Please note that this answer discusses the Illinois grace period notice requirement, which expired on July 1, 2016, pursuant to a sunset provision. Please see 735 ILCS 5/15-1502.5.

Yes, we believe the loan should be considered “delinquent,” because it has matured and the borrower has not paid the balloon payment.

The new RESPA servicing rules prohibit servicers from initiating a foreclosure action until “a borrower’s mortgage loan obligation is more than 120 days delinquent.” 12 CFR 1024.41(f)(1)(i). However, as you noted, the RESPA rules do not define “delinquent.” We recently obtained informal guidance from a CFPB attorney about this issue, and the CFPB attorney told us that servicers should look to state law to define when a mortgage loan becomes “delinquent.”

The most relevant definition of “delinquent” in Illinois law would be in the Code of Civil Procedure’s grace notice requirement. That law defines “delinquent” as “past due with respect to a payment on a mortgage secured by residential real estate.” 735 ILCS 5/15-1502.5(a). If your loan agreement requires the borrower to pay the full balance of the loan (the balloon payment) on maturity, we believe that the loan would become delinquent as soon as the balloon payment came due and was not paid.