July 2016 • Volume 104 • Number 7 • Page 40
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From the Newsletters - The first 10 steps if you represent a creditor
Skipping some of these crucial steps can send you back to square one.
"My first 10 steps in foreclosing a mortgage"
By Lawrence O. Taliana
Commercial Banking, Collections, and Bankruptcy Law - May 2016
Representing a creditor in foreclosure involves "so many steps, inquiries and decisions…that a casual discussion doesn't do the process justice," Edwardsville lawyer Lawrence O. Taliana writes in the May issue of the Commercial Banking, Collections, and Bankruptcy Law newsletter.
Nonetheless, he has crafted a step-by-step procedure for foreclosing on real estate to "minimize the chance that something gets overlooked." Here are the crucial first 10 steps on his list.
1. Acknowledge receipt of the file
This first communication with your client is a great time to address "all agreements pertaining to the scope of representation," any limitations on your scope of work, and "any special requirements or practices that exist in your jurisdiction (e.g. mandatory mediation)," Taliana writes.
2. Find whether the real estate taxes have been paid
If nothing in the file addresses it, contact the treasurer and "find out the status of the real estate taxes, determine the relevant deadlines" for paying them, and let your client know what they are, Taliana writes. "Even if you simultaneously advise the client that you will not monitor the real estate taxes in the future, you have at least averted anything unexpected while the file is in your hands."
3. Make sure your client has offered loss mitigation programs to the borrower
Has your client offered loss mitigation programs to the mortgagor pursuant to Supreme Court Rule 114? "If all loss mitigation steps have not yet been explored,…alert the client to begin this process immediately so you will not have to hold up the foreclosure…."
4. If 12 CFR 1024.41 applies to your client (i.e., if it's a bank), don't start foreclosing until the account is four months delinquent
These complex regulations apply if your client is "an entity that is regulated by or whose accounts are insured by any agency of the Federal Government or which makes residential real estate loans aggregating more than $1 million," Taliana writes
5. Make sure you have all required documents
"Do you have the note? Do you have the mortgage? Do you have all of the assignments of the note and mortgage?" All are required to file a foreclosure complaint, Taliana writes.
6. Find out whether the borrower has filed for bankruptcy
"Any steps taken in a foreclosure after a bankruptcy is filed (until the automatic stay is lifted) are void pursuant to section 362 of the Bankruptcy Code," Taliana warns.
7. Find out whether the property is residential
That will affect how your client must treat the borrower. Residential real estate is property "improved with a single family residence or a dwelling structure with six or fewer families living independently," Taliana writes.
8. Find out whether the property is abandoned
"Verify with the client whether the property is abandoned pursuant to 735 ILCS 5/15-1200.5 and the exceptions at 735 ILCS 5/15-1200.7," Taliana writes.
9. If the property is residential, send the homeowner protection notice ASAP
If you don't, "even if you have done everything else correctly and are at the foreclosure sale stage, you will have to go back to the beginning of the foreclosure," Taliana cautions.
10. Send the validation-of-debt notice to the borrower as required
The notice, which is required under the Fair Debt Collection Practices Act, "must be sent within five days after the initial communication with the debtor," Taliana writes.
Skipping any of these steps - all of which occur before you have "even gotten to ordering the title work or drafting the complaint" - "can lead to delays in the case, the invalidation of actions taken in the foreclosure, or even liability," Taliana writes.