Wednesday, September 26, 2012

The Anatomy of a Foreclosure

“So I fall behind on my mortgage payments, the lender says to pay up, I am unable or otherwise unwilling to pay up, the lender takes my home, sells it and kicks me to the curb, right?” asks Fred the delinquent owner.

The concepts outlined in Fred’s statement are somewhat correct, but there are procedures put in place to protect home owners from overzealous lenders along with certain rights implemented to ensure that the process is a just process.  Our foreclosure attorneys will walk you through the different aspects of the foreclosure process in discussing your particular case, but here we will help give you a little information so when you speak with one of our attorneys, you better understand the terminology and the overall process.

Most Used Mortgage/Foreclosure Terms

“Liens, lis pendens, lien theory, security, note?  I thought I just had a house payment?”

There are several legal terms that specifically outline how a house loan in Illinois is constructed.  For starters, Illinois is a “lien theory” state.  The Mortgage is the document that states that the property acts as Security for the loan; hence the lien theory meaning the homeowner holds onto to the title to the property subject to the lien placed by the lender.   The Note actually sets forth the terms of the loan, but the mortgage is what is filed to prove the debt exists.  Lis pendens is a term that you hopefully do not encounter.  It is the recorded document giving public notice that the property is the subject of a foreclosure process.  Deed In lieu of Foreclosure or a Deed in Lieu is pretty self explanatory.  The borrower essentially hands the property back to the lender instead of going through the full foreclosure process.  The catch to a Deed in Lieu is that the property must be equal to or greater than the amount owed on the property by the borrower.  If there is a deficiency, a deed in lieu may not be an option.  A Deficiency Judgment is also something to look out for.  If the public sale of a foreclosed property amounts to less than what the homeowner owes, then the homeowner is still responsible for the remaining debt.

Another important term to note is the Right of Redemption or Right of Reinstatement.  This right gives the homeowner the ability to reclaim foreclosed property by paying all of the unpaid payments along with any costs associated.  This is an important right that our attorneys can best explain and we will most likely tackle this in a future blog, but that is the general concept.    

These terms will help you understand the process outlined below.           

How Does a Foreclosure Work?    
For starters, a lender cannot just take your property in Illinois.  Since Illinois is a judicial foreclosure state, the lender must take the matter up in Circuit Court where the court must issue the final foreclosure judgment.   Your note and mortgage will outline what constitutes grounds for foreclosure, but oftentimes the foreclosure process begins after 3 missed payments.  Once the complaint is filed, you have 90 days from the date you receive notice of the foreclosure to exercise your right of reinstatement.   Once in court, if you lose then you receive the judgment of foreclosure and so the property is no longer yours.  At this point, your right of redemption period begins.  

However, you may contest the foreclosure based on a variety of grounds or may be granted additional time to contest the foreclosure based on judicial discretion.   Before the lender can conduct the foreclosure sale of your property, it must publish notice of the sale in a local newspaper at least 3 weeks in a row.  The lender must also determine if you have not already done so whether or not you qualify for a loan modification under the Home Affordable Modification Program.   At this point, unless additional time was granted for any of the reasons above, almost one year has elapsed.  If you have lost your case, then the lender will conduct the sale after proper notice and the court will confirm the sale.  You will be removed from your home if you have not already left.   If you are curious about the specific timeline for these events, please see one of our previous blog posts.

Do not get to this point.  Our attorneys will explain your rights and the steps to take at each phase of the foreclosure process to ensure that you are not unjustly or illegally foreclosed on and kicked out.  You may think that you have no options left, but we may be able to find a better way out for you.

See Our Related Blog Posts:

Foreclosure, Short Sales, & New Federal Guidelines
Hardest Hit Program Keeps a Bad Day from Getting Worse

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