What is the Mortgage Foreclosure Process in Illinois?


Foreclosure is an action to take possession of mortgaged property when a borrower fails to comply with the terms of a mortgage agreement. In Illinois, foreclosure requires a judicial cause of action, and the process is governed by state law. The Illinois Mortgage Foreclosure Act is the law that governs the process. There are also specific federal regulations that affect the foreclosure process intended to help homeowners keep their homes. We will review some of these procedures to help you learn how to stop foreclosure in Illinois.

There are three key phases for an Illinois Mortgage Foreclosure, 1) Pre-Foreclosure, 2) Foreclosure and 3) Post-Foreclosure.

What is Pre-Foreclosure?

The first phase in the Illinois Mortgage Foreclosure process is “Pre-Foreclosure.” During this phase, there is an initial event to trigger the process, as well as requirements to provide a borrower with opportunities to mitigate and stop further legal action by the lender. The required activities that occur during the Pre-Foreclosure phase are 1) Default , 2) Loss Mitigation and 3) Notice of Loan Acceleration.

Default. The initial pre-foreclosure activity in any Illinois foreclosure action is a “default.” A default is when a borrower fails to comply with the terms of a mortgage loan. There are many ways a borrower can default on a mortgage, including failure to make scheduled payments or maintain insurance on the property. Although, the most common default trigger is failure to pay monthly payments.

Loss Mitigation. The second pre-foreclosure activity is required loss mitigation, which occurs when a mortgage loan is approximately two months in default. The term “loss mitigation” refers to a loan servicer’s duty to try and reduce loss to investor (i.e., owner of the loan) and help a homeowner avoid foreclosure due to default by a borrower. Loss mitigation requires a lender to notify a borrower of the loan default, as well as available options that can occur during a 30 day loss mitigation grace period after a default.

Loss mitigation is intended to benefit both the investor and borrower. Loan modification, forbearance, short sales, deeds in lieu of foreclosure, and repayment plans to cure a default are common types of loss mitigation. These options help borrowers remain in their homes, while investors protect their investment, which can stop the foreclosure process.

The Consumer Financial Protection Bureau (CFPB) also has federal regulations to regulate loss mitigation in all Illinois foreclosure actions. These regulations specifically require a “pre-foreclosure review period,” which restrict a lender from filing a foreclosure case unless a borrower is more than 120 days delinquent. The lender also cannot proceed if the borrower submits a “complete loss mitigation application” within the 120 pre-foreclosure review period, unless 1) the borrower is not eligible for loss mitigation, 2) the borrower rejects loss mitigation options and/or 3) the borrower does not comply with a loss mitigation agreement.

Notice of Loan Acceleration. The final pre-foreclosure activity in an Illinois Mortgage Foreclosure is Notice of Loan Acceleration. When the borrower is more than 120 days delinquent and the loss mitigation period has expired, the lender will provide a notice of loan acceleration and an intent to foreclose to the borrower.

What is Foreclosure?

The second phase in the Illinois Mortgage Foreclosure process is commonly referred to as “Foreclosure.” During this phase, a court case is filed, which can result in a judicial order for foreclosure. This phase also includes additional opportunities for a mortgage borrower to resolve the default to try and keep their home. The activities that occur during the Foreclosure phase are 1) Complaint, 2) Service of Summons, 3) Reinstatement, 4) Judgment of Foreclosure and Order of Sale, and 5) Redemption.

Complaint. All Illinois foreclosure cases are initiated by a lender filing a complaint for foreclosure in the county where the real property is located. The Illinois Mortgage Foreclosure Act, which governs all foreclosure actions filed in the State of Illinois, includes a specific list of requirements for information that must be included in a complaint for foreclosure, as well as specific documents which must be attached to the complaint. Therefore, it is extremely important for a foreclosure complaint to accurately include all information and documents required by the Illinois Mortgage Foreclosure Act.

Service of Summons. After a complaint for foreclosure is filed, there must be proof of proper service of summons on all required parties. It is extremely important for the case to have proper service. The reason is because the court cannot act unless there is jurisdiction via proper service of summons on all required parties.

Illinois law permits service of a foreclosure action by two methods, 1) personal service on the named mortgage borrower or anyone in the household over the age of 13 or 2) by publication in the newspaper, pursuant to court rules. However, service by publication is proper only when a lender is not able to obtain personal service.

Illinois law also requires for a “Homeowner Notice” to be attached to the summons to advise a borrower of their rights, including reinstatement and redemption. (i.e., additional opportunities for a borrower to keep their property). (See reinstatement, redemption, and special redemption discussion below).

Reinstatement. After proper service of a summons, there is a ninety period where the borrower has a right to reinstate a mortgage by paying all past-due payments, escrow, costs, and fees. When a mortgage is reinstated, a foreclosure action will be dismissed. There is a reinstatement limit where a borrower will not be permitted to reinstate until after five years.

