Yes, we believe that your bank generally should follow the right to cure notice requirements in the state where your collateral is located, ideally in consultation with local bank counsel.

Loan agreements routinely include a provision specifying which state’s laws will govern the contract (i.e., a choice of law provision). Our guess is that your secured loan agreements stipulate that a loan will be governed by the laws of the state of Illinois. However, if your secured loan agreements stipulate a state other than the state in which the collateral is located, the courts in that state are unlikely to enforce that choice of law provision, particularly in the context of a consumer or residential loan.

For example, a residential loan agreement’s choice of law provision could invoke the laws of the state of Michigan (which is a nonjudicial foreclosure state), even if the loan is secured by a residence located in Illinois. But in that case, an Illinois court would be very unlikely to enforce the choice of law provision and forego Illinois’ judicial foreclosure processes and homeowner protections. (In the commercial context, a court might be more likely to enforce a choice of law provision pointing to an out-of-state law, but that result is not guaranteed, either.)

Consequently, we recommend following the right to cure requirements of the state in which the loan’s collateral is located, which will put your bank in a better position to defend against potential foreclosure challenges.

We are not aware of any comprehensive fifty state surveys that cover all types of loans and all types of collateral. The National Consumer Law Center provides a free state-by-state survey of residential foreclosure laws, although we note that this is not a substitute for seeking the advice of your bank counsel before foreclosing on collateral located in another state. Each state has unique foreclosure laws, some of which may apply only to certain types of loans or collateral. Consequently, whenever your bank is foreclosing on out-of-state collateral, we recommend consulting with bank counsel to determine that state’s applicable laws regarding right to cure notice requirements.

For resources related to our guidance, please see:

• Freddie Mac Uniform First Lien Security Instrument for Illinois, pg. 12 (“Governing Law; Severability; Rules of Construction.  This Security Instrument shall be governed by federal law and the law of the jurisdiction in which the Property is located. All rights and obligations contained in this Security Instrument are subject to any requirements and limitations of Applicable Law.  Applicable Law might explicitly or implicitly allow the parties to agree by contract or it might be silent, but such silence shall not be construed as a prohibition against agreement by contract.  In the event that any provision or clause of this Security Instrument or the Note conflicts with Applicable Law, such conflict shall not affect other provisions of this Security Instrument or the Note which can be given effect without the conflicting provision.”)

• National Consumer Law Center, Survey of State Foreclosure Laws