Topic: Mortgage Foreclosures
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A commercial borrower in Wisconsin is in default, and we have a lien on their real property, which we are contemplating foreclosing. However, the borrower has failed to submit a substantial amount of sales tax to the Wisconsin Department of Revenue, which recently filed liens against the same property. We contacted the Department of Revenue, and they asked us how much we would pay for them to release their liens. Is our lien superior to the Department of Revenue’s liens, and can we potentially foreclose them out?
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While we are not experts on the laws of states other than Illinois, it appears that Wisconsin law provides that mortgages executed to a state or national bank that have been “duly recorded” have “priority over all liens upon the mortgaged premises . . . except tax and special assessment liens filed after the recording…
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A borrower died and their mortgage loan is now in default. The deceased borrower’s spouse resides in the home and is in title to the property but is not a borrower on the loan. We are aware that we cannot file a foreclosure action until the loan is 120 days delinquent. Are we required to send a notice of acceleration after the third missed payment, and can you provide a sample of such a notice?
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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…
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Do you have a checklist for taking an impaired loan from the demand letter through finality, such as a foreclosure?
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We do not have such a checklist in our forms library, and we recommend consulting with your bank’s outside counsel on the timing and steps involved in collecting an impaired loan and particularly the mortgage foreclosure process for delinquent mortgage loans. For general reference, we have included a link to the Illinois Legal Aid lawyer…
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If we purchase a bank’s assets as part of a merger, what do we need to file for mortgages that we purchased from the bank to protect our mortgage liens? Should we record assignments of the mortgages to ensure that we can foreclose?
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Ideally, we believe that a purchasing bank should record assignments of the mortgages it acquires. Although recording assignments reflecting the acquisition of mortgage notes is unnecessary to preserve your mortgage lien and priority position as to third parties, recording an assignment could protect your bank from having its lien extinguished as a non-record claimant in…
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Our consumer mortgages that secure revolving lines of credit provide that they also secure future advances made within twenty years from the date of the mortgage. Can we modify these mortgages to extend the advance period beyond twenty years, or do we need to obtain new mortgages?
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No, we do not believe you can modify these mortgages to extend the advance period beyond twenty years, as we do not believe the mortgages would be a lien on any funds advanced beyond the twenty-year time period. As a result, we believe you would need to record a new mortgage to secure the advancement…
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What amounts should we report to the credit bureaus for foreclosed customers whose properties we now own? Specifically, after we foreclose on a property and add it to our other real estate owned (OREO) assets, should we add interest, appraisal fees, property taxes, insurance, legal fees, and other property maintenance fees that have accrued to the balance that we report to the credit bureaus?
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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…
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A borrower with a residential mortgage died, and their spouse (who signed the mortgage but is not on the note) is living in the property. The deceased borrower also had a car loan solely in their name. The mortgage and the car loan have not been paid for several months, and the spouse has not responded to our communications. What steps can we take moving forward?
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Since the spouse has not responded to your communications, and presumably has not indicated an interest in assuming either loan, we generally recommend following the same procedures you would follow when a living borrower has defaulted on a residential mortgage loan or a car loan — with the caveats addressed below. We also recommend conferring…
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How does the Illinois Executive Order prohibiting evictions affect foreclosures? We would like to initiate some foreclosure proceedings, knowing that it will take at least nine months before we reach the eviction stage. Can we proceed with a foreclosure while the prohibition on evictions remains in place?
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The Illinois Executive Orders issued during the COVID-19 pandemic — including the orders placing restrictions on evictions — do not prohibit lenders from commencing or proceeding with foreclosure actions. However, some Illinois courts have stayed or restricted mortgage foreclosure proceedings. Additionally, certain federally-backed or federally-insured mortgage loans may be subject to a foreclosure moratorium. Accordingly,…
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Under the Illinois Executive Orders currently in effect, can banks commence or proceed with residential foreclosures? We are aware of the foreclosure restrictions related to federally-backed or federally-insured mortgage loans, but we would like to know whether we can move forward with foreclosures of our in-house mortgage loans.
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The Illinois Executive Orders issued during the COVID-19 pandemic do not prohibit lenders from commencing or proceeding with foreclosure actions. However, some Illinois courts have stayed or restricted mortgage foreclosure proceedings. Accordingly, we recommend consulting with your foreclosure counsel regarding any applicable county-level restrictions on foreclosure actions. Two examples of Illinois courts that have restricted…
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Are we still required to provide a “grace period notice” under the Illinois Mortgage Foreclosure Law? This requirement appears to have been repealed in 2016, but has any subsequent legislation reinstated this requirement?
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No, the requirement to send a “grace period notice” for delinquent residential mortgage loans expired pursuant to a sunset provision on July 1, 2016, and it has not been reinstated. For resources related to our guidance, please see: Illinois Code of Civil Procedure, 735 ILCS 5/15-1502.5 (Illinois grace period notice requirement, with a sunset date of July…