After Foreclosure: Arlington Heights Deficiency Judgment

The effects of the economic recession are still being felt throughout the nation, even though foreclosure rates have dropped significantly. Unfortunately, some homeowners who are underwater in their mortgages are facing foreclosure. And once the foreclosure action is over, the owner may still be held liable for the balance of the loan that is not covered by the proceeds of the sale.

Deficiency Judgment Explained

In a foreclosure or short sale, sometimes a homeowner owes the lender more money for the property than what is received from the proceeds when the home is sold or auctioned. When this happens, there is a remaining loan balance still owed by the borrower. This balance is called a “deficiency.” Numerous states throughout the nation, called non-recourse states, do not provide legal remedies for the lender against a buyer who has a deficiency. Illinois, however, is not one of these states. Consequently, a borrower in Arlington Heights, Schaumburg, Palatine or elsewhere in Chicago is liable to the lender for the remaining loan balance on a property after a short sale or foreclosure occurs. The legal action the lender may take against a borrower in this circumstance is called a deficiency judgment.

The lender will have to obtain a court-ordered deficiency judgment against a borrower who owes a balance post foreclosure or short sale in order to collect the funds. A judgment is a court decision on the rights and claims of parties to a lawsuit. If the court approves the request, the lender can use the judgment to place a lien on bank accounts or other assets the borrower owns or even garnish wages earned.  

How to Avoid a Deficiency Judgment

Illinois foreclosure law provides several options for a borrower who is facing a foreclosure. A lender may or may not seek a deficiency judgment against a borrower. Nevertheless some available options for homeowners who are underwater include:

1.         Deed in lieu of foreclosure – borrower gives lender the deed to the property in exchange for not filing a foreclosure action.

2.         Consent foreclosure – borrower gives lender the deed free and clear of all claims.

3.         Loan modification – consists of a restructuring of the mortgage, approved by the lender, allowing the borrower to remain in the home and have lower monthly payments.

4.         Redemption – borrower must pay all money owed on the loan, including late fees and charges, becoming up to date on the mortgage (can only occur up to 90 days after a foreclosure summons).

Contact a Foreclosure Attorney

If you are facing foreclosure or short sale of your home and believe you may owe a balance on your loan once the sale has occurred, contact an Illinois foreclosure attorney today to learn about your rights and obligations. Don’t navigate this complex process alone. With over 35 years of experience fighting for clients’ rights, the Law Offices of Gilbert C. Schumm can provide real estate advice, and serves the Chicago area including Arlington Heights, Rolling Meadows, Des Plaines, and Streamwood.

The Essential Role of an Attorney in a Chicago Area Real Estate Transaction

Whether buying or selling property in the Mt. Prospect, Hanover Park or Arlington Heights area, a real estate attorney is essential to ensure your rights and property interests are protected before, during and after such a complex transaction. Although opinions may differ as to whether or not an attorney is necessary during this process, one thing is certain: the cost of professional legal fees upfront will pale in comparison to legal fees incurred during litigation as the result of a breach. Because there are several legal considerations to consider in a real estate transaction, hiring an experienced Chicago real estate attorney is key to protecting your investment.

Review of Purchase and Sale Contract

A real estate attorney will review the purchase and sale contract - preferably before it is signed - to ensure the rights, obligations and remedies in the contract favor the client. Negotiating the specific terms of the contract to ensure you are protected during the entire process is just one of the legal services provided. An attorney can change legal language in a purchase contract to protect the interest of a buyer, such as requiring the purchase and sale contingent on the appraisal, financing or a satisfactory home inspection. A contingency is a condition precedent to finalizing the sale; if the matter specified in the contingency does not occur or is not resolved to the buyer’s satisfaction, the buyer has the right to terminate the sale and have the earnest money deposit returned.

Title, Financing and Legacy Concerns

Unlike other participants in a purchase and sale of a home, such as realtors, lenders, appraisers, inspectors, and title insurance company representatives, your lawyer owes an absolute duty of loyalty to you in a real estate transaction. A qualified real estate attorney can review title documents to ensure clear and marketable title to the property is conveyed at closing, explain and evaluate financing options available to the buyer, advise the seller regarding tax implications as a result of selling, and ensure all title documents are correctly prepared so that the conveyance is effective and valid. A buyer’s attorney will review title to determine if there is any interference with the client’s future property rights, such as easements, restrictions or encroachments. Furthermore, if the buyer is a couple, a real estate attorney can give advice as to the legal consequences of holding title as joint tenants or tenants by the entirety.

Representation at Closing

At closing, the attorney can assist clients by guiding them through the process of signing the large number of documents needed to convey the property, as well as ensuring all documents were satisfactorily prepared. The seller’s attorney will review the proposed settlement statement, which details all of the fees and charges the buyer and seller will incur, which is prepared by the buyer’s lawyer. This “second look” at the numbers ensures the math was done correctly because the attorney will cross check all debits and credits prior to approval. The seller’s attorney will also obtain the payoff amount from the seller’s lender and will prepare a certificate of satisfaction for the buyer, showing the loan has been paid in full. Before closing, the buyer’s attorney will communicate with the client’s lender, the realtors and the seller’s attorney to ensure all conditions have been met in order to close successfully.

