Yes, courts in Illinois generally have upheld cross-collateralization clauses, which are provisions in security agreements that secure both the current loan and future loans (whether made by the same or another lender). The U.S. Court of Appeals for the Seventh Circuit recently held that a cross-collateralization clause in a mortgage document was enforceable because it provided “inquiry notice” (also called “constructive notice”) to other lenders as to the existence of other loans that might be secured by the same collateral. In addition, the Uniform Commercial Code permits a security agreement that provides for the collateral to be secured by “future advances or other value . . . .”

For citations related to our guidance, please see:

• Peoples Nat. Bank, N.A. v. Banterra Bank, 719 F.3d 608, 612 (7th Cir. 2013) (“[T]he dispositive question presented by these facts [is] . . . whether actual notice of a cross-collateralization clause in a mortgage imparts inquiry notice as to the existence of other obligations that may be covered by the security instrument. On these facts, we hold that it does.”)

• Universal Guar. Life Ins. Co. v. Coughlin, 481 F.3d 458, 463 (7th Cir. 2007) (“Dragnet clauses are not favored in Illinois, but they are enforceable if they are clear and unambiguous.”) (Cross-collateral provisions often are referred to as a “dragnet clause” or “anaconda clause.”)

• Illinois Uniform Commercial Code, 810 ILCS 5/9-204(c) (“A security agreement may provide that collateral secures . . . future advances or other value, whether or not the advances or value are given pursuant to commitment.”)