Foreclosure Process

Typical Foreclosure Process (State of Illinois)

1. Foreclosure Defined: A Court proceeding to extinguish all rights, title, and interest of the owner(-s) of property in order to sell the property to satisfy a lien against the property.
2. Foreclosure Trigger and Initial Steps:
   1. Trigger: Typically, three or more missed mortgage payments, varies depending on actions of Borrower, homeowner is encouraged to contact the bank to discuss options.
   2. Lender notifies its Foreclosure Attorneys.
   3. Lender’s Attorneys review the subject property’s title to discover what liens exist and the parties holding the title.
   4. Liens example: Property Taxes, Mortgages, Judgments, Mechanic’s Liens, Tax Liens, to name a few.
3. Foreclosure Complaint is Filed and Summons Issued
   1. Complaint: Complaint is requesting the Court to deliver possession of the subject property due to Borrower’s violation of the terms of the mortgage and other remedies, typically asking for attorney’s fees and court costs.
   2. Summons: Summons is a notice served personally by the County Sheriff, private process server or, in certain situations, by publication. Typically delivered with a copy of the complaint to all parties named as defendants in subjection action.
   3. The Borrower has thirty days to file appearance and respond to the Complaint the time of service.
4. Lis Pendens
   1. Filed with the Recorder of Deeds for the county where property is located.
   2. The purpose of the Lis Pendens is to notice the public that there is litigation pending related to the subject property, thus preventing the owners from selling until foreclosure is resolved.
5. Right of Reinstatement
   1. The borrower, also known as the mortgagor, has the statutory right to reinstate the mortgage within 90 days of the Summons being served or the first date of publication being published.
   2. To reinstate, the borrower must pay all costs and expenses required by mortgage to cure default (must get current on mortgage).
   3. The Lender often extends the time period for reinstatement.
6. Initial Court Date
   1. The Mortgagor will have to answer or otherwise plead (argue) to what is alleged in the complaint.
   2. The Judge may consider granting extension of time, setting a hearing date when borrower alleges defenses to foreclosure, resolving other legal matters.
   3. The first court hearing is assigned on the Summons and is typically called an Initial Case Management date.
7. Judgment of Foreclosure
   1. Court awards Foreclosure Judgment if borrower loses at hearing, fails to respond, or Bank prevails on what is typically called Motion for Summary Judgment, or if borrower defaults (does not appear in court or otherwise fails to comply with certain procedures or court orders).
   2. Foreclosure Judgment awards property ownership rights to the Lender, but not actual title. The Borrower will retain title until the subject property sale is properly advertised through publication and a sale is conducted and an order of possession in favor of the Lender is issued at the time of the Motion Approving Sale scheduled by the Bank shortly after the Judicial Sale/Auction date.
   3. The Redemption period continues for Ninety (90) Days from issuance of Foreclosure Judgment.
8. Right of Redemption

Redemption is the act of paying off the delinquent loan in full. Redemption is paying everything that is owed: principal, interest, lender’s court cost and attorney’s fees.  Borrower may redeem the subject property as follows:

1. If the subject property is the Borrower’s primary residence, the Borrower may redeem the subject property within Seven (7) Months from the date the Borrower was served with summons or by publication or no later than Three (3) Months after the Judgment of Foreclosure is entered, whichever is later.
2. If the subject property is not the Borrower’s primary residence the Borrower may redeem the subject property within Six (6) Months from the date Borrower was served with summons or by publication or no later than Three (3) Months after the Judgment of Foreclosure is entered, whichever is later.
3. Regardless of whether the Borrower resides in the subject property or not, the Redemption period may end earlier if:
   1. The value of the real estate as of the date of the judgment is less than 90% of the amount required to Redeem and;
   2. The Lender waives any and all rights to a Deficiency Judgment against the Borrower – within the right of reinstatement period (7 months from service or 3 months from judgment, whichever is later) or 60 days after the date of the Foreclosure Judgment, whichever is later.
4. If the Court determines that the property is abandoned, the Right of Redemption period ends Thirty (30) Days after the date of the Foreclosure Judgment is entered.
5. A Borrower may Redeem the subject property by paying the Foreclosure Judgment amount plus other expenses authorized by the court.
6. A commercial property owner can (and usually does) waive their reinstatement and redemption rights in exchange for some consideration; waivers for residential properties are not valid. Most commercial mortgages have a specific provision whereby the Borrower/Mortgagor waives all Redemption Rights.
7. Special Right To Redeem: Pursuant to Section 15-1604 the owner of the special right of redemption will have the right to purchase the property for the sale price, plus all additional costs and expenses incurred by the mortgagee 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 or credited as an offset if the purchaser at the sale was a Lender who was a party to the foreclosure or its nominee and the sale price was less than the amount specified in subsection (d) of Section 15-1603 (Judgment Amount or Redemption Payoff), then, and only in such circumstances, an owner of special right to redeem/Borrower may have the right to redeem the property for that amount within 30 days of the date the sale is confirmed, by paying to the Lender the Judgment Amount or Redemption Payoff.

9. Foreclosure Sale
   1. Upon expiration of Reinstatement and Redemption periods or entry of a Foreclosure Judgment and waiver of all Redemption rights, a foreclosed property may be sold.
   2. Notice of sale must be published at least Three (3) Weeks in a row, once per week, in a newspaper circulated to the general public.
   3. Notice of the sale may be given prior to the expiration of the Reinstatement or Redemption period.
   4. Notice of sale does not need to be given to the Borrower if he/she is in default. This means that if homeowner did not file appearance, answer to complaint, or was found in default during the proceeding, said homeowner may not even receive a notice of sale.
10. Report and Confirmation of Sale
    1. After the Sale, the Lender will file a motion including a report of the sale with the Court to confirm the validity of the Sale.
    2. The Court conducts a hearing on the Sale and will approve the Sale unless notice was not given properly, the sale was otherwise not conducted properly, or that the Sale, if confirmed would cause an some specific injustice, the burden of proving an injustice being on the homeowner.
11. Deficiency Judgment, Special Right to Redeem, Surplus Funds Turnover
    1. If the subject property is sold for less than the amount necessary to Redeem, the Lender may enter a Deficiency Judgment against the Borrower. A Deficiency Judgment is the difference from what the subject property was sold for at the Sale and the balance owed to the Lender.
    2. If the Lender purchased the subject property and the Sale price was less than the redemption amount, the Borrower has the Special Right to Redeem.
    3. The Special Right to Redeem expires within Thirty (30) Days after the Sale is confirmed and is satisfied only if the Sale price plus any approved Court costs are paid.
    4. In certain situations, the surplus may be left after the judicial sale, and it is important to act fast and file motion for turnover of surplus funds, at which time Borrower may receive the surplus after the foreclosure sale.