Judgment of Foreclosure and Order of Sale. After proper service of summons, the case will commence, where the borrower must decide how to respond. The decision is whether to file an appearance and answer because of a valid defense

A borrower has 30 days to decide whether to respond with a written defense to the foreclosure action. It is important to note that simply stating an inability to pay a mortgage loan is not likely a valid defense to stop a foreclosure action. There are foreclosure defenses, which are related to specific technical defects with the case or loan servicing. A borrower who decides to try and defend a foreclosure action should consider retaining an attorney because the process can be very confusing for a non-lawyer.

If a borrower believes there is a valid defense, then they are required to file an appearance, pay a court fee, and file a write answer the foreclosure complaint within 30 days of service. In situations where a borrower fails to raise a valid defense in their written answer, then the mortgage lender can seek a summary judgment to obtain a judgment of foreclosure.

If a borrower does not file an answer and appearance to a foreclosure complaint within 30 days of service, then the mortgage lender can seek a default judgment to obtain a judgment of foreclosure.

In both situations, summary judgment and default judgment, a mortgage lender is required to file a “prove-up” affidavit before the court will order a judgment for foreclosure. Mortgage lenders may also file a “loss mitigation” affidavit to demonstrate that they offered meaningful assistance to a borrower. (Illinois Supreme Court Rules 113 and 114).

It is also important to note that a judgment for foreclosure will usually include a deficiency judgment clause, where the borrower will still owe the remaining balance due on the loan, after the real estate is sold at a judicial sale.

Redemption. There is also a redemption period where a party identified as “owner of redemption” has a right to redeem the mortgage loan by paying the entire remaining balance, costs, fees, and any other amount authorized by the court. The time limit to redeem is either seven months from date of service of summons or three months from the judgment of foreclosure date, whichever is later. Although, it is important to note that a redemption period can be significantly shortened if the court determines that foreclosed property is not “residential real estate” or “abandoned residential property,” as defined in the Illinois Mortgage Foreclosure Act.

The importance of the redemption period is that a judicial sale cannot occur until the redemption period expires.

What is Post-Foreclosure?

The final phase in the Illinois Mortgage Foreclosure process is commonly referred to as “Post-Foreclosure.” During this phase, the mortgaged real estate is sold at auction with a right to possession by the new owner and the borrower is allowed one final chance to keep their property through a special redemption. The activities that occur during the Post-Foreclosure phase are 1) Judicial Sale and Confirmation, 2) Special Redemption, and 3) Right to Possession.

Judicial Sale and Confirmation. After entry of the judgment of foreclosure and expiration of the redemption period, the court will schedule a date for judicial sale of the property which requires at least 30 days’ proper notice. The Illinois Mortgage Foreclosure Act includes specific requirements for a judicial sale, which includes notice to all interested parties and publication in a newspaper for three consecutive weeks.

After the judicial sale, the lender is also required to file a motion to confirm sale of the real estate. The court is required to confirm the sale unless it finds, 1) notice of the sale was not proper, 2) terms of the sale were unconscionable, 3) the sale was conducted fraudulently, and 4) justice was not otherwise done. After the court confirms the sale, ownership of the real estate will transfer the party who was the successful bidder at the judicial sale.

Special Redemption. The Illinois Mortgage Foreclosure Act also includes a “special right to redeem” during the 30 day period after a judicial sale is confirmed if 1) a mortgage lender for the property was the purchaser at sheriff’s sale and a party to the action and 2) the judicial sale price was less than the total amount to redeem. During this period, a borrower can pay the price paid at the judicial sale, plus statutory interest from the date the sale, and any additional lender costs that were set forth in the report of sale confirmed by the court.

Right to Possession. The final activity in the Post-Foreclosure phase is transfer of possession to the new owner who purchased the property at the judicial sale. There is a 30 day period after the judicial sale is confirmed before the purchaser can proceed with a separate action under the Illinois Eviction Act to legally remove a borrower who has not vacated the property. If an eviction order is necessary, the sheriff can proceed to remove the borrower from the property. Of course, the new owner can also ask he borrower to vacate the property within 30 days of the judicial sale, and in some cases, they will offer “cash for keys”.

What is the Timeframe for an Illinois Foreclosure?

So, how long does foreclosure take in Illinois? The answer is not straightforward. As with any court action, the length of time to obtain court resolution in a lawsuit is dependent on many factors, including the court’s schedule and volume of cases. However, the timeframe for an Illinois Mortgage Foreclosure is estimated to be 12 to 18 months. Of course, whenever there is a surge in filings, that time frame can easily increase.

Foreclosure and Bankruptcy?

A pending foreclosure action must be identified and addressed in the schedules, statement of financial affairs and other required documents for a Chapter 7 or Chapter 13 case. All aspects related to valuation and ownership of real estate involved in a foreclosure, as well as all mortgages, judicial liens, arrearages, debts, and expenses related to the property must be properly treated in a bankruptcy case.

Do you want to learn more about Foreclosure and Bankruptcy? Watch for a future blog post with a detailed explanation for how foreclosure is treated in Chapter 7 and Chapter 13 bankruptcy cases. We are just getting started with posts for our new blog. Stay tuned.


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