Page 9 - John Hundley 2012

Mortgage Law Roundup

Sharp Thinking

No. 60 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. March 2012

“Short Sale” Provision Adopted For Foreclosure Proceedings

The Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1101 et seq . (“IMFL”), has been amended to
require mortgagees to say aye or nay to requests that they approve “short sales” of residential real
estate that is in foreclosure.

Under IMFL § 15-1401.1, added by P.A. 97-0666, effective January 13, 2012, the mortgagee must
respond to the mortgagor within 90 days if the mortgagor sends a bona fide written offer to purchase
from a third party and requests in writing that the mortgagee approve the sale. A “short sale” is when
the mortgaged real estate is being sold for less than the amount owed the mortgagee on the mortgage
note. Failure to accept the offer does not impair or abrogate the rights of the mortgagee or affect the
status of the foreclosure proceedings, and the 90-day period does not stay such proceedings. By its
terms the new law does not apply to proposed short sales of non-residential real estate or to proposed
sales of property that is not in foreclosure. Moreover, P.A. 97-0666 specifies no penalty for
mortgagees who ignore it.

Successor By Merger Not Bound By Assignment Pleading Rule

Banks which succeed to the rights of other banks by process of merger do not have to comply with
735 ILCS 5/2-403, regarding allegations of assignments, in order to bring a foreclosure action, a panel
of the Appellate Court in Chicago has held.

Rebuffing a belated debtor’s “standing” challenge, the panel in Standard B.&T. Co. v. Madonia,
2011 IL App (1st) 103516, noted that in such a merger the successor has the rights of the acquired
bank as a matter of statutory provision (205 ILCS 5/28) and not of assignment. Accordingly, if the
plaintiff files the statutory short-form foreclosure complaint asserting it is the successor by merger to
the original mortgagee, that is sufficient, the court said.

“Abode Service” Sufficient for Personal Deficiency Judgment

“Abode service” on the debtor is sufficient to support a personal deficiency judgment against him
under IMFL, an Illinois Appellate Court panel has ruled.

In Metrobank v. Cannatello, 2012 IL App (1st) 110529, service was effected on a person living at
defendant’s place of abode, but not on defendant personally. After defendant failed to appear, the
property was sold and the sale confirmed, but the circuit court refused to enter a deficiency judgment,
reasoning that abode service was not “personal service” as required under IMFL § 15-1508(e).
Surveying numerous authorities, the appellate panel reversed, holding that “personal service” under §
15-1508(e) included abode service as well as literal service on the individual defendant.

Paid Mortgagee Must Release Mortgage

A mortgagee refusing to release a mortgage must point to “actual, current and unsatisfied
obligations” to avoid liability under the Mortgage Act, 765 ILCS 905, a bankruptcy court has ruled.

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