SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD, SUITE 150 OAK BROOK, ILLINOIS 60523 TEL 630.575.8181 FAX 630.575.8188 SULAIMANLAW.COM

THE FORECLOSURE PROCESS: A BRIEF OVERVIEW

1) Foreclosure Defined: A court proceeding to extinguish all rights, title, and interest of the owner(s) of property in order to sell the property to satisfy a lien against the property. 2) Foreclosure Trigger and Initial Steps: a) Trigger: Three to five missed payments, though it can vary depending on actions of borrower. b) The lender notifies foreclosure attorneys. c) The lenders attorney reviews the subject propertys title to discover what liens exist. i) Liens: property taxes, mortgages, judgments, mechanics liens, etc. 3) Foreclosure Complaint is Filed and Summons is Issued a) The foreclosure complaint is typically prepared within one month of a trigger, which is usually in the fourth month after first missed payment. b) Complaint: The complaint is requesting the court to deliver possession of the subject property due to a borrowers violation of the terms of the mortgage and other remedies. c) Summons: The summons is a notice served personally by the sheriff or by publication. d) The borrower has thirty days to respond to the complaint. The response time is critical. 4) Lis Pendens a) The lis pendens is filed with the recorder of deeds. b) The purpose of the lis pendens is to notice the public that there is litigation pending related to the subject property. 5) Right of Reinstatement a) The borrower (also known as the homeowner or mortgagor) has the statutory right to reinstate the mortgage within 90 days of the summons being served or the first date of publication being published. b) Reinstatement: The borrower has the right to bring the mortgage current by paying all costs and expenses required by mortgage to cure default. c) The lender may extend the time periods in some circumstances. 6) Initial Court Date a) The borrower will have to answer or otherwise plead (argue) to what is alleged in the complaint. Judgment of Foreclosure a) The court awards foreclosure judgment if borrower loses at trial or if borrower defaults (does not appear in court). i) Unfortunately, this is what occurs in the vast majority of cases. By not appearing in court or hiring an attorney the borrower will lose their home. b) A foreclosure judgment awards property ownership rights to the lender, but not actual title. The borrower will retain title until the subject property is properly advertised and a sale is conducted and an order of possession in favor of the lender is issued. c) The redemption period continues for ninety (90) days from issuance of a foreclosure judgment.

7)

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SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD, SUITE 150 OAK BROOK, ILLINOIS 60523 TEL 630.575.8181 FAX 630.575.8188 SULAIMANLAW.COM

8) Right of Redemption: a) Redemption: The borrower has the right to pay off the delinquent loan in full by paying everything that is owed: principal, interest, cost of collection, and foreclosure (court costs of lender) and attorney fees. b) The borrower may redeem the subject property as follows: i) If the subject property is the borrowers primary residence, the borrower may redeem the subject property within seven (7) months from the date the borrower was served with summons or by publication or no later than three (3) months after the judgment of foreclosure is entered, whichever is later. ii) If the subject property is not the borrowers primary residence the borrower may redeem the subject property within six (6) months from the date borrower was served with summons or by publication or no later than three (3) months after the judgment of foreclosure is entered, whichever is later. iii) Regardless of whether the borrower resides in the subject property or not, the redemption period may end earlier if: 1) The value of the real estate as of the date of the judgment is less than 90% of the amount required to redeem and; 2) The lender waives any and all rights to a deficiency judgment against the borrower within the right of reinstatement period (7 months from service or 3 months from judgment whichever is later) or 60 days after the date of the foreclosure judgment, whichever is later. This typically occurs if the subject property was investor owned, and the borrower did not file an appearance before the court.

iv) If the court determines that the property is abandoned, the right of redemption period
ends thirty (30) days after the date of the foreclosure judgment is entered.

v) A borrower may redeem the subject property by paying the foreclosure judgment amount
plus other expenses authorized by the court.

vi) A commercial property owner can (and usually does) waive his reinstatement and
redemption rights in exchange for something. Waivers for residential properties are not valid. Most commercial mortgages have a specific provision whereby the borrower waives all redemption rights.

vii) Special Right to Redeem: If a lender purchases a property at the sheriffs sale, and the
purchase price is less than the amount listed in the judgment of foreclosure and sale, the borrower may repurchase the property for the sale price plus all applicable fees and costs. This must be done within thirty days of the confirmation of sale.

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SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD, SUITE 150 OAK BROOK, ILLINOIS 60523 TEL 630.575.8181 FAX 630.575.8188 SULAIMANLAW.COM

