Yes, we believe it is permissible to state a maximum lien amount on a mortgage that is higher than the loan amount, provided that the customer agrees to the maximum lien amount that you will be recording.

There are cases in Illinois that support the use of a maximum lien amount that exceeds the loan amount. For example, in a recent 7^th Circuit case, the court held that the maximum lien amount noted in a recorded mortgage was enforceable against junior lienholders, even though the original loan amount was less than the maximum lien amount. Peoples Nat’l Bank, N.A. v. Banterra Bank, 719 F.3d 608, 612 (7th Cir. 2013).

There can be many different reasons for recording a maximum lien amount that is higher than the note amount.  One example is when a mortgage includes a cross-collateralization clause, where the maximum lien amount is intended to cover multiple loans. Another example is when a lender anticipates making future credit increases on a revolving line of credit secured by the mortgage.  The purpose of placing the maximum lien amount on the recorded mortgage is to place other potential lienholders on “inquiry notice” about the extent of the loan or loans secured by the mortgage, which may exceed the loan amount listed on the mortgage.