Detailed mortgage foreclosure process Lawyer Manual

The mortgage foreclosure process it outlined below in detail. This is designed for lawyers. Here is a simpler version.

Here are the main phases:

• Default
• Filing of foreclosure
• Service of summons
• Foreclosure judgment and order of sale
• Reinstatement period expires
• Redemption period expires
• Judicial sale
• Confirmation of foreclosure sale
• Special redemption
• Right to possession expires; eviction by the Sheriff

Default

A “default” refers to a failure to abide by the terms of the mortgage or loan documents. Although default may occur in several ways, default usually happens when a borrower fails to make a required monthly mortgage payment. The specific reason for the alleged default should be identified in the complaint to foreclose i.e. the date of the first missed payment. When a borrower fails to make a second monthly payment, the loan servicer must send a notice advising the borrower that he or she has a “30 day grace period” to contact a housing counselor, in which case the borrower will receive a second 30-day grace period prior to taking legal action. Once a borrower misses a third payment, the loan servicer sends a notice of acceleration, informs the borrower it intends to foreclose and sends the file to an attorney to initiate a foreclosure case.

Filing of foreclosure

In Illinois, the foreclosure case initiates when the “complaint” to foreclose is filed. The required elements of the complaint are set forth in the IMFL. 735 ILCS 5/15-1504. At a minimum, the complaint should have copies of the mortgage and note attached as exhibits. Copies of prior loan modification agreements or relevant assignments of the mortgage may also be attached or required.

Federal regulations issued by the Consumer Financial Protection Bureau (CFPB) establish a “pre-foreclosure review period,” and restrict when the lender may start a foreclosure. For instance, lenders cannot start a foreclosure case unless the borrower is more than 120 days delinquent. And, if the borrower submits a “complete loss mitigation application” within the 120-day “pre-foreclosure review period,” the lender may not begin foreclosure unless:

• The lender sends a written notice that the borrower is not eligible for any loss mitigation option and the loss mitigation appeal process has ended or is inapplicable;
• The borrower rejects all loss mitigation options offered by the lender; and
• The borrower fails to perform under a loss mitigation agreement. 12 C.F.R. 1024.41.

Service of summons and complaint

Service of the summons and complaint are governed by Article II of Illinois Code of Civil Procedure. 735 ILCS 5/15-1107. Service by publication is only valid after an attempt at personal service. All information in the notice must be accurate. A “Homeowner Notice” advising the homeowner of their rights, including reinstatement and redemption must be attached to the summons.  735 ILCS 5/15-1504.5.

Filing an answer and appearance

Within 30 days of being “served,” defendants must generally file an appearance and appropriate pleading in response to the complaint. Although the complaint contains many express allegations, the IMFL contains additional implied allegations that are “deemed and construed” to be part of the complaint. 735 ILCS 5/15-1504(c); 735 ILCS 5/15-1504(d). Borrowers filing answers to the foreclosure complaint must also respond appropriately to the “deemed and construed” allegations contained in the IMFL.

Defendants may also allege defenses or other claims in an answer. If directing a defendant to pro se materials, a residential mortgage foreclosure “appearance and answer” form can be found here. Filing an answer and appearance requires payment of a “filing fee.” However, the defendant may request the fee be waived by completing an Application for Waiver of Court Fees.

Foreclosure judgment and order of sale

If no “answer” is filed by the defendant, the lender may file a motion for a default judgment or if an answer is filed by the homeowner, the lender may file a motion for summary judgment alleging there are no genuine issues of material fact. If the plaintiff’s motion for judgment is granted, a judgment of foreclosure will be entered.

Note that, in all cases filed after May 1, 2013, in order to receive a foreclosure judgment, the plaintiff must file a “prove-up” affidavit pursuant to Illinois Supreme Court Rule 113. And, in some cases, in order to receive a foreclosure judgment, the plaintiff may be required to file a “loss mitigation” affidavit pursuant to Illinois Supreme Court Rule 114. For more information about Rule 113 and Rule 114 affidavits, see below.

