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Utilizing Foreclosure to Collect Mortgage Debt

Posted on in Mortgage Foreclosure

Utilizing Mortgage Foreclosure to Collect DebtFor mortgage lenders, property foreclosure is a complex yet effective method of retrieving debt when borrowers fail to make mortgage payments. A successful foreclosure can allow the creditor to sell the property and recover a large share of the borrower’s debt. In Illinois, all foreclosures must go through a court. A judicial foreclosure allows legal protections for both sides but can draw out the process. A creditor must follow a set of legal procedures in order for a court to approve the foreclosure.

When to Foreclose

If you are a mortgage lender, you may start considering foreclosure when a borrower misses a scheduled mortgage payment. However, you must give the borrower amble opportunities to pay the mortgage before you can request foreclosure in court:

  • Loan agreements typically have grace periods for when the first mortgage payment is late.
  • After a second missed payment, you must notify the borrower of the missed payments and the grace period.
  • If the missed payments continue, you must notify the borrower that you will pursue foreclosure unless he or she makes up all the missing payments within a certain number of days.
  • According to federal law, you cannot start a foreclosure case until a borrower is 120 days late in a mortgage payment.

Foreclosure Ruling

When you file for foreclosure, you must give the borrower 30 days to respond to the case. If there is no response, you can ask for a default judgement to immediately foreclose on the property. If the borrower contests the foreclosure, you must either show that there is no evidence to contest the claim or go to trial. Borrowers commonly defend themselves by claiming that lenders acted unfairly when issuing the mortgage or collecting the debt. As the lender, you must present detailed evidence of how the borrower has breached the mortgage agreement:

  • You are required file a prove-up affidavit that shows the borrower’s payment history and how you kept track of payments. You can also include payment history with previous lenders as evidence.
  • You may need to file a loss mitigation affidavit that details your efforts to create an alternative payment plan with the borrower to avoid foreclosure.

Post Decision

If the court rules in favor of foreclosure, the borrower typically has a three-month redemption period to pay off the remaining balance of the mortgage and retain the property. Once that period has ended, you can proceed to a judicial sale of the property, which the court must approve before it becomes official. If the property sells for less than the money owed, the borrower will be liable for the difference, unless he or she has successfully filed for chapter 7 bankruptcy.

Successful Foreclosure

Foreclosing on a property can be arduous because of the legal steps involved. A Chicago mortgage foreclosure attorney at Walinski & Associates, P.C. has the experience to navigate your foreclosure case.

Source:

https://www.illinoislegalaid.org/legal-information/mortgage-foreclosure-lawyer-manual

Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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