KEEPING YOUR HEAD ABOVE WATER IN AN ILLINOIS FORECLOSURE

In September and October 2010, several major mortgage lenders confessed that many of their employees had been signing and notarizing home foreclosure documents (affidavits) without reviewing their content. Lenders including GMAC/Ally, Bank of America and JP Morgan Chase all revealed they had filed thousands of documents without verifying the underlying mortgage information.

As these documents were used in court proceedings, the inaccuracies often resulted in unintended and unfortunate outcomes for people trying to salvage what they could after a foreclosure. The revelation of this nationwide debacle caused major banks to put a freeze on foreclosure activities until they could investigate the damage already done.

State Action to Address the Foreclosure Problem

In response to this foreclosure document scandal, Brent E. Adams, the Secretary of the Illinois Department of Financial and Professional Regulation, issued a nine point plan to correct foreclosure errors. Aggressive action such as this is important in states with high foreclosure rates such as Illinois.

The nine point "affidavit preparation expectations" plan seeks to regulate those preparing foreclosure documents (affiants) with the following rules:

• Affiants may not use signature stamps to sign affidavits;
• Affiants must confirm the amount owed by the borrower and ensure the numbers are totaled correctly;
• Affiants must be people, not entities;
• Affiants must have sufficient knowledge to submit affidavits in court proceedings;
• Mortgage lenders and servicers must have procedures in place to ensure accurate and complete affidavits;
• Notarized affidavits must be notarized according to state laws, which generally requires an oath and signature in the notary's presence;
• Affiants may not leave blanks or incomplete statements in affidavits and affiants must date their signatures by hand;
• An affiant's printed name must appear on the affidavit if his or her signature is not legible;
• Mortgage lenders and servicers may not file unsigned affidavits with the court.

Hopefully these regulations will improve the accuracy and reliability of the documents used in court when the impact on peoples' lives is so high.

The Foreclosure Process

If a homeowner has defaulted and is already in the foreclosure process, they should be aware of the basic laws and processes involved to protect their rights and financial future.

The average foreclosure in Illinois takes nine months from filing to eviction. Foreclosure begins with a default, which is a homeowner's failure to make between three and five mortgage payments. The lender then files a foreclosure complaint and the homeowner must be given notice of the foreclosure request in person or by publication. A "Lis Pendens" is filed with the recorder of deeds to give public notice of litigation related to the property.

The right of reinstatement gives the homeowner 90 days after service to make full payment of costs and expenses to fix the mortgage default. The right of redemption gives the homeowner the later of seven months after service or three months after judgment to pay the full mortgage principal, interest, attorney's fees and costs owed on a primary residence.

If the homeowner fails to appear in court or takes the case to trial and loses, a court will make a foreclosure judgment, which gives ownership rights (but not title) to the mortgage lender. However, reinstatement and redemption periods must be allowed to expire before the home can be sold.

Once both the reinstatement and redemption periods have expired and proper notice is given, the home may be sold. The lender files a motion with a report of the sale for the court to confirm the sale's validity. A hearing is then held to approve the sale. The homeowner has 30 days to vacate the home before eviction and the foreclosure deed is then recorded.

Valid Foreclosure Defenses

Even if a valid defense cannot stop a foreclosure, it can be powerful in prolonging the process for up to two years. The following are just a few examples of the state and federal defenses available to a homeowner to fight a lender's attempt to take away their home:

• Illinois Mortgage Foreclosure Act: addresses summons, complaint and procedural defects
• Racketeer Influenced and Corrupt Organizations Act (RICO): fights conspiring lenders and others attempting to defraud homeowners
• Illinois Fairness in Lending Act: seeks to prevent discriminatory loans
• Federal Truth in Lending Act (TILA): ensures the right disclosures were made and received by the homeowner
• Illinois High Risk Home Loan Act: addresses whether the loan was both necessary and within the guidelines
• Federal Real Estate Settlement Procedures Act (RESPA): ensures proper disclosure of all fees and costs were made to the homeowner
• Federal Fair Debt Collection Practices Act (FDCPA): holds lenders to every provision of the FDCPA in collecting debts from the homeowner

The additional time created by claiming a defense allows a homeowner to seek additional defenses, refinance the mortgage, find a new job, sell the home or file for bankruptcy. Moreover, with increasing government intervention in preventing foreclosure, more time means a greater chance of taking advantage of a new government program that seeks to allow the owner to keep his or her home.

A foreclosure can be devastating and the foreclosure process can be complex. While states have taken notice of the foreclosure document problem, there is still significant room for error. Having a knowledgeable foreclosure attorney to assist you in the process and help you assert a valid foreclosure defense may be exactly what you need to help you stay in your home.