What is a Judicial Foreclosure State?

According to a recent article in The Patch, Illinois had one of the highest rates of foreclosure in the country in 2017. Indeed, Illinois came in fourth for the total number of foreclosure filings last year, yet foreclosures overall dropped significantly. In total, Illinois had a foreclosure filing rate of 0.86% of the total number of housing units in the state, which still shows a decline from the previous year. In other words, foreclosure rates are declining in Illinois, yet they are still among the highest in the nation. As you have read about foreclosures in Oak Park and throughout Chicagoland, you might have come across the term “judicial foreclosure.”

Given that many homeowners in the state are still facing foreclosure, it is important to understand the difference between a judicial and a non-judicial foreclosure, and what this means for homeowners in Illinois.

Two Types of Foreclosures in the U.S.

In the country, there are two different types of foreclosures - judicial and non-judicial foreclosures. You may have heard of or seen references to judicial foreclosures in Illinois, and this is because Illinois is a judicial foreclosure state. What does this mean? It is actually a relatively simple premise: Foreclosures need to go through the court system. Other states are what are known as non-judicial foreclosure states, and as such, foreclosures do not have to go through the court.

Judicial and non-judicial foreclosures have different processes. While the basic difference between them is relatively easy to understand, it is important to carefully consider the distinctions between these two types of foreclosures and the way they affect homeowners. Since Illinois is a judicial foreclosure state, we will focus on what that means for mortgage borrowers who may be behind on payments.

How do Judicial Foreclosures Work?

For a judicial foreclosure to begin, the bank (the lender of the mortgage) needs to file a lawsuit. Because judicial foreclosures go through the court system, they tend to take a significantly longer period of time than non-judicial foreclosures. Under foreclosure laws, the following are typically the steps in a judicial foreclosure:

• The bank first needs to send a notice of its intent to begin the foreclosure process after you get behind on your mortgage payments by 120 days or more;
• The bank will file a lawsuit if you do not attempt to make payments on the mortgage debt you owe;
• Homeowner receives notice of the lawsuit and can respond, which is the point at which the homeowner can raise defenses to the foreclosure; and
• If the bank wins the lawsuit, the court will enter a judgment for the bank and a foreclosure sale usually will occur.

About half of all U.S. states are judicial foreclosure states. In non-judicial foreclosure states, the foreclosure process does not go through the court and thus is typically much quicker. It usually involves the homeowner receiving a notice of default and a notice of sale before the foreclosure sale occurs.

Contact an Oak Park Foreclosure Defense Attorney

Do you need help with foreclosure defense, or do you have questions about the foreclosure process in Illinois? An experienced Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm for more information.

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Remedy for Illinois Homeowners Who Faced Foreclosure

Recent Case Addresses Illinois Single Refiling Rule for Foreclosure

Remedy for Illinois Homeowners Who Faced Foreclosure

Did your home go into foreclosure, or were you facing the threat of foreclosure, while dealing with the mortgage servicer PHH Mortgage Corp.? You may be eligible for a financial remedy. According to a recent article in the Chicago Tribune, Illinois Attorney General Lisa Madigan reported that “Illinois residents who faced foreclosure or lost their homes due to alleged improper mortgage loan serving practices by PHH Mortgage Corp. are eligible to collect $1.5 million in cash payments as part of a nationwide settlement.” The company was sued by the attorneys general of every U.S. state except New Jersey, in addition to facing lawsuits from mortgage regulators. What else do you need to know about the settlement and its connection to the foreclosure crisis?

Alleged Improper Mortgage Servicing Practices By PHH Mortgage Corp.

What are the alleged improper mortgage servicing practices by PHH Mortgage Corp. that resulted in the recent settlement? According to the article, the company:

• Failed to properly apply homeowners’ loan payments;
• Failed to properly execute paperwork for foreclosures; and
• Failed to respond to borrowers’ requests for loan information.

As a result of these improper mortgage servicing practices, Attorney General Madigan and other attorneys general throughout the country contended that homeowners dealt with the uncertainty of foreclosure, and many actually lost their homes due to foreclosure. According to Madigan, “this settlement will provide some long-awaited relief to the homeowners who fell victim to PHH’s improper loan services practices.” Madigan went on to explain how, “under this agreement, PHH will be held accountable for its actions and must follow standards to prevent this conduct in the future.”

What kinds of remedies are available to homeowners under the terms of the settlement? If you lost your home through foreclosure and your mortgage was serviced by PHH Mortgage Corp., you may be eligible for a payment of at least $840. If you did not lose your home, but PHH initiated foreclosure proceedings, you may be eligible to receive a payment of at least $285. The alleged improper mortgage servicing practices occurred between 2009 and 2012, just as many Oak Park residents were still struggling to recover from the housing crisis. Upwards of 2,800 homeowners in Illinois could be eligible to receive a payment from the settlement.

