Mortgage Foreclosure

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Author: Revisions contributed by, Jim Brady, Legal Assistance Foundation of Metropolitan Chicago
Last updated: August 2011

State Statutes

Illinois Mortgage Foreclosure Law (IMFL), 735 ILCS 5/15–1507,1508;1602

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Foreclosure Process

Illinois is a judicial foreclosure state. The foreclosure process is governed by the Illinois Mortgage Foreclosure Law (IMFL), 735 ILCS 5/15–1101 et. seq.

Mortgages for this purpose include real estate installment contracts of more than five years duration, entered into after July 1, 1987, whose balance is less than 80% of the original purchase price. IMFL provides the exclusive method for foreclosing on all mortgages. In addition, the secured party in some UCC actions may elect to use IMFL, if the security interest is based on the assignment of a real estate installment contract or the beneficial interests in a land trust. 735 ILCS 5/15-1106, 735 ILCS 5/15-1207.

The entire foreclosure process in Illinois takes, on average, from the filing of the complaint to the eviction by the sheriff, about nine months. Foreclosure defense in court can be successful in defeating the foreclosure action but if not, may prolong the foreclosure by as much as 24 months. If the property is not residential or is abandoned, the process can be substantially shortened. The following is an outline of a typical foreclosure case:

  • Default
  • Filing of Foreclosure
  • Service of Summons
  • Foreclosure Judgment and Order of Sale
  • Reinstatement Period Expires (90 days after personal service)
  • Redemption Period Expires (7 months after personal service or 3 months after judgment, whichever is later)
  • Foreclosure Sale
  • Foreclosure Sale Confirmed
  • Right to Possession Expires (30 days after foreclosure sale confirmed)
  • Eviction by Sheriff of Named Parties
  • Recording of Foreclosure Deed

Why It Matters

A homeowner risks the loss of their home (including any accumulated equity), a personal judgment for the debt, and the loss of future credit, since a foreclosure judgment appears on credit reports.


Default: The date of the first missed payment and should be identified in the lender’s complaint. When the borrower has missed the second payment, the lender sends (statutory) notice advising borrowers they have a 30-day grace period to contact a housing counselor, in which case they will receive a second 30-day grace period prior to taking legal action. 735 ILCS 5/15-1502.5. Once the borrower misses a third payment, the lender sends a notice of acceleration, informs borrower it intends to foreclose and sends the file to an attorney to initiate foreclosure.

Filing of Foreclosure: The foreclosure case starts with the filing of the lender’s complaint to foreclose. The required elements of the complaint are set forth in the IMFL. 735 ILCS 5/15-1504.

Service of Summons:
Service of the summons and complaint are governed by Article II of Illinois Code of Civil Procedure. 735 ILCS 5/15-1107. Service by publication is only valid after an attempt at personal service. All information in the notice must be accurate. A “Homeowner Notice” advising the homeowner of their rights, including reinstatement and redemption must be attached to the summons. 735 ILCS 5/15-1504.5.

Foreclosure Judgment and Order of Sale: If no answer is filed by the homeowner the lender may move for a default judgment or if an insufficient answer is filed by the homeowner, the lender may move for summary judgment. If granted, a judgment of foreclosure is entered.

Reinstatement: Payment of past-due amounts, including all accumulated principal, interest, escrow, costs and fees, bringing the account current. 735 ILCS 5/15-1602. If the court makes an express finding that a homeowner has reinstated the loan pursuant to this section, the right to reinstate will be available once every five years. The mortgagor has the right to reinstate the mortgage within 90 days from the date the mortgagor was served with a summons or is served by publication or was otherwise submitted to the jurisdiction of the court.

Redemption: Payment of all amounts due to the lender, including the full principal balance, all accumulated interest, fees, and costs. In the case of residential real estate, the redemption period ends seven months from the date the mortgagor was served with summons or by publication or three months from the date of entry of the judgment of foreclosure, whichever is later. 735 ILCS 5/15-1603.

Judicial Sale: After expiration of the rights to reinstate and to redeem, the lender may sell the home by judicial sale. Notice of the sale must be given to all parties in the action who have appeared and have not been found in default for failure to plead. Notice of sale must also be published, running in the newspaper for at least 3 consecutive weeks, between 45 and 7 days prior to the sale. 735 ILCS 5/15-1507.

