Falling behind on your mortgage loan can be a good reason to worry about losing your home. It can also include making only partial mortgage payments, too. When you want to save your house from foreclosure, getting good legal counsel will help. But it also helps to know what kind of foreclosure you’re facing and understand the timeline for the foreclosure process. No matter what, you can stop the mortgage foreclosure and have the right to ensure it’s not taken from you improperly. Let’s first take a look at what foreclosure is and get to know about preforeclosure.
What Is Foreclosure and Pre-Foreclosure
Foreclosure is the process when the lender takes ownership of the property they have a lien on. This occurs when the borrower fails to make timely monthly payments in full on the loan that was given and according to the mortgage contract. Many steps to this process could end in a judicial sale and eviction.
Pre-foreclosure is the time before a foreclosure complaint and under 120 days of missed payments. It is the first step in the process and ends when the lender files a foreclosure action with the court system.
During the pre-foreclosure period, the lender will send a notice of default to the mortgage borrower about the missing payments. This informs them that they will take legal action if the loan needs to be made current, including missing payments, late fees, and new interest.
Homeowners can submit a loss mitigation action with the loan servicing company during the pre-foreclosure review period, typically the 30 to 90 day period before the foreclosure action occurs. This is also when homeowners can take other actions to prevent losing their house and avoid further damaging their credit.
During An Illinois Foreclosure, You Have The Right To…
During the Illinois foreclosure process, the preforeclosure period allows you the right to have notice. Also, it includes the loan servicing company providing a way to remedy the default. This could include applying for loss mitigation or, depending on which of the Illinois counties you live, participating in mediation. It also would include providing you with a payoff amount to stop the foreclosure sale.
You have the right to special protections in any military branch. This may seem small, but it can go a long way toward helping you avoid foreclosure. Additionally, you always have the right to respond in court to the foreclosure filing.
Even after foreclosure proceedings, you may have the right of redemption of the property. Reclaiming your property means paying off the entire debt, including all fees, interest, and missed payments. Should you have additional equity above the payoff amount, you would have the right to that additional value paid for the property.
Missed Mortgage Payments
Getting behind on any bill can happen to anyone. Any payment can be late, and most mortgage lenders have a 15-day grace period before a fee is assessed and will be detailed in the promissory note. Even one missed payment won’t cause mortgage lenders to take your home.
That first missed payment will start the foreclosure process in Illinois. Your lender will call you to inform you of the missed payment. After a borrower fails to make their second monthly payment, the mortgage lender sends you pre-foreclosure letters, which may include the opportunity to speak with a housing counselor, or they may even offer you payment plans or other programs like forbearance or loan modification.
Is Illinois a judicial foreclosure state?
After you’ve reached 90 days late, you’re in default. After 120 days, the foreclosure process in Illinois begins. Every action must occur in the court system. This means that Illinois is a judicial foreclosure state.
Not every state requires foreclosure to occur judicially and is sometimes handled directly by the lender. These states use a non-judicial foreclosure process. This typically happens much faster and is much cheaper. The lender is more likely to work through this process, with a mortgage borrower needing more recourse.
Learn how foreclosure in Illinois works
There are many intricacies to Illinois foreclosure law. One of these includes that the mortgage lender must accept payments from a delinquent mortgage borrower, even after a foreclosure lawsuit was filed. If the payments exceed the debt, they may continue with foreclosure proceedings. Let’s look at some other things to know about foreclosure in Illinois.
Breach Letters and Demand Letters
Most mortgage agreements provide legal protections and require the mortgage lender to notify borrowers that they have a loan default before they can take legal action. This is called a breach letter or a demand letter and must include the following:
- The loan default and details of when it occurred
- Any action that would remedy the default
- A deadline date to remedy the default, which is typically 30 days
- Notice that unresolved debt would lead to an acceleration of the mortgage loan and possibly the sale of the property
After the breach letter has been sent and all these things have occurred, the mortgage lender will send the file to their attorney and initiate a foreclosure case.
Served With a Mortgage Foreclosure Summons
The legal mortgage foreclosure process begins when a foreclosure complaint and summons are served to the mortgage borrower. Illinois law requires that all information in the notice be accurate and that a “Homeowner notice” be attached to the summons to advise them of their rights.
Illinois law also requires the mortgage lender to record a foreclosure notice in the county where the mortgaged real estate is located. The mortgage borrower will have 30 days to respond to every complaint. We advise seeking a reasonable foreclosure attorney to help draft your response.
Depending on your defense and the circumstances of your foreclosure, a summary judgment may be entered in favor of the mortgage lender or a trial ordered. It would be wise to maintain your foreclosure attorney should a trial be ordered.
If you do not respond, a default judgment in favor of the lender will be entered and the foreclosure sale ordered. The judge may give you more time to file your response, but it is not guaranteed.
Default Judgment Is Entered
After a foreclosure judgment has been entered, you will have a right to reinstate the mortgage loan and a right of redemption. The redemption period expires 7 months after being served or 3 months after judgment, whichever is greater. If no action occurs now, the lender can sell the property.
Right to Reinstate Loan Expires
It is important to note that a redemption period can be shortened significantly if it is determined that foreclosed property is not “residential real estate” or is “abandoned residential property,” as defined in the Illinois Mortgage Foreclosure Act.
