Foreclosure Defense & Loan Modifications


The Foreclosure Process

The foreclosure process in Illinois is governed by the Illinois Mortgage Foreclosure Law and various federal laws and regulations. Lenders and servicers must strictly comply with this law before and during the foreclosure process. If they fail to do so, their mistakes could be your leverage to delay or defeat the foreclosure or negotiate favorable terms of a modified loan. Only an experienced foreclosure lawyer can fully protect your state and federal rights.

Foreclosure proceedings can begin after a single missed payment, but it isn’t very likely. Most banks and lenders have a grace period for late payments, usually with a fee added on. It typically takes being a full 30 days late for the alarm bells to go off. After the second missed payment, you’ll be getting some phone calls. Many lenders will only accept late payments sufficient to bring the loan completely current. They also may refuse any partial payments.

Once you fall three months behind, things get serious. This is typically when most lenders will begin the foreclosure process. Lenders and servicers must strictly comply with all applicable laws and regulations before they are entitled to sue you for foreclosure. You must know your rights in order to enforce them, and that is why you need an experienced foreclosure defense attorney on your side.  

Once a foreclosure lawsuit is filed, the lender or servicer will try to move it quickly through the court system toward a judicial sale. However, the rights you have as a foreclosure litigant are the same as those afforded any litigant: You have an opportunity to present and fully litigate any defenses you may have. These often include taking full advantage of federal law and regulations concerning loan modifications. While you are pursuing a loan modification or other type of “loss mitigation,” you have the right for your foreclosure case to be put on hold. It will not be put on hold automatically, though; you have to know how to enforce your rights. This is something you should not attempt without the help of an experienced foreclosure defense attorney.

Foreclosure also requires that any other involved parties be notified of the proceedings. For instance, if the homeowner took out another loan against the house with a third party, that lender must be contacted and its loan amount must be paid from the auction’s proceeds. If the third-party lender isn’t paid, it can apply the mortgage to the new property owner. Many times, the lender will actually buy the property back and attempt to sell it through the real estate market at a later date.

There can also be deficiency judgments entered against the borrower if the sale of the property doesn’t satisfy the amount of the loan. If saving the home is not possible, it is important to minimize or eliminate the amount of any money judgment that may be personally entered against you. Bankruptcy is only one strategy to avoid a money judgment–experienced foreclosure defense attorneys can help you minimize or eliminate money judgments entered against you after a deficiency arises from a foreclosure judgment and sale without the need for a bankruptcy filing.

 

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Foreclosure Lawyers Who Will Fight to Get you a Loan Modification

A very high percentage of loan modification applications are denied. This is because, largely, foreclosure is the most attractive option for banks and other creditors. In order for a loan modification (aka loan restructuring) to be successful, it has to be appealing to your lender. Our lawyers and staff understand the mortgage lending and servicing industries and know how to negotiate with banks, mortgage lenders and servicers on behalf of our clients. In some cases, filing for bankruptcy in addition to seeking a loan modification garners the desired result. Most often, however,  bankruptcy is not required. We will work with you personally to gain an understanding of your situation and craft a legal strategy that suits your unique goals.

If you are experiencing a temporary financial hardship, such as job loss or medical bills, your lenders may be more agreeable to a loan modification. It is important that you have sufficient documentation of such a circumstance before entering a negotiation with a creditor.

Be wary of any non-attorney that wants to charge you upfront fees to perform loan modification services. Non-attorneys cannot and will not intervene in the foreclosure lawsuit, which is a necessary step during the loan modification process. If you do not defend the foreclosure lawsuit, the bank or servicer may tell you they are working with you on a modification while at the same time their lawyers are working in court to enter a foreclosure judgment against you and take your home. We have handled thousands of mortgage modification negotiations on behalf of homeowners throughout Illinois while aggressively litigating all available defenses to the foreclosure lawsuit. Some lawyers only do foreclosure defense and will not help you through the modification process. Our two-pronged approach–litigation defense and loan modification assistance–is unique and effective. We also represent businesses in commercial loan restructuring. We can help you throughout all stages of the process and with all of the legal details.

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Non-retention Options

Consent Foreclosure 

A consent foreclosure can be requested after the foreclosure proceedings have already started. In a consent foreclosure, the lender typically requires much less paperwork than for a deed in lieu of foreclosure. Consent foreclosures are also the preferred soft landing for cases where there are one or more junior mortgages in addition to the primary lender suing to foreclose. Consent foreclosure gives the lender a clear title to the property, clearing it from any claims by third parties such as junior lienholders.

In a consent (or a non-contested) foreclosure, the borrower can negotiate an agreed date to exit the property–on their terms. In exchange for the borrower’s agreement to leave the property by a certain date and in good condition, the borrower is guaranteed by Illinois law to avoid any personal deficiency judgment. Often, borrowers can negotiate some cash for moving expenses as an additional term of their agreement to a consent foreclosure. Consent foreclosure can be a powerful tool for people who are no longer able to afford mortgage payments but do not wish to file for bankruptcy. If you would like to know more about consent foreclosures, our lawyers can help.

 

Deed-in-lieu of Foreclosure

A Deed-in-Lieu of Foreclosure (DIL) is where a homeowner voluntarily transfers the ownership of their property to the owner of your mortgage loan in exchange for a release from their mortgage loan and payments.  However, there may be tax implications. The IRS may consider the amount between what the house is worth and the outstanding loan as forgiven debt. Depending on your income and other financial circumstances, the forgiven debt may or may not be taxable income. 

A DIL is an alternative to foreclosure and should be considered if:

  • You are ineligible to refinance or modify your mortgage
  • You don’t want to sell your home or haven’t been able to sell your home
  • You can no longer afford your home and you are ready to leave
  • You have no junior or subordinate liens
  • You are facing a long-term hardship
  • You are behind on your mortgage payments
  • You owe more on your home than it’s worth

 

Short Sale

In a short sale, the borrower sells the property on the open market to a willing buyer and applies to the bank to accept an amount less than what is owed in full payment of the debt. A short sale can be a great opportunity to walk away from a bad debt situation. Although it will not allow you to keep your home, in most cases it will allow you to negotiate relief (forgiveness) of your mortgage debt above the proceeds of the sale. Just as with a DIL there may be tax implications.  If the debt is forgiven, the IRS may consider the amount between what the house was sold for and the outstanding loan balance as forgiven debt. Depending on your income and other financial circumstances,  however, the forgiven debt may or may not be taxable income.  

Our attorneys can handle all aspects of your short sale, from negotiation with your lender to accept the short offer, to closing the deal and representing you at the closing table.  We can also help you understand the impact a short sale will have on your credit and other important factors. If a short sale is not in your best interest, you may consider other foreclosure defense options or bankruptcy. The decisions are yours. We are here to offer legal guidance and determined advocacy.