IBA Compliance Connection

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Under the upcoming TRID rules, the new Closing Disclosure must state whether a consumer “may remain responsible for any deficiency after foreclosure.” Does Illinois law protect borrowers from personal liability for the unpaid loan balance after a judicial sale?

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No, Illinois law does not protect borrowers against deficiencies after the judicial sale. The Illinois Mortgage Foreclosure Law states that a foreclosure does not affect the lender’s right to obtain a personal judgment against the borrower in the event of a deficiency. A number of Illinois courts have permitted a mortgagee to pursue a money judgment against a borrower for a deficiency after the judicial sale is completed.

For resources related to our guidance, please see:

  • Regulation Z, 12 CFR 1026.38(p)(3) (requirement in Closing Disclosure to disclose consumer’s responsibility “for any deficiency after foreclosure under applicable State law”)
  • Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1511 (a mortgage foreclosure does not affect the mortgagee’s rights to obtain a personal judgment against any person for a deficiency)
  • Metrobank v. Cannatello, 964 N.E.2d 656, 663 (1st Dist. 2012) (the Illinois Mortgage Foreclosure Law “provide[s] the foreclosure court with the authority to enter personal judgments for any deficiencies after sale of the real estate . . . .”)
  • St. Ange v. Chambliss, 71 Ill.App.3d 658, 660 (1st Dist. 1979) (“the Illinois cases hold that in any foreclosure proceeding the creditor may proceed against the property and in addition may obtain a money judgment in personam for any deficiency”)