Illinois foreclosure proceedings are particularly stiff, making it even more important for struggling homeowners to stop foreclosure before the process can take place. As a lien theory state, the mortgaged property serves as security for the loan. Only judicial foreclosures are permitted in Illinois when a borrower defaults on their mortgage. The process generally takes 215 days, and although an Illinois debtor has no right of redemption after a foreclosure sale, they have seven months from the time of the foreclosure complaint to cure the default and redeem their property. The lender has the right to sue for a deficiency judgment except in certain cases. With these difficult foreclosure processes, the many alternatives to foreclosure are in great demand in Illinois.
Lender Programs
The cost and time of a judicial foreclosure, as well as the number of such foreclosures taking place in this state, which is tenth in the nation, provide a better opportunity to negotiate with lenders to obtain help in avoiding foreclosure. The sooner a borrower talks with their lender the better chance they have of building good faith and obtaining an agreement, usually through their loss mitigation department.
- Loan modification – whereby a lender changes the terms of the loan or refinances the loan at more favorable terms.
- Loan reinstatement – for those borrowers who believe they will be receiving additional monies to catch up on their loan, either through several large payments or one lump sum payment, at which time the original terms of the loan will be reinstated.
- Forbearance – whereby a lender will forgive a few missed or late payments if they have reason to believe the borrower can catch up and make up those payments, often at the end of the loan schedule.
Government Programs
The government has established several programs to help homeowners struggling to make their mortgage payments and avoid foreclosure. These programs have specific and sometimes confusing qualification requirements, so it is important to consult an attorney and a counselor from the U.S. Department of Housing and Urban Development (HUD) to help determine who is eligible.
- Hope for Homeowners Act – a program by which lenders are given incentives to refinance or adjust the terms of existing loans, and often provide them with FHA backing, to assist struggling homeowners. Those incentives may also extend to lenders who waive early or late payment fees or who lower principal amounts.
- Homeowner Affordability and Stability Plan – a plan for providing incentives for those lenders who refinance or adjust the terms of mortgage loans.
- Mortgage Forgiveness Debt Relief Act of 2007 – a law which protects homeowners who have had any portion of their debt forgiven from having those monies taxed as income.
Bankruptcy Programs
There are several bankruptcy options that may help a homeowner in more serious financial trouble gain time to find a workable solution. The negative result is primarily the damage done to the homeowner’s credit rating which will last for a number of years. However, one of the greatest benefits is that the court puts an automatic stay, or hold, on all creditors’ collection efforts and foreclosure actions. And while a lender may petition the court to lift the stay, the approval procedure takes time, allowing the borrower time to regroup.
- A debtor can obtain help to reorganize their finances and devise a repayment plan that works with their financial status through Chapter 13 bankruptcy. If the court approves and the debtor completes the plan, they may save their home.
- A debtor can have much of their debt erased through Chapter 7 bankruptcy, although the procedure may require them to liquidate some of their personal property. Illinois homeowners, however, have a $15,000 exemption for residential property.
Home Sale Programs
There are times when losing one’s home is inevitable. If that’s the case, the homeowner may be able to sell their home and realize some profit to use in relocating and clearing up other debt. If not, they may have to choose another option to avoid foreclosure:
- Short Sale – whereby the lender agrees to accept the sale amount, even if it is less than the amount owed. This agreement must be put in writing, however, to avoid a deficiency judgment for the difference.
- Deed in Lieu of Foreclosure – by which a debtor offers their deed to the lender to fulfill their debt. Illinois law protects a debtor from a deficiency judgment in such transactions.
- Consent Foreclosure – whereby a homeowner consents to the foreclosure, and Illinois law prohibits the lender from filing a deficiency judgment.
Getting Legal Help Stopping Foreclosure in Illinois
There is a complex list of options available to Illinois residents to stop foreclosure. But with the help of a devoted attorney and a knowledgeable HUD counselor, a homeowner may be able to accomplish that important goal. Illinois requirements make that difficult in some cases, but many homeowners may find the solutions they need in one or more of these options. Don’t give up too soon without exhausting all of the options, and don’t fall for one of the con artists taking advantage of today’s difficult economy to scam gullible homeowners.