Confirmation: Lender files a petition with the court to confirm the judicial sale. The court must confirm the sale unless it finds: 1) that notice of the sale was not proper, 2) the terms of the sale were unconscionable, 3) the sale was conducted fraudulently or 4) that justice was otherwise not done. 735 ILCS 5/15-1508. An order of possession will also be entered and stayed for 30 days. Personal liability for any deficiency is established at this time. The order confirming the sale is the final order in the foreclosure case for appeal and other motion deadline purposes.

Special Redemption: A right of redemption that applies if the purchaser of residential property at a foreclosure sale is the mortgagee and if the sale price is less than the total amount of principal, interest, costs, and attorneys' fees. Under those circumstances, the mortgagor has a special right to redeem up to 30 days after the foreclosure sale is confirmed by paying the sale price, all additional costs incurred by the mortgagee set forth in the report of sale and confirmed by the court, and interest at the statutory judgment rate from the date the purchase price was paid. 735 ILCS 5/15-1604.


Homeowners threatened with foreclosure receive a flood of mail offering quick fixes and advice.  Homeowners should be warned about this mail and told to discard it all. Typically, scams involve offers to refinance (at an exorbitant interest rate or with hidden fees) and offers to buy the property, pay off the mortgage and resell the property to the homeowner, usually at an inflated price or on terms guaranteed to cause default.

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If the house is not yet in foreclosure, the client should immediately contact the lender and try to work something out. The client should pay as much as possible and save any money returned by the lender.

Once the house is in foreclosure, the client should decide if they can and wish to keep the house or if they wish to move. A realistic and careful assessment of the client’s income and expenses must be done to determine if it is feasible to keep the home. If the homeowner is to keep the house, they must reinstate, redeem, file a Chapter 13 bankruptcy, or attempt a work out with the lender. If the homeowner does not want to keep the house, the client can sell the house, offer a deed-in-lieu of foreclosure, or file bankruptcy.

Sales: The house can be sold at any point through the final redemption date. Proceeds are used to redeem the mortgage. This is a particularly good option for a homeowner who has substantial equity in the home. An assumption of the mortgage by the purchaser is also possible. The lender may also agree to a short-sale – a sale for less than the debt – if the house has been assessed at less than the value of the debt. A short sale has tax consequences – forgiveness of debt is income – and buyers should be advised accordingly. Many lenders require that the home be listed for at least 90 days before they will consider a short sale. Also, unless the lender waives their right to a deficiency, a short sale rarely benefits the homeowner.

Deed-in-lieu: The client deeds the house to the lender and moves out in exchange for a release from personal liability on the debt. The procedures are set forth at 735 ILCS 5/15-1401. There can be no junior liens on the property for this to work. The Illinois ARDC recommends that the homeowner use an attorney for the preparation of these documents to avoid chances of practicing law without a license.

Bankruptcy: If the buyer has enough regular income that they can bring the mortgage current within 60 months, they may be eligible for a Chapter 13, which would allow them to keep the house. If not, they can file a Chapter 7, which will allow them to escape personal liability for the debt. A Chapter 7 will not let the buyer keep their home. Only a Chapter 13 bankruptcy filing will stay foreclosure proceedings and extend the redemption deadline. Chapter 7 bankruptcy does not stop the foreclosure process. Chapter 7 bankruptcy is not an option if they have filed another Chapter 7 petition in the last eight years and if a discharge was a granted in the prior bankruptcy.

A bankruptcy must be filed before the judicial sale. Additionally, a debtor seeking bankruptcy protection must obtain credit counseling before filing the bankruptcy case. You can find an approved credit counseling agency on the United States Department of Justice website.

The client may continue living in the house until the expiration of the stay of enforcement of the order of possession that is entered upon confirmation of the judicial sale. Until confirmation of the judicial sale or a deed in lieu of foreclosure, the homeowner is responsible for the upkeep of the property.

Workout Agreement

After a possible workout agreement is identified, a hardship letter, outlining the client‘s circumstances, must be drafted and sent to the lender. There are a wide range of workout agreements possible. If the client has some income, or has the prospect of some income in the near future, and wishes to keep the house, a careful review of their income and expenses must be done to determine what workout arrangements are possible. Many credit counseling agencies will help negotiate workout agreements to prevent foreclosure. Typically, the homeowner or their representative needs to work with the loss-mitigation department, not the foreclosure department. If the homeowner is represented by an attorney, the attorney should seek permission from the foreclosure attorney before contacting the loss mitigation department directly.

Temporary Indulgence: A month or two grace period to bring payments current.

Deferral of Principal: Buyer pays only interest for a period of time and then resumes normal principal and interest payments.

Forbearance: Payments are suspended or reduced for up to 18 months with the agreement that they will be brought current at the end of that month.

