Types of Foreclosure
At A&L Licker Law Firm, we practice in both Illinois and Missouri. Each state has a different type of foreclosure. Illinois uses judicial foreclosure, while Missouri uses non-judicial foreclosure.
What is Judicial Foreclosure?
In a judicial foreclosure the lender files a lawsuit against you in the county where your home is located. The lender must provide proof that you have defaulted on your mortgage. They are also required to serve you with a copy of the complaint filed with the court. You can answer the suit in court or do nothing. There are two types of judicial foreclosure: Foreclosure by sale and strict foreclosure.
In a foreclosure by sale the property is auctioned off. This is commonly known as a sheriff’s sale. The lender has the opening bid. A strict foreclosure consists of the court setting a date when the mortgage must be paid. If this is not met the court awards the home to the lender.
What is Non-Judicial Foreclosure?
While judicial foreclosure the court oversees the foreclosure process that is not the case with non-judicial foreclosure.
First, you must know that a “deed of trust” is similar to a mortgage. Most people including foreclosure attorneys use the word mortgage when they mean a deed of trust and the other way around. Here in Missouri we normally see deed of trusts and in Illinois mortgages. A deed turns a promissory note into a debt secured by a lien on your home. This allows a third party (trustee) the ability to sell your home if you fail to make payments. When you are delinquent on your payments and the lender wants to foreclose they begin by recording a notice of default with the Recorders Office in the county where the home is located. You are sent a copy of the notice. At this point you can file an action with the court or do nothing. If you do nothing your house will be put up for auction. The lender is required to provide notice of pending sale in a newspaper of general circulation in the area your property is located or by notice in a public place. This notice should include time and place of the sale. From this point the Trustee conducts a foreclosure sale at a designated location and the home is sold to the highest bidder.
The sale of the property takes place on the courthouse steps by the sheriff or auctioneer. At the sale there are four possible outcomes.
- Cancelled – the sale can be cancelled if you become current on the mortgage before the auction is complete.
- Postponed – can come about by the lender and borrower coming to an agreement to delay sale. Most commonly the borrower files bankruptcy, which puts in place the Automatic Stay.
- 3rd Party – the home is sold to a 3rd party that has the highest bid.
- Lender – the home is sold to the bank that holds the loan.
Throughout this process there is no court oversight.
In both of these situations during the time between notice of default and the selling of your property you have the right to redeem your property by becoming current on payments. In both states the lender can sue after a home is sold if there is a delinquency.
You also have the option of consulting with a lawyer to stop the foreclosure process by filing bankruptcy.
Short sales in Illinois
The law in Illinois has been amended requiring mortgage companies to respond within 90 days after receiving an offer to purchase whether the mortgage company approves the short sale or not. The residential real estate must be in foreclosure proceedings. The Written request does not stop the foreclosure proceeding. A short sale means the mortgage company agrees to a sale price that is below the amount of the mortgage. That means the mortgage company will forgive part of the mortgage amount.
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