Mortgage Servicing Rules from the CFPB

The Consumer Financial Protection Bureau (CFPB) issued a final Mortgage Servicing Rule in 2016, and it clarifies the obligations of mortgage servicers. Common complaints about mortgage servicers include but are not limited to the following:

• Failing to apply mortgage payments in a timely manner;
• Improperly applying mortgage payments;
• Failing to apply mortgage payments altogether;
• Charging egregious fees to homeowners;
• Dual-tracking (which involves the mortgage servicer working with a homeowner on a loan modification while moving forward with foreclosure proceedings); and
• Failing to provide information to consumers about their mortgages or the state of foreclosure proceedings.

When mortgage servicers harm consumers, they can be held responsible.

Seek Advice from an Oak Park Foreclosure Defense Attorney

Homeowners should not have to face foreclosure as a result of improper mortgage services practices. If you were harmed by a mortgage servicer’s practices, or if you have questions about the PHH Mortgage Corp. settlement, an Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm to discuss your case.

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Assessing the Risks of a New Foreclosure Crisis

Could Illinois Benefit from Fast-Track Foreclosure Laws?

Assessing the Risks of a New Foreclosure Crisis

The foreclosure crisis that began in 2007 has now been over for a number of years, yet we have continued to discuss commentators’ concerns that the foreclosure crisis might not, in fact, be over entirely. Many homeowners in the Chicago area remain at risk of losing their homes due to their inability to make monthly mortgage payments on time, and many of those homeowners are dealing with complicated home loans that contain confusing terms. According to a recent article in Forbes Magazine, we may be at risk of another foreclosure crisis. Are the underlying reasons the same this time around? What can we do to prevent another consumer crisis?

Recalling the Reasons for the Housing Bubble Burst in 2007

As the Forbes article explains, most of us directly connect the foreclosure crisis that began about 10 years ago to the housing bubble burst and the subsequent “Great Recession.” What caused the foreclosure crisis the bursting of the housing bubble? In short, “for years beforehand, lenders had been giving out riskier and riskier mortgages, including waiving or lowering down payment requirements.” In addition, subprime mortgage resulted in numerous homeowners finding themselves underwater, or owing more money on their mortgages than their houses were actually worth on the market, meaning that even if they were to sell their properties, they would owe more money to the bank than they could afford.

Are we looking at similar conditions now, in 2017? The article suggests that “low- or no-down-payment mortgages may be making a comeback.” In other words, more homeowners that cannot actually afford to make monthly mortgage payments may be getting home loans that they could be at risk of defaulting on months or years down the road. Indeed, “several banks are now offering various zero-down mortgage programs or down payment assistance to higher-risk borrowers.” But the problem is not exactly the same as it was in the early 2000s. In large part, adjustable-rate mortgages have been linked to the first foreclosure crisis. Now, a different kind of loan may be responsible for consumer difficulties.

Down Payments Taxed as Income

One of the types of down payment assistance that is gaining popularity is a type of home loan that involves the bank providing for a 3% down payment and, in some cases, closing costs. While this deal might sound good to struggling families who want to buy a house, this kind of down payment assistance has hidden costs that many borrowers might not fully grasp. Specifically, “the down payment and closing costs can be taxed as income by the IRS.” What does this mean for the average low-income or moderate-income borrower?

If a 3% down payment and up to $3,500 are taxed as income, that could mean homebuyers could end up in a higher tax bracket, owing significant taxes as a result of making the decision to buy a home. For example, imagine that a borrower wants to buy a $200,000 home. A 3% down payment would total $6,000, and add the $3,500 closing costs to that amount for a total of $9,500. Now, the borrower would be taxed on that amount, adding thousands of dollars in the total tax owed for the year. For many low-income and moderate-income borrowers, this kind of tax bill could be debilitating, adding to additional debt issues.

Contact a Foreclosure Defense Lawyer in Oak Park

Do you have questions about current mortgage offers and foreclosure risks? An Oak Park foreclosure defense attorney can assist you. Contact the Emerson Law Firm for more information.

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Could Illinois Benefit from Fast-Track Foreclosure Laws?

Did Banks Undermine Federal Foreclosure Assistance?

Could Illinois Benefit from Fast-Track Foreclosure Laws?

Despite the fact that the foreclosure crisis is largely over, many homes remain in foreclosure in the Chicago area, and many families are still at risk of losing their homes due to the inability to make monthly mortgage payments. An article in Chicago Now indicates that Chicago foreclosures have reached a record low—including homes that are newly entering foreclosure as well as those that are part of the shadow inventory. However, the total number of homes in the Chicago area at some stage of the foreclosure process was already higher than in many other major urban areas.

While foreclosure numbers appear to be declining, is it time for Illinois to consider foreclosure fast-tracking laws? According to a recent article in DSNews.com, a fast-track foreclosure law could be a “much-needed remedy” for Chicago and for Illinois more generally.

What are Fast-Track Foreclosure Laws?

