If you default on your mortgage payments in Illinois, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. Approximately half of the states, including Illinois, require the lender to file a lawsuit in court to foreclose. State law specifies how foreclosures work, and both federal and state laws give you rights and protections throughout the process.
If you get a loan to buy residential real estate in Illinois, you'll likely sign two documents: a promissory note and a mortgage. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The mortgage is the document that gives the lender a security interest in the property. If you fail to make the payments, the mortgage provides the lender with the right to sell the home at a foreclosure sale to recoup the money it loaned you.
If you miss a payment, the servicer can usually charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you’ll incur late charges. To find out the grace period in your situation and the amount of the late fee, review the promissory note or your monthly billing statement.
If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. In most cases, federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called "loss mitigation" options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available, and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file for bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many Illinois mortgages have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. But in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lienholder, the foreclosure can begin sooner. (12 C.F.R. § 1024.41).
Again, Illinois requires the lender to file a lawsuit in court to foreclose. The lender gives notice of the suit by serving you a summons and complaint, along with a notice advising you about your rights and how to get help during the foreclosure process. (735 Ill. Comp. Stat. § 5/15-1504.5). You generally have 30 days to file an answer with the court.
If you fail to answer the court action, the lender can get a default judgment from the court. The judgment will give the lender permission to hold a foreclosure sale. But if you respond to the lawsuit by filing an answer, the case will go through the litigation process. The lender might then request the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because the case’s critical aspects aren’t in dispute.
If the court grants summary judgment for the lender—or you lose at trial—the judge will order the home sold at a foreclosure sale. A notice of sale must be published three times between 45 and seven days before the sale and mailed to you at least ten business days before the sale. (735 Ill. Comp. Stat. § 5/15-1507, Illinois Supreme Court Rule 113).
At the sale, the lender usually makes a bid on the property using a "credit bid" rather than bidding cash. With a credit bid, the lender gets a credit up to the amount of the borrower’s debt. Sometimes the lender bids the full amount of the debt; sometimes, it bids less. The highest bidder at the sale becomes the new owner of the property.
“Reinstating” is when the borrower brings the loan current by paying the missed payments of principal and interest, plus fees and costs. Completing a reinstatement will stop the foreclosure.
Under Illinois law, you may reinstate the mortgage loan within 90 days after you were served with a summons or served by publication, or otherwise submitted to the jurisdiction of the court. (735 Ill. Comp. Stat. § 5/15-1602). Though, as a practical matter, many lenders allow borrowers to reinstate if the borrower offers to do so a reasonable time before the sale.
Sometimes, a foreclosure sale doesn’t bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a "deficiency balance." Many states, including Illinois, allow the lender to get a personal judgment, called a "deficiency judgment," for this amount against the borrower.
In Illinois, the lender can get a deficiency judgment as part of the foreclosure action if the complaint is personally served to the borrower, or the borrower isn’t personally served, but enters an appearance in the action. (735 Ill. Comp. Stat. § 5/15-1508). (For a summary of the deficiency judgment laws in Illinois, see Illinois Laws on Deficiency Judgments.)
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. Illinois law provides a general right to redeem before the sale and a special right to redeem after the sale.
In Illinois, the borrower can redeem the home until the later of:
To redeem before the sale, you'll have to pay off the full amount of the loan plus costs.
Illinois law also provides a special right to redeem if:
In this situation, you may redeem within 30 days after the court confirms the sale by paying the foreclosure sale price plus interest and costs. (735 Ill. Comp. Stat. § 5/15-1604). (To get details on redemption rights in Illinois, see Nolo’s article If I lose my home to foreclosure in Illinois, can I get it back?)
The foreclosed homeowner can remain in the home for 30 days after the court confirms the sale. (735 Ill. Comp. Stat. § 5/15-1701, 735 Ill. Comp. Stat. § 5/15-1508).
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure, or you might have leverage to work out an alternative.
Consider talking to a local foreclosure attorney or legal aid office to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a HUD-approved housing counselor can provide helpful information (at no cost) about various alternatives to foreclosure.