Having a bank initiate the legal process of taking possession of your property through foreclosure – in Illinois or any other state is understandably worrisome. However, by undertaking “loss mitigation” for your foreclosure case: devising a plan for keeping your home, or perhaps giving it up, yet avoiding liability, you may improve the outcome.

The foreclosure process can take some months, and you can remain in your home during this period. A sound defense administered by an experienced attorney may extend this time, and in some cases could result in the Court denying the bank’s foreclosure lawsuit altogether.

Potential actions regarding foreclosure depend on the conditions of your specific situation. But knowing your options when facing foreclosure in Illinois, and working diligently with your mortgage company are extremely important. An Illinois foreclosure defense lawyer can help.

Terms Regarding Foreclosure Options

The following are some potential solutions for those facing foreclosure in Illinois.

Mediation Helps Mitigate Threat of Foreclosure

Some courts have created mediation programs that help homeowners discuss the foreclosure situation with their mortgage lender, and reach an agreement. Mediation is a highly useful process run by a neutral person called a “mediator”.

Check with the circuit court in your county to determine if mediation is available.  Lake County, for instance, has a wonderful mortgage foreclosure mediation program with rules and procedures everyone must strictly follow.

Loan Modification

Changing the terms of your mortgage loan can help to bring it current by making the monthly payments more affordable. Eligibility for loan modification depends on many factors such as:

• Income.
• Mortgage company.
• When the loan was taken out.
• Loan type.

Applying for loan modification as early as possible increases your chance of success with this option.

Flex Mod for Fannie Mae or Freddie Mac Mortgages

This modification option, if you have a Fannie Mae or Freddie Mac loan, changes the terms of the mortgage. It may result in a 480 month term, and, potentially, a lower rate of interest, The obligation to pay back some principle later, and/or a reduced monthly payment.

Bankruptcy and Foreclosure

Sometimes, filing bankruptcy is a viable option for helping to solve a foreclosure problem, and eliminate other debts. But it’s very important to understand how filing bankruptcy will affect your rights. In some cases you may file bankruptcy and keep your home. In other situations you may lose your residence if you file bankruptcy.

Filing a Chapter 7 bankruptcy will usually eliminate your liability for a mortgage loan. It prevents or eliminates a “deficiency” – a condition that occurs when when someone owes money to the bank after their home is sold. Chapter 7 bankruptcy may also avoid a lien on the house  that has been recorded by another creditor following entry of a judgment.

Keep in mind that some debts, for example, IRS debt or student loans, cannot be discharged in Chapter 7 bankruptcy. Most importantly, if your home is worth more than what you owe on the mortgage loan, you may lose your home by filing Chapter 7 bankruptcy. – But if the opposite is the case, you may be able to keep it.

Chapter 13 bankruptcy is a type of debt repayment plan. Chapter 13 bankruptcy normally allows you to keep your home – however, you must repay the missed mortgage payments within 60 months (5 years), while also making your current monthly mortgage payments. This option only works if you have sufficient income to fulfill both obligations. 

Repayment and Forbearance

A repayment plan with your mortgage company, normally involving loan modification, can help you get caught up on your loan over time.

Forbearance can refer to a repayment plan. But it usually means an agreement between you and the mortgage company, such as one that allows you to make lower payments, or no payments, over a certain time period. If you are in a forbearance period, you should have a written agreement verifying that the lender will not proceed with foreclosure.

This can be a good option in the case of short-term financial problems. But while you are in forbearance, the balance of unpaid loan payments will build up. You could be required to make up the missed payments in one lump sum payment.

Additional Options to Consider When Facing Foreclosure

An experienced, informed foreclosure defense lawyer can help you explore the details of every option available if you’re facing foreclosure, including:

• Reinstatement – Getting the loan’s missed payments up-to-date and bringing it back in good standing.
• Redemption – paying off the entire balance of the loan.
• Refinancing – If you have enough equity, and a sufficient credit rating, you may be able to refinance through traditional channels. But beware unscrupulous refinance offers.
• Reverse Mortgage – A type of home equity loan that allows homeowners over 62 to convert their equity into cash and eliminate mortgage payments. But be certain you understand the long-term implications, and how the process works.
• Home sale/short sale -If your home sells for more than you owe, before the redemption period ends, you can keep the profit. If you sell the home for an amount less than what you owe, it’s called a short sale, and the lender must agree to the terms.
• Deed-in-lieu-of foreclosure – This means that you voluntarily give your home to the mortgage company to eliminate your liability for the mortgage loan.
• Consent foreclosure – A type of foreclosure you agree to, so the mortgage company cannot get a deficiency judgement against you.

If you’re facing a foreclosure in northern Illinois, Contact us at Johnston, Tomei, Lenczycki, and Goldberg LLC. Our foreclosure defense team can review your situation and possible courses of action to determine the option that’s best for your future.