Partial Reinstatement: Pay one-half of delinquency and agree to repayment plan no longer than 18 months for remainder.

Mortgage Modification: A change in one or more terms of the original loan to eliminate the arrearage. The interest rate can be lowered, the term extended, the arrearage added to the principal balance or recast to the end of the term, and the principal reduced to the assessed value.

The Home Affordable Modification Program (HAMP) is a voluntary modification program that aims to help homeowners avoid foreclosure as part of the President Obama Administration’s larger Making Home Affordable (MHA) initiative. HAMP provides incentives for Fannie Mae, Freddie Mac, and participating servicers to reduce first lien mortgage payments for eligible borrowers to 31% of their gross (before taxes) monthly income using specific modification steps. The program expires on December 31, 2012. For information on the Home Affordable Modification program (HAMP) go to Making Home Affordable.

Streamline Refinance: A new loan is issued, at current market rates, by the same lender. This is only an option if the loan is or can be brought to 2 months or less delinquent.

Refinance: A new loan from another lender. Homeowners should be very wary of this. They are likely to receive many offers to refinance the loan and save the home. The terms of these offers are usually predatory and the homeowner ends up losing the house, after more expense.

Partial Claim: If the mortgage is HUD (Department of Housing and Urban Development) insured, the lender may be able to request that HUD pay the arrearage. HUD then takes a junior mortgage on the property, which must be paid off after the existing mortgage or at the time of the transfer of the property.

Repayment Agreements: The buyer pays the arrearage with an additional payment each month; term is usually limited to 12 months, not to exceed 18 months.

You should warn homeowners to call back if, after negotiating a workout agreement, they receive a notice from the servicer raising the total monthly payment because delinquent escrow accounts must be made up. This usually means the loss mitigation department has not contacted the escrow department. Buyers should not have to pay back the delinquent escrow twice.

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Defenses to Foreclosures

Loan documents and the foreclosure complaint must be carefully reviewed to determine if there are any equitable or technical defenses. A list of some possible issues that may create defenses follows:

Force-placed Insurance: Sometimes lenders purchase insurance in the mistaken belief that the homeowner has let their policy lapse. If, in fact, the homeowner has their own insurance, they should not have to pay for force-placed insurance.

Tax Sale: If the real estate taxes are unpaid and sold, the buyer should not have to pay any increased costs, if the buyer made all timely mortgage and escrow payments and responded promptly to lender inquiries.

Lost Payments: Sometimes, particularly when a loan is sold or transferred to a new service, payments are not applied to a buyer’s account.

Failure to Accelerate the Note: The loan cannot be foreclosed until the loan is accelerated. If the loan documents require notice because of acceleration, failure to send the notice may defeat the foreclosure.

Suit after Assumption: If the original mortgagor sells the property and does not get a release, they will still face personal liability in a foreclosure action. The original mortgagor should be dismissed from the lawsuit without any adverse credit consequences.

FHA-Insured Loans: FHA loans have special servicing requirements, including a counseling notice mailed to the mortgagor within 45 days of default, a face-to-face meeting with the borrower within 90 days of default, and a notice of available counseling. 24 C.F.R. §203.500 et. seq. Failure to comply with these rules is an affirmative defense. Bankers Life v. Denton, 120 Ill. App. 3d 576, 458 N.E. 2d 203 (3d Dist. 1983).

Accepting Payments After Foreclosure: If the lender accepts payments after filing foreclosure, and the mortgagor is not in bankruptcy, there may be a technical defense to the foreclosure.

Truth-in-Lending and HOEPA Violations: Truth-in-Lending and HOEPA violations may be raised as a defense at any time. However, the most powerful remedy available, rescission, i.e. voiding the mortgage (if a nonpurchase mortgage) is only available within three years of execution of the mortgage. An attorney must review the original disclosure documents to determine if there was a violation, but failure to disclose material terms in writing, or high interest rates on a nonpurchase mortgage, almost always warrant careful investigation.

Fraud, Abuse, Collusion: In some cases, where the loan is clearly abusive or coercive or where the overall loan transaction was abusive or coercive, it may be possible to plead fraud or raise an equitable defense to foreclosure.

Fair Debt Collection Practices Act, 15 USC §§1692-1692a: Attorneys who file foreclosure papers are debt collectors and must comply with the FDCPA. Heintz v. Jenkins, 115 S. Ct. 1489 (1995). While not a defense per se to the foreclosure action, it does give rise to a statutory and actual damages claim.

