How Foreclosures Work

Lenders use foreclosures when a person repeatedly defaults on their mortgage payments. The lender forecloses on the home by selling the house, and using the proceeds of the sale as payment for the mortgage. The process for foreclosure varies from state to state. Some states require foreclosures to be done through the courts (judicial foreclosure), while others allow foreclosures to proceed without court oversight (non-judicial foreclosure).

Judicial Foreclosures in Illinois

A judicial foreclosure requires the lender to move through the court system. This process usually takes a few months, which gives the resident time to find a new home and put forth legal arguments against the foreclosure. Importantly, Illinois is a judicial foreclosure state.

An ordinary judicial foreclosure normally goes through the following steps:

  1. The resident misses their mortgage payments. While lenders can foreclose after a single missed payment, most will wait longer since they find it easier to get the resident back on track, rather than go through the foreclosure process.
  2. The lender provides a notice of intent. The notice informs the resident that in a certain period of time, often 10 days, foreclosure proceedings will begin. The notice may also give the resident the opportunity to avoid foreclosure by getting up to date on their payments.
  3. After the notice period elapses, the lender can file a lawsuit, which they will also have to notify the resident about.
  4. The resident may then respond to the lawsuit with any legal defenses against the foreclosure that they may have.
  5. If the resident wins, the process ends here, unless the lender can get around the defense they used. If the resident loses, then the lender provides the resident with a “notice of intent to sell.”
  6. Following the notice, the lender puts the house up for auction. If the house does not sell at auction, then the lender will gain ownership of it.
  7. Once the process ends, the resident may stay in the home, without making payments, until the lender sends an eviction notice, which may take time if the lender wants to wait for the housing market to improve before trying to sell the home.

Non-Judicial Foreclosure States

In non-judicial foreclosure states, lenders may move more quickly since they can foreclose on the home without needing to go through the courts.

Although the steps for a non-judicial foreclosure vary depending on state law, they do share some aspects that residents should keep in mind:

  1. Non-judicial foreclosures can happen with less warning than judicial ones. Often, the resident’s first warning will be a notice of sale, which usually comes two weeks to one month in advance of a foreclosure sale. Some states also require lenders to issue a notice of default. The notice of default would precede the notice of sale, often, but not always, by about one month.
  2. If the lender does provide a notice of default, then the resident may pay off the missed payments, along with any fees and costs associated with them, in order to avoid foreclosure
  3. Unless the resident makes those payments, the lender will put the house up for auction. Some states allow residents to keep their home if they can pay the winning bidder for it.
  4. Residents may also go to court themselves in these states in order to fend off foreclosure. Once they file a lawsuit, they can temporarily halt the foreclosure, and make the same arguments in court that those in judicial foreclosure state do.

If you have bankruptcy and foreclosure questions, please contact our Illinois bankruptcy lawyers at Newland & Newland today. We provide support to clients in Lake County, McHenry County, Cook County, DuPage County, Crystal Lake, Arlington Heights, Barrington, Palatine, Rolling Meadows and throughout Northern Illinois.

  • Newland & Newland LLP, Attorneys, Arlington Heights, IL