If you are a homeowner in Illinois facing the scary prospect of losing your home to foreclosure, don’t be caught off guard. Read on to find out each step in an Illinois foreclosure (from missing your first payment all the way to eviction) and learn about your rights during the process.
(For more articles on foreclosure in Illinois, visit our Illinois Foreclosure Law Center.)
Illinois Mortgage Loans
When you take out a loan to purchase residential property in Illinois, you typically sign a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note.
Find out more in our article What’s the Difference Between a Mortgage and a Promissory Note?
To learn more about mortgage terminology, see our Glossary of Foreclosure Terms.
What Happens When You Miss a Payment
If you miss a payment, most loans include a grace period of ten or fifteen days after which time the loan servicer will assess a late fee. (Loan servicers collect and process payments from homeowners, as well as handle loss mitigation applications and foreclosures for defaulted loans.)
The late fee is generally 5% of the overdue payment of principal and interest based on the terms of the note. To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement.
Learn more about fees that the lender can charge if you’re late on mortgage payments.
What Happens When You Fall Behind in a Few Payments
If you miss a few mortgage payments, your mortgage servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement (such as a loan modification, forbearance, or payment plan) so you can avoid foreclosure.
Learn the difference between a loan modification, forbearance agreement, and payment plan.
To get information about these and other options to avoid foreclosure, see our Alternatives to Foreclosure area.
Pre-Foreclosure Loss Mitigation Review Period
Under the federal Consumer Financial Protection Bureau servicing rules that went into effect January 10, 2014, the mortgage servicer must wait until you are 120 days delinquent on payments before filing the case in state court to start the foreclosure. This is to give you sufficient time to explore loss mitigation opportunities. (The servicer can still send you notices informing you that you are late in payments and/or that explain what your loss mitigation options are within this pre-foreclosure period.)
Foreclosure Grace Period
Illinois law provides residential borrowers with a grace period of up to 90 days after their mortgage is in default before a foreclosure can be initiated.
The lender can take no action toward filing a foreclosure lawsuit for the first 30 days after a mortgage default. Once the loan becomes delinquent by more than 30 days, the lender/servicer sends a grace period notice advising the borrower of the right to obtain housing counseling. The grace period is in effect for 30 days from the date of the notice. An additional 30-day period is available for homeowners who enter into counseling.
The grace period applies to all loans secured by residential real estate unless:
- the borrower has previously filed bankruptcy, or
- the property is not the borrower’s principal residence.
The grace-period law is scheduled to sunset (end) on July 1, 2016.
Mortgage Contracts Often Require a Breach Letter
Illinois mortgages often contain a clause that requires the lender to send a notice, commonly called a breach letter or demand letter, informing you that your loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)
The letter must specify:
- the default
- the action required to cure the default
- a date (usually not less than 30 days from the date the notice is given to the borrower) by which the default must be cured, and
- that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.
In Illinois, foreclosures are judicial, which means the lender (the plaintiff) must file a lawsuit in state court. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
The lender initiates the foreclosure by filing a complaint with the court. The complaint is served to the borrower, along with a summons that typically provides 30 days for the borrower to file an answer, as well as a Homeowner Notice advising the homeowner of his or her rights during the foreclosure process.
If you do not respond to the court action within the specified amount of time, the lender can get a default judgment from the court. This means you automatically lose the case.
On the other hand, if you file an answer, the lender cannot obtain a default judgment. Instead, the lender will either:
- file a motion for summary judgment (this type of motion requests that the court grant judgment in favor of the lender because there is no dispute as to the important facts of the case; you can file a paper opposing the motion), or
- go to trial.
If the lender is granted summary judgment or you lose at trial, the court will enter a final judgment of foreclosure against you.
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure. Mediation is available in some Illinois counties.
Learn more about Foreclosure Mediation Programs in Illinois.
Reinstatement Before Sale
Reinstatement is when the borrower pays the past-due amounts on the mortgage, plus all costs and fees, in order to bring a delinquent loan current. Illinois law provides that the borrower may reinstate the loan up to 90 days after the borrower has been:
- served with a summons or by publication, or
- has otherwise submitted to the jurisdiction of the court.
As a practical matter though, most loan servicers allow the borrower to reinstate at any time prior to the sale.
Learn more about reinstating a loan to avoid foreclosure.
A redemption period is the legal right of any mortgage borrower in foreclosure to pay off the total debt, including the principal balance, plus certain additional costs and interest, in order to reclaim the property. In Illinois, the sale may not be held until after the expiration of the redemption period.
The redemption period for residential properties expires at the later of either:
- seven months after the complaint is served, or
- three months from the date of judgment.
(If the property has been abandoned, the redemption period can be reduced to 30 days from the date of judgment.)
Additionally, there is a 30-day special right to redeem following the date the sale is confirmed if:
- the purchaser at the foreclosure sale of residential property was the mortgage lender, and
- the sale price was less than the total debt (the total debt is the amount of the judgment plus expenses up to the date of redemption).
Learn more about redemption periods.
Notice of Sale
Notice of the foreclosure sale must be published in a newspaper for at least three consecutive weeks, once per week, with the first notice published not more than 45 days prior to the sale and the last notice published not less than seven days prior to the sale.
Notice of the sale must also be mailed to the homeowner and any other defendants at least 10 business days before the sale. (This is a relatively new requirement in Illinois. Learn more in our article New Illinois Foreclosure Rules.)
The Foreclosure Sale
At the foreclosure sale, the property will be:
- sold to the highest third-party bidder, or
- revert to the foreclosing lender and become REO.
Most properties revert to the foreclosing lender.
Deficiency Judgments in Illinois
When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower.
Learn about methods that creditors can use to collect judgments.
In Illinois, a lender may obtain a deficiency judgment as part of the foreclosure action, but only if the homeowner has been personally served in the foreclosure lawsuit (unless the borrower enters an appearance in the action).
Learn more about deficiency judgments in Illinois.
Eviction Following Foreclosure
If you don’t vacate the property following the foreclosure sale, the new owner will likely:
- offer you a cash-for-keys deal (where the new owner offers you money in exchange for you agreeing to move out), or
- evict you. (The order approving the sale in the foreclosure action usually provides that the lender is entitled to possession 30 days after the order is entered.)
To learn more about foreclosure in general, ways to defend against foreclosure, and programs to help struggling homeowners avoid foreclosure, visit our Foreclosure Law Center.