Failure to Attach Note and Mortgage to Complaint: If the note and mortgage are not attached to the complaint, the complaint is subject to a motion to strike. 735 ILCS 5/2-606. However, most courts allow a lender to cure this deficiency without striking the complaint. A lender is not required to attach any endorsements of the note or assignments of the mortgage and simply is required to allege that it is the holder of the indebtedness or the holder’s agent.

Incorrect Notice or Service: Service by publication is only valid after an attempt at personal service. All information in the notice must be accurate. Not infrequently, mistakes are made in the notice of motion for foreclosure, invalidating the subsequent order.

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Federal Law

Protecting Tenants at Foreclosure Act of 2009 (PTFA). Pub. L. 111-22, Div. A. Title VII.

The PTFA requires that tenants residing in foreclosed residential properties be provided notice to vacate at least 90 days in advance of the date by which the immediate successor, generally the purchaser, seeks to have the tenants vacate the property.

Furthermore, the term of any bona fide lease also remains in effect for the full length of the lease, and the tenant is entitled to 90 days notice prior to the end of the lease. Bona fide lease holders may not be removed by filing a supplemental petition for succession in the original foreclosure suit. 

The PTFA  will sunset on December 31, 2014. 

State Law

735 ILCS 5/15-1701

The Illinois law states that the purchaser may not file a forcible action against the occupant of the mortgaged real estate “until 90 days after a notice of intent to file the action has been properly served upon the occupant.”

The purchaser may not file a supplemental petition for succession against a bona fide lease holder. 

The purchaser may not file a forcible action against a bona fide lease holder until 90 days prior to the end of the lease, up to one year. 

A lease or tenancy shall be considered bona fide if:

  • The mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant
  • The lease or tenancy was the result of an arm's length transaction; and
  • The rent is not substantially less than fair market value for the property or unit, unless reduced by Federal, State, or local subsidy. 

735 ILCS 5/9-121(c).

The court file relating to a forcible entry and detainer action brought against a tenant who would have lawful possession of the premises but for the foreclosure on the property, or a bona fide lease holder, shall be sealed pursuant to Section 15-1701.

Chicago Ordinance

Residents of Chicago may be afforded additional protections under the Residential Landlord and Tenant Ordinance (RLTO) and Keep Chicago Renting Ordinance (KCRO). 

RLTO 5-12-095

Within 7 days of being served a foreclosure notice, an owner or landlord of the premises that is subject to the complaint shall disclose, in writing, to all tenants of the foreclosed premises that a foreclosure action has been filed.

RLTO 5-12-080(e)

Successor landlord is liable for tenant's security deposit.

RLTO 5-12-030(h)

Sets forth definition of "successor landlord." A court-appointed receiver is not a successor landlord. 

KCRO 5-15-40

 No later than 21 days after a person becomes the owner of a foreclosed rental property, the owner shall make a good faith effort to ascertain the identities and addresses of all tenants of the rental unites in the foreclosed property and notify, in writing, all known tenants of such rental units that, under certain circumstances, the tenant may be eligible for relocation assistance. The notice shall be given in English, Spanish, Polish, and Chinese.

KCRO 5-14-050 For "qualified tenants":

  • The owner of a foreclosed rental property shall pay a one-time relocation assistance fee of $10,600, or
  • The owner must offer an option to renew or extend the tenant's current rental agreement with a capped annual rental rate. 

 KCRO 15-14-020 Defines "qualified tenant":

  • A tenant in a foreclosed rental property on the day that a person becomes the owner of that property; and
  • Is a bona fide lease holder (see definition above).


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Judicial Sale

735 ILCS 5/15–1507, 1508

The person who conducted the sale reports the results of the sale to the court. Personal liability for any deficiency is established at this time. Occasionally, the property is sold for more than the pay-off. The client may be entitled to a surplus from the sale. The client should call the mortgagee’s attorney and see if the property sold for more than the amount due. If there is a surplus, the client must file a motion to request turnover of the excess proceeds of sale.

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Investment Property

If the property is an investment property, the lender can ask for a receiver or caretaker as soon as the suit is filed. Also, since the right to redeem can be waived in non-residential loans, the foreclosure can go much faster.

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Foreclosure Scams

There are many mortgage scams. Anyone who is foreclosed will receive 30 to 80 pieces of "vulture" mail which offers a variety of advice. The client should beware of these solutions. The client should use approved credit counseling agencies instead.

EXAMPLE: Caller tells client that they have excellent credit and can get a mortgage on the property. They will allow client to deed the property over to them, and lease it back to client. Of course, they own the property then and the client is evicted.

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