Topic: Mortgage Foreclosures
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We obtained a farm property through a deed in lieu of foreclosure that includes rental homes. One of the homes is occupied by a paying tenant who now will need to pay our bank directly. What actions do we need to take to notify the tenant, and what other items are we responsible for handling?
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We are not aware of any laws that govern the notice a lender must provide to a tenant when it takes ownership of a rental property through a deed in lieu agreement. Consequently, we recommend reviewing your deed in lieu agreement and any related documents — such as the tenant’s lease — to determine your…
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In the “Liability after Foreclosure” section on page 5 of the Closing Disclosure, should we indicate that “state law may protect you from liability for the unpaid balance” or that “state law does not protect you from liability for the unpaid balance”?
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Lenders extending mortgage loans in Illinois should check the box on the Closing Disclosure indicating that “state law does not protect you from liability for the unpaid balance” to reflect that a borrower may remain responsible for any deficiency after foreclosure under Illinois law. The Illinois Mortgage Foreclosure Law states that a foreclosure does not…
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We received a notice from AllRegs that Illinois has amended the notice of foreclosure requirements. What changes have been made?
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The Illinois legislature recently amended the notice of foreclosure requirements in the Illinois Mortgage Foreclosure Law to ease the penalties for failure to comply with certain notice requirements applicable only in Chicago. For foreclosure complaints related to properties located in Chicago (“a city with a population of more than 2,000,000”), the plaintiff must send a…
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When we extend a loan secured by a mortgage on a property held in a land trust, we frequently take an assignment of beneficial interest (ABI) in the land trust as additional collateral for the loan, out of an abundance of caution, which allows us to foreclose on the additional properties held in the land trust. In such cases, we obtain a flood certification for the mortgaged property but not for any other properties held in the land trust (which could include as many as fifteen tracts). We also do not obtain appraisals or title work for these additional properties. Are we required to obtain flood certifications for all the buildings held in a land trust when we take an ABI in the land trust as additional collateral for a loan out of an abundance of caution?
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Yes, we believe a flood certification is necessary for every building or mobile home held in a land trust that is security for your loan, even if the assignment of beneficial interest (ABI) in the land trust was taken only out of an abundance of caution. There is no exception to the flood insurance requirements…
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Have the SCRA’s foreclosure protections been permanently extended from ninety days to one year? Can you clarify whether the stay of proceedings and adjustment of obligation were permanently extended as well? Our policy provides that the extension to one year is set to expire on December 31, 2019.
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Yes, the recent Economic Growth Act permanently extended the Servicemember Civil Relief Act (SCRA)’s foreclosure protections to one year following the servicemember’s military service. This extension applies to the “sale, foreclosure, or seizure of property for a breach” of a servicemember’s mortgage loan obligation, as well as a court’s authority to stay such proceedings or…
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If we have a commercial loan modification for two borrowers, and one of them does not sign the modification, does that void their liability for the loan?
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No, we do not believe a co-borrower’s liability under the original loan agreement would be released due to their failure to sign a loan modification. Moreover, the loan modification may be void because it lacks a necessary signature. Generally, a loan modification must be signed by all original parties to the original loan agreement (or…
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In Illinois, if a borrower gets married during a foreclosure, does the bank have to start the foreclosure process over? What about in other states? In this case, we do not know if the new spouse is on the title to the property being foreclosed.
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No, we do not believe that it is necessary under Illinois law to re-start the foreclosure process when the mortgagor gets married. Instead, your bank simply may add the new spouse as a party to the existing foreclosure proceedings. It is difficult to determine what specific interest, if any, the new spouse has in the…
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We would like to foreclose on a consumer mortgage loan. The borrower’s wife signed the mortgage, but she is not on the title to the mortgaged home and did not sign the loan agreement. The borrower has informed us that he has moved out of the home securing our loan, his wife’s boyfriend has moved in, the home’s condition is deteriorating, and he is done making loan payments. If the borrower signs an affidavit averring that the home is no longer his primary residence, are we still required to wait 120 days before filing for foreclosure?
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No, we do not believe that the 120-day grace period requirement will apply if your bank has an affidavit from the borrower averring that the mortgaged property is not his principal residence. The requirement to delay initiation of foreclosure proceedings until a mortgage loan is more than 120 days delinquent applies only to loans secured…
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If a bank advertises in Spanish, does it have to provide loan documents in Spanish?
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No, we do not believe that advertising in Spanish obligates a bank to provide loan documents in Spanish. However, you should be aware of two statutory notice requirements in Illinois relating to residential mortgage foreclosures. One requirement applies to all foreclosure filings, and one requirement applies to foreclosures of residential rental properties located in the…
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Under the new Mortgage Servicing Rules that took effect October 19, 2017, we are required to make “good faith efforts” to establish live contact with a delinquent borrower no later than the 36th day of delinquency and again no later than 36 days after each payment due date. Does this mean that we must continue to make phone calls until a foreclosure sale is confirmed? Our bank does not qualify as a small servicer.
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No, in general we do not believe that a loan servicer’s responsibility to make good faith efforts to establish live contact always requires phone calls to be made up to the date of the final foreclosure sale. A servicer’s obligation to make live contact varies from case to case. (While not applicable here, we also…