We do not believe that amounts that accrue after a foreclosure sale has been confirmed and the bank has taken possession of the property should be added to the consumer’s balance or reported to the credit bureaus. Unless your mortgage or loan agreement state otherwise, we believe your bank is responsible for the carrying costs associated with foreclosed properties held as OREO.
A lender may be entitled to collect expenses incurred in connection with a borrower’s default and pursuing foreclosure if provided for in the mortgage. For example, Fannie Mae’s standard mortgage document for Illinois allows the lender to charge for reasonable attorneys’ fees and costs, property inspection, valuation, mediation, and loss mitigation fees, and “other related fees.” However, we do not believe a lender would be entitled to collect costs incurred for a property held as OREO, unless your mortgage or loan agreement specifically entitle you to collect such costs after the completion of a foreclosure action.
Additionally, in conjunction with seeking to confirm a foreclosure sale, you may request a deficiency judgment for any balance still due over and above the proceeds of the sale. But you generally cannot add anything to the deficiency judgment once entered, other than post-judgment interest that accrues by statute.
Depending on whether your customer is responsible for a balance remaining after the completion of a foreclosure action, the amount you report to the credit bureaus may differ. Your bank may be subject to the requirements of the Consumer Data Industry Association’s Credit Reporting Resource Guide, which includes specific information on how foreclosures should be reported. A link to purchase the 2021 version of the guide has been included below. While we do not have access to the guide, we found a link to the 2020 version online (although we cannot vouch for its accuracy), and it contains an FAQ that addresses how different stages of a foreclosure should be reported. The relevant quote has been included in the resources below.
For resources related to our guidance, please see:
- Fannie Mae, Illinois Standard Mortgage, pages 14–15 (“Default Charges. If permitted under Applicable Law, Lender may charge Borrower fees for services performed in connection with Borrower’s Default to protect Lender’s interest in the Property and rights under this Security Instrument, including: (i) reasonable attorneys’ fees and costs; (ii) property inspection, valuation, mediation, and loss mitigation fees; and (iii) other related fees.”)
- Fannie Mae, Illinois Standard Mortgage, page 19 (“Acceleration; Foreclosure; Expenses. If the Default is not cured on or before the date specified in the notice, Lender may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclose this Security Instrument by judicial proceeding. Lender will be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 26, including, but not limited to: (i) reasonable attorneys’ fees and costs; (ii) property inspection and valuation fees; and (iii) other fees incurred to protect Lender’s interest in the Property and/or rights under this Security Instrument.”)
- Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-508(e) (“In any order confirming a sale pursuant to the judgment of foreclosure, the court shall also enter a personal judgment for deficiency against any party (i) if otherwise authorized and (ii) to the extent requested in the complaint and proven upon presentation of the report of sale in accordance with Section 15-1508. Except as otherwise provided in this Article, a judgment may be entered for any balance of money that may be found due to the plaintiff, over and above the proceeds of the sale or sales, and enforcement may be had for the collection of such balance, the same as when the judgment is solely for the payment of money. . . .”)
- Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1511 (“Deficiency. Except as expressly prohibited by this Article, foreclosure of a mortgage does not affect a mortgagee’s rights, if any, to obtain a personal judgment against any person for a deficiency.”)
- Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1504(f) (“Request for Deficiency Judgment. A request for a personal judgment for a deficiency in a foreclosure complaint if the sale of the mortgaged real estate fails to produce a sufficient amount to pay the amount found due, the plaintiff may have a personal judgment against any party in the foreclosure indicated as being personally liable therefor and the enforcement thereof be had as provided by law.”)
- Illinois Code of Civil Procedure, 735 ILCS 5/2-1303 (“Judgments recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied . . . .”)
- Consumer Data Industry Association, 2021 Credit Reporting Resource Guide
- Consumer Data Industry Association, 2020 Credit Reporting Resource Guide (“Foreclosure Completed – Account Status Code 94 should be reported, which specifies ‘Foreclosure completed; there may be a balance due’. The appropriate Payment Rating should be reported in conjunction with this Account Status. Discontinue reporting Special Comment Code BO (Foreclosure proceedings started) at this point. If the consumer is not responsible for the remaining balance on the account or there is no deficiency balance, report Account Status 94 and a Scheduled Monthly Payment Amount, Current Balance and Amount Past Due of zero. Report the Date Closed as the date the foreclosure was completed. If the consumer is held responsible for the remaining balance on the account, continue reporting Account Status 94. In each subsequent reporting period, increment the first position of the Payment History Profile with value H (Foreclosure completed). Report the remaining balance in the Current Balance and Amount Past Due fields, and as payments are made by the consumer, report a declining balance in both fields. When the Current Balance reaches zero, report the Date Closed as the date the account was paid in full.”)