The purchase or sale of a home can be one of the largest transactions during one’s lifetime. Contact an Illinois real estate attorney today if you are considering purchasing or selling a property. A small investment in legal fees upfront will save you thousands of dollars in the long run by avoiding legal consequences from mistakes or omissions during the sale. The Law Offices of Gilbert C. Schumm has over three decades of experience and serves the communities of Mt. Prospect, Hanover Park, Arlington Heights, Rolling Meadows and Roselle, among others.

Help from a Loan Modification Lawyer in Hoffman Estates and Surrounding Areas

Facing the loss of your Hoffman Estates home to foreclosure can be one of the most daunting experiences of life. Fortunately for Chicago area homeowners who are underwater, there are protections and options outside of a court ordered foreclosure. Thanks to recent changes in the rules that govern how mortgages are serviced and modified issued by the Consumer Financial Protection Bureau in January of this year, struggling homeowners have options including loan modifications, short sales, and deed in lieu of foreclosure. A loan modification, if approved, will not only allow you to keep your home but will make your mortgage more affordable.

Keep Your Home, Lower Your Payments

Loan modifications provide permanent changes in one or several terms of a mortgage that often result in lower payments that the borrower can afford. This process takes the mortgage out of default by reinstating the loan, allowing the borrower to keep the home. Terms that are changed under a loan modification include a reduction in the interest rate, reducing principal, adding overdue payments on the back end of the loan and extending the life of the loan. Furthermore, because a successful loan modification can prevent the foreclosure process, a borrower’s credit is protected from further harm. It is imperative to take action before a foreclosure sale date has been issued.

Feds Extend Help to Homeowners

According to the New York Times, the current administration is extending its Making Home Affordable program through 2016 and may extend it further, if needed. Since the inception of the program, there have been nearly two million mortgage assistance actions in the United States with an average reduction in monthly payments of $544, according to the Department of Treasury & Housing and Urban Development.  The Home Affordable Modification Program (HAMP), which is part of the Making Home Affordable program, was designed to reduce monthly mortgage payments for borrowers who were delinquent on their home loans and covered loans entered into prior to January 1, 2009. The program was set to expire on December 31, 2015. Through HAMP, a borrower’s mortgage interest rate can be reduced to two percent for the life of the loan and delinquent payments could be added on to the back of the loan to minimize out-of-pocket costs.

What You Should Do

If you are a struggling homeowner in the Chicago area, there are a few things you can do to help save your home from foreclosure.

1.         Ask for help now – Previously, loan modifications were only available to homeowners who were more than 90 days late on their payments and the lender filed a motion to start the foreclosure process. Today, some lenders will work with you before then, and the federal assistance program does not require default to be eligible.

2.         Seek a professional  – It can be highly beneficial to seek help from an attorney who has experience in the process. As a result of the real estate bust, many companies have emerged preying on struggling homeowners. Do your research before choosing whom to use.

3.         Fannie vs. Freddie – Knowing who holds your loan can help with the modification process. A mortgage may be held by Fannie Mae, Freddie Mac or may have been sliced up when banks were buying and selling mortgage-backed securities during the boom.

4.         Be transparent – Once the loan modification process begins, be completely honest about your financial situation no matter how difficult that may be. Information needed to expedite the process includes household monthly gross income, previous years tax returns, balances and minimum payments due on revolving credit, and information about your assets, among others. The priority is to save your home and anything less than full disclosure will only harm you.

We Are Here to Help You

Contact an Illinois real estate attorney today if you may be losing your home to foreclosure in Hoffman Estates, Illinois. The Law Offices of Gilbert C. Schumm specializes in foreclosure defense and serves the communities of northwest Chicago including Hoffman Estates, Schaumburg, Palatine, Des Plaines and Bartlett.

The Impact of Foreclosure on Chicago Area Renters

Thanks to an Illinois law passed last fall by Governor Quinn, tenants residing in an Illinois home that is undergoing foreclosure can have more time to make a move. If you are a renter in Rolling Meadows whose landlord is facing the loss of a home, it is important to know your rights under state law.

How Foreclosure Works

Illinois is one of 22 states that requires judicial foreclosures, which means a lender must go through the state court system and its judicial process in order to foreclose on a property and obtain relief on the debt owed. A lender initiates the proceeding by filing a complaint to foreclose on the property laying out the claims of the suit. The complaint will describe the promissory note, mortgage, default, amount due on the loan, property to be foreclosed, and the defendants, along with whatever interest they hold in the property. The complaint may also seek a deficiency judgment that allows the lender to file a separate suit against the borrower after the foreclosure if the proceeds at the sale do not fully cover the total debt owed. In addition to filing the complaint with the court, the lender will properly and effectively serve the complaint and a summons to appear in court on the defendants. The lender also files a lis pendens in the county records providing notice to the borrower - as well as the public - that a suit is underway relating to the property.

