Page 19 - John Hundley 2014

Mortgage Law Roundup

Sharp Thinking

No. 116 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. June 2014

Violation of Mortgage License Act Voids Mortgage

A mortgage made by an entity that lacked authorization to conduct such business under the
Residential Mortgage License Act (205 ILCS 635) is void as against public policy, a panel in the Appellate
Court’s Second District has held.

Finding that the License Act was enacted to protect the public, the panel said “Illinois courts have held
that where a licensing requirement has been enacted not to generate revenue, but rather to safeguard the
public by assuring them of adequately trained practitioners, the unlicensed party may not recover fees for
services or otherwise enforce a contract.” First Mortgage Co. v. Dina, 2014 IL App (2d) 130567. “To
enforce mortgage contracts entered into by unlicensed and, therefore, unregulated lenders would
abrogate the stated purpose of the License Act,” the court said.

Moreover, the court said it would not apply technical waiver rules to prevent
consideration of the issue, as it was one of public policy. “[C]ourts should consider
whether agreements are unenforceable as against public policy even if no party raises the
issue,” the court emphasized.

Note the court ruled only that summary judgment for the mortgagee under the
Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq.) should not have been granted. It
did not address distinguishable issues such as whether the underlying debt was
unenforceable and whether the mortgagee might be able to assert an equitable mortgage
claim.

Sanctions Ordered For Frivolous Foreclosure Delays

The Appellate Court in the Third District is imposing sanctions on mortgagees who engaged in
various delaying tactics which resulted in their enjoyment of the mortgaged premises for six years without
making mortgage payments.

“[W]e believe defendants simply wanted to remain in possession of the property, for as long as they
possibly could, without having to pay,” said the panel in Bank of Am., N.A. v. Basile, 2014 IL App (3d)
130204. It said the record made apparent that they had engaged in numerous stalling tactics, including:

● failing to respond to the complaint until a default judgment was entered;

● failing to timely replead after being given leave to do so;

● arguing based on pleadings that had been withdrawn or superseded;

● making a rescission claim that was neither properly pleaded nor within the three-year window
of the Truth-In-Lending Act (15 U.S.C. § 1635 (c));

● bringing an appeal which the court found was frivolous, taken for an improper purpose, and
filed specifically to harass and cause unnecessary and needlessly increase the cost of litigation.

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●
Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
Thinking shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein
constitute educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal
advice on your particular situation, contact a Sharp lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.