Whether a notice of acceleration is required generally depends on the terms of your loan agreement. However, if the mortgage loan is a “high risk home loan” as that term is defined in the Illinois High Risk Home Loan Act, you are required by statute to deliver a notice to the borrower informing them of the date by which they must cure a default to avoid acceleration and initiation of a foreclosure.

We recommend reviewing the terms of the mortgage and promissory note with your bank counsel to determine whether you are required to send a notice of acceleration — which may be impacted by the borrower’s death.

For example, Fannie Mae’s standard mortgage for Illinois generally provides that a lender must send a notice of default to a borrower following a default, specifying “a date, not less than 30 days . . . from the date the notice is given to Borrower, by which the Default must be cured” and stating “that failure to cure the Default on or before the date specified in the notice may result in acceleration of the sums secured by [the mortgage].” If the borrower fails to cure the default, “Lender may require immediate payment in full of all sums secured by [the mortgage] without further demand and may foreclose [the mortgage] by judicial proceeding” (i.e., a subsequent notice of acceleration is not required).

Although Fannie Mae’s standard mortgage does require a lender to send a borrower notice of acceleration if it opts to accelerate the loan balance when “all or any part of the Property or any Interest in the property is sold or transferred . . . without the Lender’s prior written consent,” federal law prohibits the enforcement of such clauses when the transfer is due to the death of a borrower.

Fannie Mae’s Servicing Guide also provides that “the servicer must issue the breach or acceleration letter . . . not later than the 75th day of delinquency” if the property securing a first mortgage lien is not vacant or abandoned. The servicing guide also specifies the information that must be included in a breach or acceleration letter, such as the nature of the breach, the action required to cure the breach, and the date by which the breach must be cured. As this is just an example, we encourage you to review the specific provisions of your loan documents with your bank counsel.

Additionally, the RESPA servicing rules require a servicer that learns of a borrower’s death to promptly facilitate communication with any potential successors in interest who may have acquired an ownership interest in the property when the borrower died. If the borrower had a will, we recommend reviewing it with your bank counsel to determine if there are any other potential successors in interest besides the spouse with whom you should initiate communication.

For resources related to our guidance, please see:

• Illinois High Risk Home Loan Act, 815 ILCS 137/10 (“‘High risk home loan’ means a consumer credit transaction, other than a reverse mortgage, that is secured by the consumer's principal dwelling if: (i) at the time of origination, the annual percentage rate exceeds by more than 6 percentage points in the case of a first lien mortgage, or by more than 8 percentage points in the case of a junior mortgage, the average prime offer rate, as defined in Section 129C(b)(2)(B) of the federal Truth in Lending Act, for a comparable transaction as of the date on which the interest rate for the transaction is set, or if the dwelling is personal property, then as provided under 15 U.S.C. 1602(bb), as amended, and any corresponding regulation, as amended . . .”)

• Illinois High Risk Home Loan Act, 815 ILCS 137/105(a) (“Before an action is filed to foreclose or collect money due pursuant to a high risk home loan or before other action is taken to seize or transfer ownership of property subject to a high risk home loan, the lender or lender's assignee of the loan shall deliver to the borrower a notice of the right to cure the default, informing the borrower of all of the following: . . . (3) The date by which the borrower may cure the default to avoid a court action, acceleration and initiation of foreclosure, or other action to seize the property, which date shall not be less than 30 days after the date the notice is delivered, and the name, address, and telephone number of a person to whom the payment or tender shall be made.”)

• Fannie Mae, Standard Security Instruments, Illinois (“26. Acceleration; Remedies.

(a) Notice of Default. Lender will give a notice of Default to Borrower prior to acceleration following Borrower’s Default, except that such notice of Default will not be sent when Lender exercises its right under Section 19 unless Applicable Law provides otherwise. The notice will specify, in addition to any other information required by Applicable Law: (i) the Default; (ii) the action required to cure the Default; (iii) a date, not less than 30 days (or as otherwise specified by Applicable Law) from the date the notice is given to Borrower, by which the Default must be cured; (iv) that failure to cure the Default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property; (v) Borrower’s right to reinstate after acceleration; and (vi) Borrower’s right to deny in the foreclosure proceeding the existence of a Default or to assert any other defense of Borrower to acceleration and foreclosure.

