Frequently Asked Foreclosure Questions
I just received a foreclosure summons and complaint. Do I need to start packing?
Absolutely not. You have much longer in your home than you would expect. In Illinois, a bank must go through a judicial process before it can repossess a borrower's home. During this process, the borrower remains the record title owner to the property. This means that you can still obtain a loan modification, perform a sale or short sale of the home, or save the house via a strategically-filed bankruptcy. It also means that you remain responsible for any homeowner or condo association assessments.
I have just been served with a foreclosure summons and complaint. What should I do?
First, don't panic. You have time on your side, so long as you take early action. From the time you receive the summons and complaint, you have 30 days to respond to the complaint. In many cases, judges will give homeowners more time to respond, but it is wise to seek counsel or respond before the 30 day period elapses.
You may wish to attempt a loan modification, seek other loss mitigation options, or you may wish to fight the foreclosure lawsuit. In any event, it is wise to consult with a licensed attorney before making any major decisions. It is better to make an informed choice than to act out of fear.
Can I get my home free and clear?
The short answer is, "probably not." Although many people on the Internet believe that it is possible, and although it has happened in the past, it is highly unlikely that a successful foreclosure defense will result in the release of your mortgage and the cancellation of your debt obligation to the lender. Illinois courts have not shown that they are likely to give someone a home "free and clear." Even in situations where the mortgage is voided, the underlying loan obligation is not voided. This means that the borrower still owes the lender money. The goal of a foreclosure defense strategy is to give the home-owner a position of strength from which to bargain. This may mean that the end goal is a loan modification; it may mean that the end goal is a consent foreclosure. Barring an extreme case, you are more likely to be hit by a meteor than you are to get your home "free and clear."
Can I sue the bank?
In many situations, there may be a federal or state law that gives you a cause of action against your lender. Many of these statutes allow for specific damages, usually between $1,000 and $2,000. It's worth noting that these damages are usually not cumulative. If your servicer calls you 100 times in a year, even though you have asked it not to call you, its ultimate liability would be closer to $1,000 than $100,000. In extreme situations, it may be possible to claim some rather large damages. Those situations are generally not the norm. If you are considering pursuing a lawsuit against your lender, be sure that you have all of the facts before proceeding. Consulting with an attorney is the best start.
What is loss mitigation?
Loss mitigation is a broad category that involves several different means of avoiding some of the risks associated with a foreclosure. The main types of loss mitigation are loan modifications, short sales, deeds in lieu of foreclosure, and consent foreclosures.
What is a loan modification?
A loan modification is an agreement between the borrower and the lender that effectively re-writes the loan agreement. Loan modifications may involve principal reductions, interest rate reductions, deferred repayment of missed payments, or an extension of the loan's term (e.g. from 30 to 40 years). Ideally, a loan modification should lower payments and allow the borrower to remain current on the loan.
What is a short sale?
When a property is worth less than the value of the mortgage loan against the property, it is underwater. One way to get rid of an underwater property is to conduct a short sale. In a short sale, the homeowner, with the bank's permission, sells the property for less than the balance of the loan.
In some short sales, it is possible to get the bank to forgive any deficiency. In other short sale situations, sellers often have to bring money to the closing to get the final amount paid to the bank up to a level that the bank will accept. Short sales sometimes fall through because the bank takes too long to approve the sale price - this can lead to buyers walking away from the deal.
What is a deed-in-lieu of foreclosure?
A deed-in-lieu of foreclosure is when a bank agrees to take back a property without filing a foreclosure lawsuit. The homeowner literally deeds the property to the bank, and the bank agrees to accept the property in full satisfaction of the loan. In Illinois, there is a provision in the Illinois Mortgage Foreclosure Law that governs the deed-in-lieu of foreclosure.
Banks typically do not grant deeds-in-lieu of foreclosure if there is a second mortgage on the property. Homeowners are usually required to list the property for sale for 90 days and submit financial documentation to the bank to secure a deed-in-lieu.
What is a consent foreclosure?
A consent foreclosure is similar to a deed-in-lieu of foreclosure, but is not available to a homeowner until after a foreclosure lawsuit is filed. In a consent foreclosure, the homeowner agrees to consent to a judgment of foreclosure being entered in the foreclosure court. The bank agrees that in exchange for the consent judgment, it will waive the right to pursue any potential deficiency. Once the consent judgment is entered, the bank is the title owner of the property, there is no need to conduct or confirm a sheriff's sale.
What is the right to reinstatement?
In Illinois, homeowners have a statutory right to reinstate their mortgages within 90 days of being served with a foreclosure summons. In order to reinstate the mortgage, the homeowner must pay all of the missed payments, fees, and costs required by the mortgage.
What is the right of redemption?
In Illinois, homeowners have a statutory right to redeem their mortgages within 90 days of the entry of a judgment of foreclosure and sale. In order to redeem a mortgage, the homeowner must pay the loan in full by paying everything that is owed: principal, interest, cost of collection, the lender's court costs, and attorney's fees.
What is the difference between a mortgage and a note?
A note is a personal promise to repay a debt. This document binds the person to the debt. A bank can choose to simply sue a defaulting borrower on the note itself. This is normally done by second mortgages after the first mortgage has foreclosed on the borrower's home.
A mortgage is a legal document that ties the note's debt obligations to a specific piece of real property. The mortgage is what gives the bank the power to file a foreclosure action against a home when a borrower defaults on his mortgage payments. The mortgage does not personally obligate those who have signed it to repay the debt. In many situations, a husband and wife will purchase a property where only one spouse is "on the loan." Only one spouse will sign the note, meaning that only one spouse is personally tied to the debt. However, both spouses will have to sign the mortgage. The signatures on the mortgage do not create any personal liability for the spouse who is not "on the loan."
How long do I have in my home?
It depends on the facts of your specific case. When clients retain our offices after receiving the summons and complaint from the sheriff, they have much more time in the home than a client attempting to retain us on the eve of the sheriff's sale. Even an uncontested foreclosure can take up to a year to run its course. Proactive homeowners who retain counsel early can easily remain in their home for 18 months or longer.
What is a sheriff's sale?
In Illinois, a sheriff's sale is the process by which a home is auctioned off after a judgment of foreclosure and sale is entered. A sheriff's sale is not final until confirmed by a judge.
What is a deficiency judgment?
When a piece of property is worth less than the balance due on the loan, it is referred to as being "underwater." When a property is foreclosed upon, it is ultimately sold at a sheriff's sale. The winning bid at the auction is considered to be the fair market value of the property. The difference between the foreclosure judgment value and the fair market value of the property is called the deficiency. Lenders do not have to seek a deficiency judgment, but may do so when the sheriff's sale is confirmed by the judge.
For answers to more specific questions about your potential foreclosure, call our Chicago consumer attorneys today at (312) 313-1613.