Reinstatement period expires 90 days after personal service

The “mortgagor” has the right to reinstate the mortgage within 90 days from the date the mortgagor was served with a summons or is served by publication or was otherwise submitted to the jurisdiction of the court. Reinstatement requires bringing the loan completely “current” by paying all past-due amounts, including all accumulated principal, interest, escrow, costs and fees. 735 ILCS 5/15-1602. If the mortgagor reinstates, the foreclosure should be dismissed. If the court makes an express finding that a homeowner has “reinstated” the loan pursuant to the IMFL, the statutory right to reinstate will not be available again for five years. Clients should be advised to exercise good judgment in reinstating if continuing monthly payment is unaffordable.

Redemption period expires

The “owner of redemption,” as defined by the IMFL (735 ILCS 5/15-1212) has the right to “redeem” the amount secured by the mortgage by paying the entire remaining balance, including accrued interest, costs, fees, and any other amount authorized by the court. The IMFL contains a special process for redemption. 735 ILCS 5/15-1603.

The redemption period ends either seven months from the date the mortgagor was served with a summons or three months from the date of entry of the judgment of foreclosure, whichever is later. 735 ILCS 5/15-1603. The redemption period may be significantly shortened if the foreclosed property is deemed not to be “residential real estate,” or is deemed “abandoned residential property” as those terms are defined in the IMFL. 735 ILCS 5/15-1219;735 ILCS 5/15-1200.5. Importantly, the plaintiff may not proceed with a judicial sale until the redemption period expires.

Judicial sale

After the plaintiff obtains a judgment for foreclosure, and after the reinstatement and redemption periods expire, the lender may proceed to sell the home by “judicial sale.” Notice of the sale must be given to all parties in the action who have appeared and have not been found in default for failure to plead. Notice of sale must also be published, running in the newspaper for at least 3 consecutive weeks, between 45 and 7 days prior to the sale. 735 ILCS 5/15-1507.

Effective December 1, 2020, Illinois Supreme Court Rule 113 is amended to allow electronic service pursuant to Illinois Supreme Court Rule 11(c). At least 10 business days before the sale, the plaintiff's attorney must send notice by electronic service to all appearing defendants. Notice by mail should still be sent to all non-appearing defendants.

If a pro se litigant does not designate an e-mail address, then service must be made in another way other than e-mail pursuant to Rule 11(c). The notice shall include the: 

• Foreclosure sale date,
• Foreclosure sale time, and 
• Location of the sale.

This information is needed unless the sale is an adjourned sale less than 60 days after the last scheduled sale.
 

Confirmation of foreclosure sale

After the judicial sale occurs, the plaintiff then files a motion with the court to confirm the judicial sale. The court must confirm the sale unless it finds:

• That notice of the sale was not proper;
• The terms of the sale were unconscionable;
• The sale was conducted fraudulently; and
• That justice was otherwise not done. 735 ILCS 5/15-1508.

An Eviction Order will also be entered and stayed for 30 days. Personal liability for any “deficiency” is established at this time. For instance, if the property only sells for $100,000 but the borrower owes $125,000 unless a personal deficiency has been waived, or the borrower has discharged personal liability in Chapter 7 bankruptcy, the order confirming the sale will establish the borrower’s liability for a $25,000 deficiency judgment. This is a personal judgment against the borrower which may be collected separately.

The order confirming the sale is the “final” order in the foreclosure case for appeal and other motion deadline purposes.

Special redemption

Up to 30 days after the judicial sale is confirmed, borrowers have a “special right of redemption” if:

• The purchaser at the sheriff’s sale was a mortgagee that was a party to the foreclosure case; and
• The judicial sale price was less than the total amount required to redeem.

Under those circumstances, the borrower may exercise the “special right to redeem” by paying the judicial sale price, all additional costs incurred by the lender set forth in the report of sale and confirmed by the court, and interest at the statutory judgment rate from the date the purchase price was paid. 735 ILCS 5/15-1604.

Right to possession expires; eviction by the sheriff

The purchaser at the judicial sale is entitled to possession of the foreclosed property 30 days after the judicial sale is confirmed by the court. Thus, after 30 days the sheriff will proceed with eviction procedure to remove the named defendants. In order to evict persons in possession not named in the foreclosure, the plaintiff must file either a supplemental petition in the foreclosure case (735 ILCS 5/15-1701(h)) or file a separate action under the Eviction Act.