(b) 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.”)

• Fannie Mae, Standard Security Instruments, Illinois (“19. Transfer of the Property or a Beneficial Interest in Borrower. . . . If all or any part of the Property or any Interest in the Property is sold or transferred . . . without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, Lender will not exercise this option if such exercise is prohibited by Applicable Law. If Lender exercises this option, Lender will give Borrower notice of acceleration. The notice will provide a period of not less than 30 days from the date the notice is given in accordance with Section 16 within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to, or upon, the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower . . .”)

• National Housing Act, 12 USC 1701j-3(a)(1) (“For the purpose of this section . . . the term ‘due-on-sale clause’ means a contract provision which authorizes a lender, at its option, to declare due and payable sums secured by the lender’s security instrument if all or any part of the property, or an interest therein, securing the real property loan is sold or transferred without the lender’s prior written consent . . .”)

• National Housing Act, 12 USC 1701j-3(d) (“With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon . . . (3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; . . . (5) a transfer to a relative resulting from the death of a borrower . . .”)

• Fannie Mae Servicing Guide, D2-2-06: Sending a Breach or Acceleration Letter (“If the property securing a first lien mortgage is . . . not vacant or abandoned . . . [t]hen the servicer must issue the breach or acceleration letter . . . not later than the 75th day of delinquency.”)

• Fannie Mae Servicing Guide, D2-2-06: Sending a Breach or Acceleration Letter (“The breach or acceleration letter must clearly explain . . . The exact nature of the breach (for example, a default in payments). The action required to cure the breach. The date by which the breach must be cured. The possibility that a deficiency judgment might be pursued if the foreclosure proceedings are undertaken, if applicable.”)

• Regulation X, 12 CFR 1024.38(B)(1)(vi)(A) (“The policies and procedures required by paragraph (a) of this section shall be reasonably designed to ensure that the servicer can: . . . Upon receiving notice of the death of a borrower or of any transfer of the property securing a mortgage loan, promptly facilitate communication with any potential or confirmed successors in interest regarding the property . . .”)

• Regulation X, 12 CFR 1024.31(a) (“Successor in interest means a person to whom an ownership interest in a property securing a mortgage loan subject to this subpart is transferred from a borrower, provided that the transfer is: (1) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; (2) A transfer to a relative resulting from the death of a borrower; (3) A transfer where the spouse or children of the borrower become an owner of the property . . .”)

• Regulation X, 12 CFR 1024.38(b)(1)(vi) (“The policies and procedures required by paragraph (a) of this section shall be reasonably designed to ensure that the servicer can: . . .

(vi) (A) Upon receiving notice of the death of a borrower or of any transfer of the property securing a mortgage loan, promptly facilitate communication with any potential or confirmed successors in interest regarding the property;

(B) Upon receiving notice of the existence of a potential successor in interest, promptly determine the documents the servicer reasonably requires to confirm that person's identity and ownership interest in the property and promptly provide to the potential successor in interest a description of those documents and how the person may submit a written request under § 1024.36(i) (including the appropriate address); and

(C) Upon the receipt of such documents, promptly make a confirmation determination and promptly notify the person, as applicable, that the servicer has confirmed the person's status, has determined that additional documents are required (and what those documents are), or has determined that the person is not a successor in interest.”)

• Regulation X, Official Interpretations, Paragraph 38(b)(1)(vi), Comment 2 (“The documents a servicer requires to confirm a potential successor in interest's identity and ownership interest in the property must be reasonable in light of the laws of the relevant jurisdiction, the specific situation of the potential successor in interest, and the documents already in the servicer's possession. The required documents may, where appropriate, include, for example, a death certificate, an executed will, or a court order. The required documents may also include documents that the servicer reasonably believes are necessary to prevent fraud or other criminal activity (for example, if a servicer has reason to believe that documents presented are forged).”)