Since the housing bubble burst over a decade ago, the thought of foreclosure has become a near-constant concern for homeowners across the country. Those dealing with financial struggles may be worried that late or missed mortgage payments will lead to them losing their homes. For those who have refinanced or obtained a second mortgage on their homes, things are often uncertain, especially as it pertains to what happens if they default on a second or additional mortgage. If you are in such a situation, a qualified foreclosure defense lawyer can help you understand your available options.

What You Should Know About Second Mortgages

Any loan that qualifies as a mortgage is considered a secured debt. This means the loan is secured by collateral, and in the case of a mortgage loan, the collateral is the home itself. If you default on your mortgage, the lender can foreclose on the home and take the house. This applies to the mortgage that allowed you to buy the home as well as any subsequent mortgages. It also applies to home equity loans taken out with the home as collateral.

In the event of a foreclosure on a home with multiple mortgages or home equity loans, the initial mortgage takes precedence. Any subsequent lenders will only get paid if the sale of the home nets enough proceeds to satisfy the initial mortgage and there is money left to distribute.

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Buying a home can be a dream come true for many people. Even if you worked hard and saved a substantial amount for a down payment, you will likely still need to take out a loan, which is known as a mortgage. If you fail to make your monthly mortgage payments, you could be at risk of losing your house. Foreclosure is the legal process by which the lender or bank can repossess your house. This means you will have to vacate the premises within a certain amount of time.

If your house is worth less than the amount you owe on your loan, a deficiency judgment may be entered. Not only do you lose your home, but you may owe your lender additional money to make up the difference in value, and your credit score will go down. The global coronavirus pandemic has impacted many homeowners financially. Fortunately, there are ways you can avoid going through foreclosure.

Practical Steps to Keep Your House

There is no doubt that the COVID-19 pandemic has impacted our nation’s economy. Many businesses have closed their doors, leaving workers unemployed and without their usual incomes. This has led many homeowners to fall behind on their bills, including their mortgage payments, which are often their biggest expense. While most lenders have instituted a moratorium on foreclosure proceedings during the current health crisis, the moratorium will eventually be lifted. It is a good idea to start preparing now for that reality.

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Illinois foreclosure law requires a judge to follow a number of steps before approving or confirming a property sale. One of these steps is to ensure that the mortgage lender or their representative has published a proper notice of the sale. Even in the Internet age, the law requires publication of this notice via newspaper advertisements. More precisely, the notice of sale must be published for three consecutive weeks in a “newspaper circulated to the general public in the county in which the real estate is located.” In counties with more than 3 million people–i.e., Cook County–the notice must be published in the township where the property is located.

Not All Defects Warrant a Reverse of Sale

An Illinois appellate court recently rejected a homeowner's attempt to undo the judicial sale of their property due to a technical failure to follow the notice requirement. The lender filed a complaint to foreclose on the mortgage in January 2010. The judgment itself was entered more than eight years later, in October 2018. In July 2019, the lender filed a notice of sale, which was published in the Chicago Daily Law Bulletin and the “Glenview Announcements,” the latter of which is published by the Chicago Tribune.

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When a homeowner cannot afford to make his or her mortgage payments, the home may go into foreclosure. In short, this means the homeowner's mortgage lender takes possession of the home. However, this is not an instantaneous or even a quick process. The foreclosure process can take well over a year to complete in Illinois and early in the process, a homeowner has some options that can allow him or her to keep the home. 

In the state of Illinois, all foreclosures are judicial foreclosures, which means that the lenders must go through the courts to complete the foreclosure process. If your lender has filed a foreclosure action against you, or is preparing to do so, here are three ways that you can stop the proceedings and possibly remain in your home. 

Modify Your Mortgage Loan

One way to steer yourself away from foreclosure is to modify your mortgage loan so it becomes easier for you to make your monthly payments. This can be done by lowering the interest rate, lowering the amount of principal for the loan, or extending its term. Sometimes, the borrower can make a single balloon payment to cover his or her missed payments or add them to other payments through the loan's life to catch up.

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Life can sometimes throw unexpected curve balls our way that prevent us from staying current on mortgage payments. Perhaps you or someone in your family has experienced a job loss, substantial increase in expenses, major health issue, or another surprising life event. Whatever the reason, being behind on mortgage payments can put an individual at risk of foreclosure. If you are facing a possible foreclosure, one option that may be right for you is a consent foreclosure.

What is a Deficiency Judgement?

Illinois law mandates that all foreclosures must go through the court system. The mortgage servicer may begin the foreclosure process when the borrower is four months or more behind on payments. If the homeowner cannot cure the default, the servicer will file a foreclosure lawsuit. If the lender wins the lawsuit, it has the authority to seize and sell your home. The difference between the amount you owe on your home and the home’s sale price is called a deficiency. Deficiencies can often be tens or even hundreds of thousands of dollars. The legal order requiring you to pay this difference is called a deficiency judgment.

Can a Consent Foreclosure Can Help Me Avoid a Deficiency Judgment?

If you want to avoid a stressful negotiations with the bank and a lengthy court process, you may be able to simply return the property to the bank and avoid a deficiency judgment through a consent foreclosure. An experienced real estate attorney can negotiate a consent foreclosure on your behalf. If the lender agrees to accept the consent foreclosure and waives the deficiency, you will be able to move on with your life without the burden of a costly deficiency judgment.

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