A mortgage should reference the amount of the indebtedness to be effective against any claims of third parties, irrespective of whether the mortgage is for a consumer or a commercial purpose. A mortgage also may include the interest rate and maturity date of the loan, but the failure to include these elements will not affect the validity or priority of the mortgage. Consequently, we believe you may exclude the interest rate, the number and amounts of payments, and the first and final payment dates, from your mortgage. However, we recommend including language in the mortgage that incorporates the note by reference.

Section 11(a) of the Conveyances Act provides that:

Mortgages of lands may be substantially in the following form: The Mortgagor (here insert name or names), mortgages and warrants to (here insert name or names of mortgagee or mortgagees), to secure the payment of (here recite the nature and amount of indebtedness, showing when due and the rate of interest, and whether secured by note or otherwise), the following described real estate (here insert description thereof), situated in the County of …., in the State of Illinois. (emphasis added)

Courts have found that while including each of the elements described in this section creates a “safe harbor” ensuring that constructive notice has been provided to a third-party purchaser, such elements do not constitute “a mandatory checklist of requirements to be completed pro forma.” Confirming this point, the Seventh Circuit has upheld the validity of a mortgage that did not include the loan’s interest rate or maturity date, but that incorporated these items by referring to the related promissory note.

Moreover, the Illinois legislature amended the Conveyances Act in 2013 to expressly provide that the provisions of Section 11(a) are permissive and not mandatory, and that “the failure to state the interest rate or the maturity date, or both, shall not affect the validity or priority of the mortgage.”

For resources related to our guidance, please see:

• In re Crane, 742 F.3d 702, 709 (7th Cir. 2013) (“Illinois statutes and cases show beyond doubt that the debt amount is an indispensable element of a mortgage and must be included in a recording, in at least some way, for the recording to be effective against a third party. . . . That reasoning simply does not apply to interest rates or maturity dates, and Illinois courts have not applied it to avoid mortgages that were silent on those terms.”)

• Conveyances Act, 765 ILCS 5/11(a) (“Mortgages of lands may be substantially in the following form: The Mortgagor (here insert name or names), mortgages and warrants to (here insert name or names of mortgagee or mortgagees), to secure the payment of (here recite the nature and amount of indebtedness, showing when due and the rate of interest, and whether secured by note or otherwise), the following described real estate (here insert description thereof), situated in the County of …., in the State of Illinois.”)

• In re Crane, 487 B.R. 906, 915 (C.D. Ill.), aff'd, 742 F.3d 702 (7th Cir. 2013) (“Based on the foregoing analysis, this court holds that § 5/11 was intended to create a safe harbor, rather than a mandatory checklist of requirements to be completed pro forma. Since § 5/11 advises lenders how best to provide sufficient detail so as to provide constructive notice to a third party purchaser, this court cannot permit the Trustee to avoid the mortgages in question because both were recorded, identified the Debtors, provided a description of the mortgaged property, set forth the amount and purpose of the indebtedness, and incorporated the interest rate and maturity date by reference to a promissory note. The court therefore respectfully disagrees with the Bankruptcy Court's decision.”)

• In re Klasi Properties, LLC, No. 12-60013, 2013 WL 211111, at *7 (Bankr. S.D. Ill. Jan. 18, 2013), aff'd sub nom. In re Crane, 742 F.3d 702 (7th Cir. 2013) (“Based on the foregoing, it does not appear to this Court that § 11 was intended by the legislature to prescribe a ‘checklist’ of formalistic mortgage requirements, especially in light of the recent amendment. Rather, its purpose was to create a framework for providing sufficient notice to innocent third parties of interests in property.”)

• In re Crane, 742 F.3d 702, 705 (7th Cir. 2013) (“The debtors in both appeals, Gary and Marsa Crane and Klasi Properties, LLC, borrowed money secured by mortgages on real estate. In both cases, the mortgages were recorded by the lenders to ensure the priority of their mortgage liens. In both cases, the recorded mortgages did not state the maturity date of the secured debt or the applicable interest rate. Those terms were included in the promissory notes, of course, which were fully incorporated by reference in the mortgages.”)

• In re Crane, 742 F.3d 702, 710 (7th Cir. 2013) (“To conclude, the recorded mortgages at issue in these appeals failed to state the interest rates and maturity dates of the underlying debts. Even so, the mortgages supplied the essential terms of a mortgage under Illinois law and were sufficient to satisfy the common law and the permissive terms of 765 ILCS 5/11. Thus, the mortgages provided constructive record notice of the mortgages to the trustees, so the trustees may not avoid the mortgages under 11 U.S.C. § 544(a)(3).”)

• Conveyances Act, 765 ILCS 5/11(b) (“The provisions of subsection (a) regarding the form of a mortgage are, and have always been, permissive and not mandatory. Accordingly, the failure of an otherwise lawfully executed and recorded mortgage to be in the form described in subsection (a) in one or more respects, including the failure to state the interest rate or the maturity date, or both, shall not affect the validity or priority of the mortgage, nor shall its recordation be ineffective for notice purposes regardless of when the mortgage was recorded.”)