Because your question pertains specifically to LaserPro, we contacted LaserPro’s legal counsel (with LaserPro’s permission) and discussed the three lien amount options you described.  LaserPro’s counsel told us that the three options are intended to permit lenders to set a maximum lien amount that can cover any future advances and any other notes that are covered by the lien under a cross-collateralization clause. (Both of those scenarios are fleshed out below.) In essence, setting a higher maximum lien amount acts as a “failsafe” to protect the lender, and LaserPro’s counsel was not aware of any limits on how high a maximum lien amount a lender may seek. LaserPro includes the option of twice the loan amount because it believes that reflects the common practice among Chicago-area attorneys.

There may also be situations where it is prudent to set a specific lien amount that is higher than twice the loan amount, or at least higher than the current loan amount. The first situation that may demand a higher maximum lien amount is where a mortgage includes a cross-collateralization clause, meaning that the maximum lien amount is intended to cover multiple loans. The second situation is where a lender anticipates future advances on a single revolving line of credit.

(1) Setting the Maximum Lien Amount for Notes with Cross-Collateralization Clauses

In the case of mortgages that are intended to secure multiple loans using a cross-collateralization clause (also sometimes referred to as a “dragnet clause”), we recommend stating a maximum lien amount on the mortgage that covers all of the known loans made by the bank that are secured by the mortgage, as well as all conceivable future loans that might be made by the bank. As noted by LaserPro’s counsel, lenders should set maximum lien amounts to “leave room” for any cross-collateralized loans.

We note that a federal Seventh Circuit decision held that a cross-collateralization clause in a recorded mortgage was sufficient to put subsequent creditors on notice of a bank’s lien, but only to the extent of the maximum lien amount stated in the mortgage. Peoples National Bank v. Banterra Bank , 719 F.3d 608, 616 (2013). As noted by the court, “the maximum lien clause serves to limit the amount of indebtedness that the property can secure.” Id. at 610. Because the maximum lien clause limits your security in the property, it is advisable to state a maximum lien amount that covers all of the loans that the mortgage will secure.

(2) Setting the Maximum Lien Amount for Revolving Credit Lines

In the case of revolving lines of credit, we recommend setting a maximum lien amount that is higher than the initial loan amount in order to cover future advances. Two Illinois laws include language that would support mortgages securing multiple advances. First, the Illinois Banking Act states that mortgages for revolving lines of credit may secure “not only the existing indebtedness, but also such future advances, whether such advances are obligatory or to be made at the option of the lender, or otherwise, as are made within twenty years from the date thereof.” 205 ILCS 5/5d. Second, the Illinois Mortgage Foreclosure Law confirms that a mortgage “shall be a lien upon the real estate that is the subject of the mortgage for all monies advanced or applied or other obligations secured in accordance with the terms of the mortgage or as authorized by law.” 735 ILCS 5/15-1301.

Note that the priority among different creditors holding liens in the mortgaged property will depend on the rules in the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1302. For advances made more than eighteen months after a mortgage is recorded, your institution will have first priority in the mortgaged property only from the time the future advances are made. 735 ILCS 5/15-1302(a). However, there are several exceptions to this rule, for (a) advances made under a commitment in the mortgage or referred to in the mortgage, (b) advances under a reverse mortgage, (c) advances under a revolving credit arrangement, (d) advances added to the principal amount secured by the mortgage, and (e) advances made under the terms of the mortgage to preserve or restore the mortgaged real estate, to preserve the lien or priority of the lien, or to enforce the mortgage. 735 ILCS 5/15-1302(b). If your institution advances funds under any of those exceptions, then your institution’s security interest will likely retain first priority in the amount of those advances.