How Illinois Law Protects Renters

In August of 2013, Illinois Governor Pat Quinn signed a new state law protecting renters living in foreclosed properties, Senate Bill 56 (SB 56), requiring those who acquire real estate through the foreclosure process to honor existing leases through the end of their term or provide sufficient notice allowing the tenants to find new living accommodations. In particular, in a foreclosure a landlord may terminate a bona fide lease that was in effect prior to the sale only if: 1) in the case of a month-to-month or week-to-week lease, with no less than 90 days’ written notice; or 2) at the end of the term of the lease, with no less than 90 days’ written notice. If the buyer intends for the home to be the primary residence, then the lease can be terminated with 90 days’ written notice and the new owner is not required to honor the lease through the end of the term.

A bona fide lease is a residential lease that includes all of the following elements:

1.         The borrower is not the tenant under the lease, nor is the borrower’s child, spouse or parent the tenant. If the child, spouse or parent of the borrower is a tenant, it may be proven by a preponderance of the evidence that a bona fide lease exists;

2.         The rental amount stipulated in the lease is not substantially lower than the fair market value of comparable rentals or it is reduced because of local, state or federal subsidies;

3.         The lease was entered into before the date of the lis pendens, or after the date of lis pendens but before the date of the judicial sale of foreclosure and the lease term is for one year or less;

4.         The lease was the result of an arms-length transaction, which means there was no special relationship between the parties and the agreement was made freely and independently.

Law Offices of Gilbert C. Schumm

If you are considering purchasing a home that is in foreclosure or are renting a home facing foreclosure proceedings, contact an Illinois foreclosure attorney today to learn about your rights and obligations. Don’t navigate this complex process alone. With over 35 years of experience fighting for clients’ rights, the Law Offices of Gilbert C. Schumm can provide real estate advice, and serves the Chicago area including Rolling Meadows, Des Plaines, and Streamwood.  

Facing Foreclosure in the Schaumburg Area? A Short Sale May Provide Alternative Relief

Acquiring your Chicago dream home has finally happened. But so have life’s surprises. Now you are behind on your payments; you may even be underwater and catching up, but even selling the home to pay off your debt seems impossible. You are not alone. According to Market Watch, Illinois ranks in the top five states in the country with the highest foreclosure rates. But you may have another, less painful, option: a short sale.

Foreclosure versus Short Sale

A foreclosure is a legal proceeding initiated by a mortgage lender when a borrower defaults, or gets behind, on payments. It is the legal right of the lender to gain ownership of the property or sell it and use the proceeds to pay off the defaulted mortgage. A short sale is when a homeowner owes more money on the home than what it will likely sell for in the real estate market, and the lender agrees to take less than what is owed to them to avoid the foreclosure process. Where previously the requirements to qualify for a short sale were more stringent - including owing more on the mortgage than the home was worth and proving financial hardship such as job loss, divorce or decreased wages of the primary provider of the mortgage payments - as of November, 2012, homeowners whose loans are serviced by Fannie or Freddie Mac may be eligible for a short sale if they are not behind on payments and are experiencing financial hardship. Similarly, the federal government passed the Home Affordable Foreclosure Alternatives (HAFA) program, streamlining the short sale process, which used to take months and, unfortunately, sometimes still ended in foreclosure.

Two Short Sale Destroyers

Unfortunately, not all situations will allow for a short sale of the home. In particular, there are two circumstances in which short sale approval is extremely difficult and will most likely be unsuccessful. First, if your loan is not in default a lender will likely not accept a short sale offer or request. In other words, you need to fall behind on your payments or receive a notice of default before your lender will even consider a short sale. Second, if a person seeking a short sale has filed for bankruptcy, a mortgage lender will likely not consider a short sale of the property. The reason for this is because negotiating a short sale is considered a collection activity, which is prohibited by law in bankruptcies.

What’s in It for the Lender?

Forgiving a shortfall on a mortgage seems counterintuitive, however, as a consequence of the real estate housing crash banks still have homes on their books affecting their profits. Avoiding foreclosure is beneficial for the lender as well as the homeowner because the foreclosure process is expensive, time-consuming, and complicated. Approving a short sale will keep the property from becoming the bank’s liability and keep the parties out of court.

Obtaining a short sale approval from your lender, however, is not guaranteed. You will need to provide specific documentation to prove your hardship including: 1) an authorization letter giving the lender permission to discuss the short sale with a buyer or agent; 2) a hardship letter, evidencing your dire financial situation and your inability to bring mortgage payments up to date; 3) an assessment of the property in question, in the form of an appraisal or a broker’s opinion; 4) a purchase offer or contract, showing the lender you have a ready buyer; and 5) a settlement statement, often prepared by a real estate lawyer, detailing what the lender’s net proceeds will be. Experienced legal, real estate and tax professionals should work together to help your case and provide assistance through every step of the short sale process.

Sometimes life’s circumstances happen, causing late or missed mortgage payments on a home. If you are at risk of losing your home you may be eligible for a short sale, which will avoid the foreclosure process. The short sale process is complicated and an experienced attorney can help you every step of the way. The Law Offices of Gilbert C. Schumm has over 35 years of experience in helping homeowners find relief and services the Schaumburg, Arlington Heights, Palatine and Des Plaines areas, among others. Contact an Illinois foreclosure defense attorney today for a free initial consultation.