Our core processor notified us that it is updating its standard right to cure notice form fields to include all collateral that secures a loan. Does Illinois require a right to cure notice on delinquent loans? Should we be using this form, along with its upcoming updates?

No, we do not believe that your bank should rely on a core processor’s standard right to cure form to comply with Illinois law.

Presumably, your core processor’s standard right to cure form is used nationwide, without customization for Illinois. But Illinois does not have a single, standard “right to cure” notice requirement for all delinquent loans, nor are right to cure notices required for all loan and collateral types. Instead, different Illinois laws impose their own notice requirements on different types of loans, at different times. It is unlikely that a single form will apply equally to all loans under Illinois law. Because of the variations in the notice requirements under Illinois law, your bank should use the specific notice required for a particular delinquent loan in question, rather than relying on your core processor’s standard right to cure notice.

We cannot provide an exhaustive list of all Illinois laws that might require a right to cure or similar notice. However, one example would be the Illinois High Risk Home Loan Act, which requires lenders to send a “right to cure” notice before filing a foreclosure suit or taking similar actions on a delinquent high risk home loan. That law lists the required contents for this notice, which may or may not match the language or timing requirements of your core processor’s notice. (As an aside, note that the Illinois “grace period notice” requirement for delinquent residential mortgage loans expired (automatically sunset) on July 1, 2016.)

Similarly, the Illinois Mortgage Foreclosure Law requires lenders to attach a “Homeowner Notice” to the foreclosure summons when foreclosing on a defaulted residential real estate loan. Among other items, that notice informs borrowers of the right to reinstate the mortgage or redeem the foreclosed property; again, these notice requirements may or may not match the language or timing requirements of your core processor’s notice.

Other collateral types, such as vehicles, are governed by other Illinois laws that have their own requirements for right to cure or similar notices.

We also recommend that you review your loan agreements for any contractual right to cure requirements, such as the notice of acceleration required by the Fannie Mae/Freddie Mac standard mortgage instruments.

For resources related to our guidance, please see:

Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1504.5 (“Homeowner notice to be attached to summons. For all residential foreclosure actions filed, the plaintiff must attach a Homeowner Notice to the summons. . . .The Notice must be in substantially the following form: . . . 3. REINSTATEMENT: As the homeowner you have the right to bring the mortgage current within 90 days after you receive the summons. 4. REDEMPTION: As the homeowner you have the right to sell your home, refinance, or pay off the loan during the redemption period. . . .”)

Illinois High Risk Home Loan Act, 815 ILCS 137/105(a) (“Before an action is filed to foreclose or collect money due pursuant to a high risk home loan or before other action is taken to seize or transfer ownership of property subject to a high risk home loan, the lender or lender’s assignee of the loan shall deliver to the borrower a notice of the right to cure the default, informing the borrower of all of the following: (1) The nature of the default. (2) The borrower’s right to cure the default . . . (3) The date by which the borrower may cure the default . . . (4) That if the borrower does not cure the default by the date specified, the lender or assignee may file an action for money due or take steps to terminate the borrower's ownership in the property . . . (5) The name, address, and telephone number of a person whom the borrower may contact if the borrower disagrees with the assertion that a default has occurred or the correctness of the calculation of the amount required to cure the default.”)

Illinois Vehicle Code, 625 ILCS 5/3-114(f-5)(1) (“In all cases wherein a lienholder has repossessed a vehicle by other than judicial process and holds it for resale under a security agreement, and the owner of record has not executed an assignment of the existing certificate of title, the lienholder shall comply with the following provisions: (1) Prior to sale, the lienholder shall deliver or mail to the owner at the owner’s last known address and to any other lienholder of record, a notice of redemption setting forth the following information: . . . .”)

Code of Civil Procedure, 735 ILCS 5/15-1502.5 (Illinois grace period notice requirement, with a sunset date of July 1, 2016.)

Fannie Mae/Freddie Mac Uniform Mortgage Instrument, Section 22, Page 15 (“Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: . . . .”)