthe account current.735 ILCS 5/15-1602. This right is only available once every five years. Themortgagor has the right to reinstate the mortgage within 90 days from the date the mortgagor wasserved with a summons or is served by publication or was otherwise submitted to the jurisdiction of the court.
Redemption:
Payment of the full principal balance, all accumulated interest, fees, and costs. In thecase of residential real estate, the redemption period ends seven months from the date themortgagor was served with summons or by publication or three months from the date of entry of the judgment of foreclosure, whichever is later.
Special Redemption:
A right of redemption that applies if the purchaser of residential property ata foreclosure sale is the mortgagee and if the sale price is less than the total amount of principal,interest, costs, and attorneys' fees. Under those circumstances, the mortgagor has a special right toredeem up to 30 days after the foreclosure sale is confirmed by paying the sale price, all additionalcosts incurred by the mortgagee set forth in the report of sale and confirmed by the court, andinterest at the statutory judgment rate from the date the purchase price was paid.735 ILCS 5/15-1604. 
Mortgage:
Mortgages for this purpose include real estate installment contracts of more than fiveyears duration, entered into after July 1, 1987, whose balance is less than 80% of the originalpurchase price. IMFL provides the exclusive method for foreclosing on all mortgages. In addition,the secured party in some UCC actions may elect to use IMFL, if the security interest is based on theassignment of a real estate installment contract or the beneficial interests in a land trust.
Warning!!
Homeowners threatened with foreclosure receive a flood of mail offering quick fixes and advice.Homeowners should be warned about this mail and told to discard it all. Typically, scams involveoffers to refinance (at an exorbitant interest rate or with hidden fees) and offers to buy theproperty, pay off the mortgage and resell the property to the homeowner, usually at an inflatedprice or on terms guaranteed to cause default.Back to Top 
Options
If the house is not yet in foreclosure
, the client should immediately contact the lender and try to
 
Page 2 of 6Illinois Pro Bono | Mortgage Foreclosure3/20/2011http://www.illinoisprobono.org/index.cfm?fuseaction=home.dsp_Content&contentID=327
 
work something out. The client should pay as much as possible and save any money returned by thelender.
Once the house is in foreclosure,
the client should decide if they can and wish to keep the houseor if they wish to move. A realistic and careful assessment of the client’s income and expenses mustbe done to determine if it is feasible to keep the home.
If the homeowner is to keep the house
,they must
reinstate
,
redeem
, file a Chapter 13
bankruptcy,
or attempt a
work out
with the lender.
Ithe homeowner does not want to keep the house
, the client can
sell
the house, offer a
deed-in-lieu of foreclosure
, or file
bankruptcy
.
Sales:
The house can be sold at any point through the final redemption date. Proceeds are used toredeem the mortgage. This is a particularly good option for a homeowner who has substantial equityin the home. An
assumption
of the mortgage by the purchaser is also possible. The lender may alsoagree to a
short-sale
– a sale for less than the debt – if the house has been assessed at less thanthe value of the debt. A short sale has tax consequences – forgiveness of debt is income – andbuyers should be advised accordingly.
Deed-in-lieu:
The client deeds the house to the lender and moves out in exchange for a releasefrom personal liability on the debt. The procedures are set forth at735 ILCS 5/15-1401. There canbe no junior liens on the property for this to work. The Illinois ARDC recommends that thehomeowner use an attorney for the preparation of these documents to avoid chances of practicinglaw without a license.
Bankruptcy:
If the buyer has enough regular income that they can bring the mortgage currentwithin 36 months, they may be eligible for a Chapter 13, which would allow them to keep the house.If not, they can file a Chapter 7, which will allow them to escape personal liability for the debt. AChapter 7 will not let the buyer keep their home. A bankruptcy filing, either Chapter 7 or Chapter13, will stay foreclosure proceedings and extend the redemption deadline. Chapter 7 bankruptcy isnot an option if they have filed another Chapter 7 petition in the last eight years and if a dischargewas a granted in the prior bankruptcy.The client may continue living in the house until after the sale. Until the sale or a deed in lieu of foreclosure, the homeowner is responsible for the upkeep of the property.Back to Top 
Workout Agreement
After a possible workout agreement is identified, a hardship letter, outlining the client ‘scircumstances, must be drafted and sent to the lender. There are a wide range of workoutagreements possible. If the client has some income, or has the prospect of some income in the nearfuture, and wishes to keep the house, a careful review of their income and expenses must be doneto determine what workout arrangements are possible. Many credit counseling agencies will helpnegotiate workout agreements to prevent foreclosure. Typically, the homeowner or theirrepresentative needs to work with the
loss-mitigation
department, not the foreclosuredepartment. If the homeowner is represented by an attorney, the attorney should seek permissionfrom the foreclosure attorney before contacting the loss mitigation department directly.
 
Page 3 of 6Illinois Pro Bono | Mortgage Foreclosure3/20/2011http://www.illinoisprobono.org/index.cfm?fuseaction=home.dsp_Content&contentID=327

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