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
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.