Illinois Supreme Court Adds New Rules Regarding Mortgage Foreclosure Cases effective May 1, 201303.11.13
On February 22, 2013, the Illinois Supreme Court adopted three new Rules, effective March 1, 2013, which affect mortgage foreclosure cases. The Rules stem from the work of the Special Supreme Court Committee on Mortgage Foreclosures, which is composed of judges, bankers, lawyers and other professionals that have first-hand experience dealing with the mortgage foreclosure process in Illinois. While the Illinois Supreme Court implemented many of the requirements in the Rules to specifically address residential mortgage foreclosure cases and homeowners' rights, it is clear that the Rules will affect all mortgage foreclosure cases.
The Rule with the greatest impact on practitioners is Rule 113, which relates to the practice and procedures for mortgage foreclosure cases. In an attempt to address issues commonly raised by defendants on the issue of standing, Rule 113(b) requires that a copy of the note, as it currently exists at the time of filing, including all endorsements and allonges, must be attached to the mortgage foreclosure complaint. Additionally, Rule 113(c) sets forth the requirements for prove-up affidavits for plaintiffs seeking the entry of a judgment of foreclosure. At a minimum, prove-up affidavits must include the following: (1) identity of the affiant; (2) identify whether the affiant is a custodian of records or a person familiar with the business; (3) if the affiant is familiar with the business, identify how the affiant is familiar with the business; (4) identification of all records and documents in addition to the payment history that the affiant reviewed or relied upon in drafting the affidavit, which may include records from a prior lender or servicer (the payment history must be attached to the affidavit if the defendant filed an appearance or responsive pleading); (5) identify whether the loan was in default at the time it was transferred, if applicable; (6) identify the computer program or software that the entity relies on to track mortgage payments, along with the source of the information, the method and time of preparation of the record to establish an accurate payment history and explanation as to why the records are "business records" within the meaning of the law; and (7) a specific form of notary acknowledgement (unless verified within the State of Illinois pursuant to the Illinois Code of Civil Procedure).
The Committee also determined that homeowners were not always receiving proper notice of the entry of a default judgment of foreclosure for a variety of reasons. Therefore, Rule 113 provides a standardized form that is to be mailed to the borrower upon the entry of the default. Counsel for Plaintiff is to prepare the Notice of Entry of Default and deliver same to the Clerk of the Circuit Court within two business days after entry of default. The Clerk of the Circuit Court shall mail the Notice within five business days of the entry of the default order to the property address or the address on any appearance filed by any defendant. The notice will also include the amount to redeem the property, if applicable. Failure to send the notice does not affect the validity of the underlying judgment of foreclosure.
The Committee further determined that procedures related to judicial foreclosure sales needed to be addressed to provide better notice to defendants. First, all notices of foreclosure sale must be sent to all defendants, regardless of whether they were defaulted, no fewer than 10 business days prior to the foreclosure sale. Rule 113 states that a private selling officer may conduct a judicial foreclosure sale. Because the term "may" is permissive, it is unknown if those counties that require the use of the local sheriff's office as a selling officer will change their rules to allow private selling officers to be used. Additionally, in the event that there are surplus funds from the mortgage foreclosure sale, counsel for Plaintiff is required to send a notice to the mortgagors advising them of the funds and enclosing a form for presentment of a motion to the court for the surplus funds.
Finally, Rule 113 addresses the manner in which to appoint a special representative for a deceased mortgagor. This issue was raised in ABN Amro Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526 (2010), but has not been addressed by legislation.
The effects of Rule 113 will not be known until it is implemented. The stated purpose of Rule 113 is to provide homeowners and mortgagors with better notice and understanding of the foreclosure proceedings and to clarify procedural issues that tend to delay mortgage foreclosure proceedings. The courts should interpret Rule 113 to meet these goals. It should be noted that these rules apply to state court proceedings and not federal court mortgage foreclosure proceedings.
In addition to Rule 113, the Illinois Supreme Court adopted new Rule 114, which deals with the filing of an affidavit by a plaintiff related to loss mitigation efforts. While the proposed form affidavit specifically refers to residential mortgage loans, the language of Rule 114 does not limit it to residential mortgage loans. Therefore, the courts may require that a Loss Mitigation Affidavit be filed for all mortgage foreclosure cases. The plaintiff is required to file an affidavit when the mortgagor has appeared or filed an answer or responsive pleading. The affidavit must be filed prior to moving for a judgment of foreclosure establishing that it has complied with any loss mitigation program that applies to the subject mortgage loan. The affidavit must contain the following information: (1) identification of any loss mitigation program that applies to the subject mortgage; (2) the steps taken to offer said loss mitigation programs to the mortgagors; and (3) the status of any loss mitigation efforts. Whether or not loss mitigation programs apply to a mortgage loan, it is foreseeable that the courts may require the loss mitigation affidavit to be completed by all plaintiffs.
The final rule adopted by the Illinois Supreme Court pursuant to the findings and recommendations of the Special Supreme Court Committee on Mortgage Foreclosures is new Rule 99.1, which governs mortgage foreclosure mediation programs. Rule 99.1 does not mandate a mortgage foreclosure mediation program, but instead addresses the need to include certain elements in any such program adopted by a judicial circuit. The Illinois Supreme Court recognized that each judicial circuit may have certain needs or restraints related to its own mediation program, but identified the following elements that must be addressed in any program: (1) any requirements in Rule 99; (2) resources to provide meaningful access to HUD-certified housing counselors; (3) resources to provide meaningful access to pro bono legal representation; (4) resources to provide meaningful language access for participants; (5) costs charged to any participant; (6) a sustainability plan that includes long-term funding plans; and (7) training of judges and key personnel on mortgage foreclosure mediation.
The foregoing discussion is intended to summarize key provisions of the new Illinois Supreme Court Riles, but is by no means all inclusive. Please consult your legal counsel before acting upon it.