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Illinois Mortgage Foreclosure Act Amended

by Sandra Tatoian, Shareholder

Lenders, attorneys and even title insurers can all breathe a little sigh of relief.  In case you missed that junior lienholder in your Illinois foreclosure action, regardless of the reason, there is now a procedure to extinguish that omitted lien.  On August 26, 2014, Illinois amended its Mortgage Foreclosure Law and added section 735 ILCS 5/15-1603.5 to address situations where a foreclosure sale occurred, but a junior lienholder was not named as a defendant in the foreclosure action. 

In Illinois, junior lienholders are permissible parties to a foreclosure action.  In the event they are not named a defendant in the foreclosure action, their lien survives the foreclosure and the purchaser of the foreclosed property takes the property subject to that omitted lien. 

With the adoption of §15-1605.5, a purchaser of the foreclosed property can now file a strict foreclosure complaint against the omitted junior lienholder to extinguish its lien.  Unless the junior lienholder objects, the court must enter a judgment extinguishing the omitted junior lien.

If the junior lienholder objects and wants its lien to survive, it is required to pay the current title holder the total amount paid at the foreclosure sale, plus all fees and costs incurred after the sale for the payment of taxes, preservation of the property, and any other actions taken by the purchaser to protect its interest in the property. 

The junior lienholder has 30 days after the entry of the order establishing the redemption amount to pay it in full.  If the junior lienholder fails to pay the redemption amount, the Court must enter an order extinguishing the lien. 

While this new law does provide certain protections, prospective plaintiffs should be careful to evaluate the risks associated with the strict foreclosure remedy, because they do stand to lose the property if the junior lienholder decides to redeem.  

For additional information about the Mortgage Foreclosure Law in Illinois, contact the Belleville office of Mathis, Marifian & Richter, LTD. - we also serve the St. Louis Metro East area, including O'Fallon and Fairview Heights in Illinois.

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