Mortgage Law Roundup

Sharp  Thinking

No. 193    Perspectives on Developments in the Law from Sharp-Hundley, P.C.    February 2021

General Description Of Improvements Held Sufficient

Failure of the plaintiff to include in the mortgage foreclosure sale notice detailed information about the improvements on the property does not constitute such a failure in the notice obligation as to require denial of confirmation of the sale, a panel in the Appellate Court in Chicago has held.

Ruling in U.S. Bank N.A. v. Sharif, 2020 IL App (1st) 191013, the panel affirmed confirmation of a sale in which the description of improvements was merely “[t]he real estate is improved with a single family residence.”  The debtor argued this was insufficient under § 15-1507(c)(1)(D) of the Mortgage Foreclosure Law (735 ILCS 5/15-1507(c)(1)(D)), but the court disagreed.  Noting prospective purchasers could attempt to obtain further information from the person named in the notice and from tax authorities, the court said the plaintiff’s description provided prospective buyers “with enough information so as to allow them [sic] to perform their due diligence and thus satisfied section 15-1507(c)(1)(D).”

Noting the issue first was raised in a confirmation hearing, the court observed that the confirmation statute (735 ILC 5/15-1508) provides that the trial court “shall” confirm the sale unless the objector establishes “good cause shown.”  In Sharif, the objector argued that the allegedly inadequate description resulted in inadequate bids at the sale.

The panel rejected that argument.  “Even an accurate but arguably incomplete description of the improvements on the real estate *** would not rise to the level of a material error and, thus, would not constitute good cause as contemplated by section 15-1508(d),” it said.  It noted that the mortgagor introduced no evidence of the property’s value other than the judgment amount.  “The judgment amount is not equivalent or representative of the value of the property,” the court said.  “Speculation that the property is worth more than the highest bid at the judicial sale is not proof.”

Creditor Need Not Prove Entire History Of Modified Loan

A party seeking summary judgment on a loan modification need not provide the history of the loan from its inception, a panel of the Appellate Court in Chicago has held.

In First American Bank v. Poplar Creek, LLC, 2020 IL App (1st) 192450, the debtors defaulted on a sixth loan modification and the creditor sought judgment with an affidavit that proved what was due only under that modification.  Debtors objected that the creditor had not accounted for the entire history of the loan.  The appellate panel rejected that objection.

“The law regards a modified contract as creating a new single contract consisting of the terms of the earlier contract the parties have not changed in addition to the new terms,” the court said.  “A lawsuit to enforce a modified or amended contract must be brought on the modified agreement, not the original agreement.”

Accordingly, the panel said the loan modification “constitutes a new transaction incorporating the parties’ prior dealings, eliminating the need for [creditor’s] affidavit to provide the history of the loan or evidence of the computer software [creditor] used to record disbursements and payments that preceded the modification. *** Prior loan documents are irrelevant to enforce the modified loan agreement.”

IMFL Provision Controls Over General Lis Pendens Statute

A lis pendens notice recorded under the Illinois Mortgage Foreclosure Law (IMFL) does not require that service be completed within six months, a panel of the Appellate Court in Chicago has held.

Ruling in LLC 1 05333303020 v. Gil, 2020 IL App (1st) 191225, the panel dealt with a belated challenge to service in a mortgage foreclosure case by an entity that claimed title through a quitclaim deed recorded a week after the lis pendens was recorded.  The quitclaim claimant sought to avoid the effect of the foreclosure notice on the ground that service was not completed with six months, as expressly required in Illinois’ general lis pendens statute, 735 ILCS 5/2-1901.

However, the current owner successfully argued that the six-month requirement did not apply in foreclosure cases because IMFL has its own, more specific notice statute (735 ILCS 5/15-1503) and that statute does not contain the six-month requirement.

The panel said the terms of the more specific statute “control over the general lis pendens provision found in section 2-1901. *** There is no six-month service requirement in section 15-1503 *** and we will not add that requirement.”

Mortgage Law § 15-1509(c) Bars RESPA, Fraud Act Claims

Claims asserted post-confirmation under the federal Real Estate Settlement Procedures Act (12 U.S.C. § 2605) and the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505) are among the “claims barred” under § 15-1509(c) of the Mortgage Foreclosure Law (735 ILCS 5/15-1509(c)), a panel of the Illinois Appellate Court has held.

Acting in Adler v. Bayview Loan Servicing, LLC, 2020 IL App (2d) 191019, the court dealt with alleged violations of those acts that arose out of the foreclosure proceeding.  Plaintiffs contended the “all claims” language of § 15-1509(c) was limited to claims specifically subject to the foreclosure proceeding.  Noting that the conduct at issue (failure to abide by a trial period plan, extending an allegedly improper permanent modification offer) could have been raised in opposing foreclosure sale confirmation, the court ruled that § 15-1509(c)’s  bar was not limited to title claims.

[735 ILCS 5/15-1508(b)] “permits a party to contest the sale *** where justice was otherwise not done,” the court said.  Further, it noted, 735 ILCS 5/1508(d-5) requires the court to set aside a sale if the mortgagor has applied for assistance under the Making Home Affordable Program and the home was sold in violation of that program’s requirements.  “Collectively, subsections (b) and (d-5) provide a statutory remedy under which a court may set aside a judicial sale,” the court said.  “We conclude that the legislature intended section 15-1509(c) to preclude all claims *** related to the mortgage or the subject property, except for claims regarding the interest in the proceeds of a judicial sale.”

• John T. Hundley