The importance of the redemption period is to slow down the process to aid Illinois homeowners. It ensures that a judicial sale cannot occur, and they have ample opportunity to pay the remaining balance until the redemption period expires.
The Foreclosure Auction
A foreclosure auction is a sheriff’s sale in Illinois. A judicial sale price is set 10 days before the sale occurs and includes three consecutive weeks of advertising. Other buyers have the right to come in and buy the property for anything above the sale price and per county laws. This can include online auctions or in-person auctions at the county courthouse.
Property Is Sold to the Highest Bidder
To collect on the debt owed, the property is auctioned off to the highest bidder only after you have received notice of the auction and it has been advertised for at least three consecutive weeks in a local newspaper.
Are Deficiency Judgments Allowed in Illinois?
You could face a deficiency judgment if the highest bidder does not cover the remaining debt. A deficiency judgment is a personal judgment against the mortgage borrower allowing the lender to collect the difference on the loan amount vs what was paid for the property separately.
Post-auction right of redemption
If no one bids on the property at auction, the lender takes ownership of the property and becomes real estate owned. However, some rare cases exist where the homeowner may still have the right to redeem after the sale, such as a deficiency judgment.
Confirmation of Foreclosure Sale
After the judicial sale occurs, the lender will file a motion with the county to confirm the judicial sale. The court confirms the sale unless it finds that: The notice of the sale was not given or improper notice of the sale was given.
What is Post-Foreclosure?
Post-foreclosure is the term for the period after the legal process in which Illinois law allows the new owner the right to possess and sell the property at a sheriff’s sale. Another term for the sale process is a judicial sale.
Eviction after foreclosure proceedings
When the new owner takes ownership of the property, moving on from the foreclosed property is best. The new owners must legally file for eviction 15 days after the sale. If you remain, an eviction order can be filed to have you forcibly removed 30 days later. It is immediately after the sheriff shows up, and it would mean leaving all your belongings behind for the new owners.
To save them time, headache, and money, some owners may offer you an opportunity to move before an eviction order can occur, sometimes called a cash-for-keys deal. This may be something to consider when considering how long you can stay home after a foreclosure.
What to Consider With Foreclosure in Illinois
Foreclosure can be overwhelming. You may not know that other options are available to you besides what the banks provide. Remember that banks don’t want to foreclose on the property but will do so if it affects their bottom line. Here are a few other things to consider when you’re under the gun with foreclosure.
Foreclosure Mediation Programs in Illinois
Foreclosure mediation is when a third party assists the borrower and loan servicer to find a mutual resolution regarding the outstanding debt. Many mediation programs are available to you if you are facing foreclosure. IHDA, the Illinois Housing Development Authority, oversees the mediation programs. IHDA works with non-profit housing counseling agencies to help provide mediation to eligible homeowners.
File Bankruptcy
If you are facing foreclosure, you may be able to stop the sale by filing for bankruptcy. Filing for bankruptcy will put an automatic stay on the foreclosure, prohibiting the lender from taking any further action to foreclose on your home. It is a quick and immediate way to stop a foreclosure when you need to.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. If you want to save your home, filing for Chapter 13 bankruptcy may be the answer. To find out your options, speak with a local bankruptcy attorney.
“Consent Foreclosures” in Illinois
Under Illinois law, a borrower and mortgage lender can enter into a “consent foreclosure” agreement. This is a streamlined method for completing the foreclosure. A lender may be interested in this because it saves time and costs. The court essentially issues a judgment of foreclosure against the borrower with the borrower agreeing to relinquish the property.
One advantage to the borrower is that the lender waives their right to a deficiency judgment. The potential drawback of the consent foreclosure, though, is the tax consequences from the canceled debt. The IRS considers canceled debt income, such as any charged-off credit card. The homeowner may have to pay taxes on the debt that was canceled unless there is some exclusion or exemption applied.
FAQs about the Foreclosure process in Illinois
How Long Can You Live in a Foreclosed Home in Illinois?
In Illinois, foreclosed homeowners can live in their homes for up to 30 days after the court confirms the sale of the property. This is when a forcible eviction can occur.
Sometimes though, a homeowner may have the right to redeem the home after the sale date. For instance, if the home’s sale price is less than the amount of debt. The homeowner may have some recourse. However, this rare occurrence does not apply to most foreclosures. We advise you to consult with an experienced attorney before taking any action.
Is Illinois a Foreclosure Redemption State?
Yes! Illinois is a foreclosure redemption state. Illinois foreclosure law allows homeowners to redeem their rights even after a judgment sale has been issued. This means the homeowner can reclaim their property by paying off the total debt, including interest and all fees.
Other ways to stop foreclosure in Illinois include negotiating with the lender to reinstate the loan, a mortgage loan modification, or filing bankruptcy. It is best to consult an attorney before considering any of these courses.
What Happens If You Don’t Respond to an Illinois Foreclosure Complaint?
Failing to respond to an Illinois foreclosure complaint will result in a faster process and a foreclosure sale. It is best to pay attention to any notices and talk to your lender as quickly as possible. If you do not participate in the foreclosure process, the court will likely move things along quickly.
