IBA Compliance Connection

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It is our understanding that the maturity date of the note has to be listed on the mortgage when we record it. For a balloon loan where monthly payments are based on a 20-year amortization schedule, but the note matures after five years, what should we list as the maturity date when recording the mortgage? If we later decide to extend the maturity date, do we have to re-record the mortgage? Or can we file an extension of our recording? We do not want to lose our priority simply by extending the maturity date.

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The note’s maturity date in this case is five years, not the twenty-year amortization period. However, it is not necessary to include the maturity date on the mortgage.

Regardless of whether you include the maturity date on the mortgage, you can file an extension of your lien recording and preserve your lien priority, provided that you renew or modify the note, as opposed to refinancing the loan. There are a number of court decisions that indicate generally how to structure a loan extension as a renewal or modification as opposed to a refinancing. The difference will depend on the specific language that you use in the documentation to extend the maturity date. For more discussion on that point, we recommend reviewing the Q&As cited below.

For resources related to our guidance, please see:

  • Illinois Conveyances Act, 765 ICLS 5/11(b) (“The failure of an otherwise lawfully executed and recorded mortgage . . . 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.”)

  • Illinois Code of Civil Procedure, 735 ILCS 5/13-116(a) (“The lien of every mortgage . . . the due date of which is stated upon the face, or ascertainable from the written terms thereof . . . shall cease by limitation after the expiration of 20 years from the time the last payment on such mortgage . . . became or becomes due upon its face and according to its written terms, unless the owner of such mortgage or vendor's lien, or the owner . . . within such 20 year period . . . files or causes to be filed for record . . . an extension agreement executed as hereinafter provided.”)

  • Illinois Code of Civil Procedure, 735 ILCS 5/13-116(b) (“The lien of every mortgage . . . in which no due date is stated upon the face, or is ascertainable from the written terms thereof, shall cease by limitation after the expiration of 30 years from the date of the instrument creating the lien, unless the owner of such mortgage . . . within such 30 year period . . . files or causes to be filed for record . . . an extension agreement executed as hereinafter provided.”)

  • Illinois Code of Civil Procedure, 735 ILCS 5/13-116(b)  (“The filing for record of an extension agreement within such 20 or 30 year period  . . . as the case may be . . . shall extend the lien for 10 years from the date the final payment becomes due under such extension agreement, and no more, but subsequent extension agreements filed before the lien, as extended, ceases, shall extend the lien for an additional 10 year period from the date the final payment becomes due under such extension agreement, and no more . . . .”)

  • Illinois Code of Civil Procedure, 735 ILCS 5/13-116(b)  (“An extension agreement . . . to be effective for the purpose of continuing the lien of any mortgage . . . shall show the time for which the payment of the indebtedness secured thereby is extended and the amount remaining unpaid on such indebtedness, and shall be executed and acknowledged by the owner of the mortgage . . . and by one or more persons representing himself, herself or themselves to be the then owners of the real estate . . . .”)

  • IBA Compliance Question: CQ 2013-002 (Recording a new mortgage when modifying a loan)

  • IBA Compliance Question: CQ 2015-356 (Effect of loan renewal on lien priority)

  • IBA Compliance Question: CQ 2016-121 (Changing loan terms without making new loan)

  • IBA Compliance Question: CQ 2015-015 (Extending the term of balloon loans)

  • State Bank of Lake Zurich v. Winnetka Bank, 614 N.E.2d 862, 867 (Ill. App. 2d Dist. 1993) (“Although a renewal note may in some cases operate as payment of and a discharge of the original note, the evidence must indicate the parties intended that the new note should serve as payment of the outstanding note. Here, the evidence indicates the parties did not intend the September note and mortgage to be a new and separate transaction which extinguished the June note. The June mortgage was never cancelled or released, and the language therein provides for additional advances at the option of the mortgagee . . . . Accordingly, we find the September mortgage was a renewal or modification of the June mortgage and the June mortgage was a valid and subsisting lien on the subject property.”)