Page 1 - John Hundley 2016

Mortgage Law Roundup

Sharp Thinking

No. 134 Perspectives on Developments in the Law from Sharp-Hundley, P.C. October 2016

Foreclosure Sale Purchaser May Profit On Resale

By John T. Hundley, 618-242-0200, john@sharp-hundley.com
Confirmation of a mortgage foreclosure sale ends the mortgagor-mortgagee relationship and
vests in the foreclosure sale purchaser all the rights, title and interests of both the mortgagor and the
mortgagee -- including the right to profit on a subsequent resale, a majority of an Appellate Court
panel has concluded.

Ruling in Old Second Nat’l Bank v. Jafry, 2016 IL App (2d) 150825, the
majority said those principles applied even when the purchaser at the
foreclosure sale was the foreclosure plaintiff.

In Old Second, the bank received a foreclosure judgment of $1,362,329. It
then was the successful bidder at the foreclosure sale with a bid of $900,000.
The court confirmed that sale, and, with additional expenses, entered a
deficiency judgment of $577,876. The bank then sold the property for
$1,320,000. The former mortgagor then sought to reduce the deficiency
judgment by the bank’s profit of $420,000. Hundley

The majority rejected that attempt. “No one disputes that, when a
mortgagor resells a property for less than it paid at the judicial sale, it may not
recover the difference in enforcement proceedings against the mortgagor,” the
panel said. “When the mortgagor-mortgagee relationship ends with the judicial
sale, the debtor loses any input over how the property will be maintained, and
thus he faces no liability for potential losses incurred by the lender. The debtor
is neither liable for future losses nor entitled to future gains.”

Mortgagors who fear the mortgagee will obtain a windfall in purchasing the
property at a judicial sale may attempt to sell the property themselves before foreclosure or may
challenge the confirmation of the sale, the panel stated.

Entireties Rule Doesn’t Prevent Foreclosure

Where both spouses have signed a mortgage of their entireties property, foreclosure may
proceed even if only one of the spouses is liable on the underlying note, a panel in the Appellate
Court’s Third District has ruled.

In OneWest Bank FSB v. Cielak, 2016 IL App (3d) 150224, the spouse not liable on the
underlying note attempted to use the rule on tenancy by the entireties to prevent foreclosure on the

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, 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
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