Currently, according to the article, only two states have what are known as fast-track foreclosure laws: Ohio and Maryland. However, a handful of additional states, including Illinois, are considering implementing similar laws to speed up the foreclosure process. So, what are fast-track foreclosure laws? In short, they are designed to speed up the foreclosure process and to prevent a growing number of homes from making up a shadow inventory. Yet fast-track laws can vary from state to state.

In Ohio, for instance, the fast-track foreclosure law “authorizes an expedited foreclosure action against vacant and abandoned single-family residential properties, allows the bank or servicer to enter and secure such properties, and criminalizes the damaging or diminishing of property in any way by a homeowner from the time they are notified of an impending foreclosure action.” In addition, the Ohio law prevents an owner from reacquiring a mortgage for a vacant or abandoned residential property once the property has been sold.

While the Ohio law has specific elements that would not need to be adopted by every state implementing fast-track laws, it sets similar goals to other states (even if those states do not yet have fast-track laws in place) to prevent the foreclosure process from lingering, sometimes for years, and leading to blighted neighborhoods and decreasing home values. With fast-track laws, the goal is for homes that enter the foreclosure process to become occupied against as quickly as possible, and for those homes to be maintained—such that they can be readily sold—during the foreclosure process.

Will Illinois Adopt a Fast-Track Foreclosure Law?

According to some commentators, Illinois is close to having a fast-track foreclosure law of its own. Not only could such a law help to keep home values up, but it could also improve the mental health of those affected by foreclosure. Whether your home has entered the foreclosure process or you are living in a community that has been saliently impacted by foreclosures (and now, vacant homes), the National Institutes of Health notes that “foreclosures adversely affect health and mental health on both the individual and community levels.”

If you have questions about foreclosure laws in Illinois, or if you need help avoiding foreclosure, an experienced Oak Park foreclosure defense lawyer can assist you. Contact the Emerson Law Firm to learn more about how we can help.

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Did Banks Undermine Federal Foreclosure Assistance?

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Did Banks Undermine Federal Foreclosure Assistance?

Could federal foreclosure assistance programs have helped more consumers in Illinois and throughout the country if banks had been more organized? According to a recent study conducted by researchers at the Stanford Graduate School of Business, the Home Affordable Modification Program (HAMP) did prevent many homeowners from losing their homes to foreclosure, but it could have been significantly more effective if banks had made internal changes that would have allowed them to better serve struggling consumers.

What does this study teach us about foreclosure prevention and the role banks play in this process?

HAMP Did a Lot of Good, But it Could Have Helped More Homeowners

The first thing to know about the study is that HAMP, the federal foreclosure assistance program launched by then-President Barack Obama in 2009, did have a significant impact on struggling homeowners who were at risk of foreclosure. As the study explains, HAMP “aimed to help families keep their homes by offering incentives to banks and loan-serving companies that modified mortgages of troubled borrowers.” In many ways, it did work—to an extent. According to Amit Seru, one of the co-authors of the study, HAMP resulted in “1 million additional permanent loan modifications and prevented about 600,000 foreclosures that otherwise would have occurred.”

At the same time, HAMP could have done even more. To better understand what the limitations were, it is important to understand precisely how HAMP did help some homeowners. As the authors of the study explain, the federal foreclosure assistance program gave “modest financial incentives” to banks and mortgage services if they were willing to provide loan modification for homeowners at risk of foreclosure. For each modified home loan, through HAMP the federal government gave banks and mortgage servicers $1,000. In addition, if those homeowners remained current on their loans for the following three years, the banks or mortgage servicers would receive an additional annual payment of $1,000.

HAMP aimed to help millions of consumers avoid foreclosure. If banks had been willing to deal with organizational issues, the study estimates that HAMP could have helped 70% more homeowners who were facing foreclosure.

Banks and Servicers Lacked the Organizational Capacity to Renegotiate High Volumes of Mortgages

How did the banks fail so many struggling homeowners with regard to HAMP? In short, they “lacked the organizational capacity to renegotiate large numbers of loans and opted not to make internal changes that would have enabled them to take advantage of the program.” To put that another way, banks and mortgage-servicing companies could have made changes so that they could help more struggling homeowners with modifications—perhaps as many as 70% more—yet the banks and mortgage-servicing companies did not make those changes.

The good news is that, for those homeowners who had their mortgages modified through HAMP and avoided foreclosure, many remain on track with mortgage payments.

For the millions of Americans who did not receive help through HAMP, the authors of the study suggest that, in the event of another foreclosure crisis, federal programs like HAMP could be developed in such a way that bank organizational issues are less likely to affect the program’s ultimate success. In other words, some of the blame is on the banks, but it is also possible that policymakers could have dealt with the pressing matter that “some banks just don’t have the organization design conducive for such activity” as renegotiating thousands of mortgages.

Contact an Oak Park Foreclosure Defense Lawyer

If you have questions about foreclosure and Oak Park real estate issues, a foreclosure defense attorney in Oak Park can speak with you today. Contact the Emerson Law Firm for more information.

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Foreclosure, Reverse Mortgages, and Chicago Seniors

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