9) Foreclosure Sale a) Upon expiration of reinstatement and redemption periods or entry of a foreclosure judgment and waiver of all redemption rights, a foreclosed property may be sold. b) The notice of sale must be published at least three (3) weeks in a row, once per week, in a newspaper circulated to the general public. c) The notice of sale may be given prior to the expiration of the reinstatement or redemption period. d) The notice of sale does not need to be given to the borrower if he/she is in default due to not filing an appearance. 10) Report and Confirmation of Sale a) After the sale, the lender will file a motion including a report of the sale with the court to confirm the validity of the sale. b) The court conducts a hearing on the sale (generally two [2] weeks after the sale has occurred) and will approve the sale unless notice was not given properly, the sale was otherwise not conducted property, or that the sale, if confirmed would cause an injustice. 11) Deficiency Judgment and The Special Right to Redeem a) If the subject property is sold for less than the amount necessary to redeem, the lender may enter a deficiency judgment against the borrower. A deficiency judgment is the difference from what the subject property sold for at the sale and the balance owed to the lender. b) If the lender purchased the subject property and the sale price was less than the redemption amount, the borrower has the special right to redeem. c) The special right to redeem expires within thirty (30) days after the sale is confirmed and is satisfied only if the sale price plus any court approved costs are paid to the mortgagee/plaintiff. 12) Deed in Lieu of Foreclosure/Short Sale: a) The borrower gives back the property to lender without need for further judicial action. In the case of a short sale, it is roughly the same, but instead of giving back the subject property, the lender agrees to a reduced payoff so that the borrower can actually sell to a third party. b) Both the lender and the borrower have to agree. c) There is no deficiency judgment against the borrower. d) Because a completed foreclosure action destroys all other secondary liens, and the deed in lieu of foreclosure does not, this procedure is not popular with the lenders. 13) Credit Score Impact: All negative, but to what degree may vary. a) Foreclosure Judgment: Negative impact. b) Bankruptcy: Negative impact. c) Short Sale: Negative impact. It is likely that the borrower had missed payments. The downside is that the borrower may end up homeless if it is the primary residence. d) Deed in Lieu of Foreclosure: Negative impact. It is likely that the borrower had missed payments. The downside is that the borrower may end up homeless if it is the primary residence.

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SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD, SUITE 150 OAK BROOK, ILLINOIS 60523 TEL 630.575.8181 FAX 630.575.8188 SULAIMANLAW.COM

THE FORECLOSURE PROCESS: FREQUENTLY ASKED QUESTIONS

1) How Did We Get Here? A Brief History a) Seller Steve: Steve the Seller wants to sell his home. He will contact his realtor who will secure a buyer. Steve may give serious incentives (cash back at closing) to Bob the Buyer. b) Buyer/Borrower Bob: Bob the Borrower wants to buy Steves house. Bobs realtor makes an offer and the terms are agreed to. Bob does not have any money to put down. c) Real Estate Agent Ronald: Ronald the Realtor states that having no money should not come between Bob and Bobs $600,000, five bedroom dream home. Arrangements are made. Ronald is aware of the serious incentives offered by Steve the Seller, and is further aware that the sale price of $600,000 is high for that neighborhood, but Ronald really needs the commission. d) Real Estate Broker: Responsible for the real estate agents. e) Mortgage Licensee Melvin: Ronald or Bob call Melvin. Typically it is Ronalds contact. Ronald contacts Melvin the Mortgage Licensee and tells him that he has a client. Melvin studies Bob and finds out that Bob has no mortgage history, poor tax returns but has really great credit. Melvin is told that Bob has no money to put down. Melvin searches which loan best suits Melvin (which will make the most money for Melvin) and does the least damage to Bob. f) Mortgage Broker: Responsible for mortgage licensees. g) Appraiser Alex: Alex the Appraiser, in concert with everyone, looks for ways to support the sale price of $600,000. The deal will absolutely not work, and no one will be paid, if Alex cannot find a way to appraise the property that Bob wants to purchase for $600,000. Alex the Appraiser finds a way to appraise the property for $600,000 even though the closest comparable house to Steve the Sellers house is only worth $569,000. Alex stretches the appraisal. h) Underwriter Unis: The loan that was submitted to the primary lender by Melvin is having trouble. Unis, the Underwriter who works for the Primary Lender Paul is concerned that there is no way Bob the Borrower will be able to pay the hefty mortgage. Melvin the Mortgage Licensee is really concerned, as is Ronald and now Bob who cannot think of anything else other than to live in his new dream home. i) Account Executive Al: Al the Account Executive works for the primary lender. He works on a commission. He also collects a base salary that will not even pay for lunch once a day. He constantly is attempting to drum up business out of Melvin. Melvin calls Al and says, Please help me close this deal. Al contacts Unis the Underwriter and asks what can we do to get this done. Al relays that message to Melvin and miraculously Bob remembers that his daughter collects income from being a babysitter and with that income and what he allegedly has in his personal bank account he now qualifies for the loan. j) Primary Lender Paul: Paul the Primary Lender funds the loan for $600,000. Paul, being very smart, has the loan already sold to Sam the Sucker on the secondary market for $660,000. Paul pockets $60,000 in profit, plus what Paul will make on servicing the loan for Sam. Paul now has a least $660,000 to work with to loan to the next Bob the Borrower. k) Loan Servicer: Hired by primary lenders and secondary lenders to manage and maintain the actual loan for the subject property for a fee. Commonly, it is the primary lender who continues to service the loan after it is sold to the secondary market lender. l) Secondary Market Lender Sam Sucker: Typically investors, pension funds, endowment funds, venture capitalist funds, hedge funds, other large financial institutions such as Bear Stearns, Lehman Brothers, etc. The Sams of the world are told that it is triple AAA rated debt instruments, but we know him better as just Bob the Borrower.

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SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD, SUITE 150 OAK BROOK, ILLINOIS 60523 TEL 630.575.8181 FAX 630.575.8188 SULAIMANLAW.COM

2) What Is Foreclosure Defense?

These are the matters that may save the home. They will not eliminate a mortgage. They will not convey a home free and clear. They will, however, act as partial or complete defenses to a foreclosure lawsuit. They will also provide a position of strength from which to negotiate. Negotiating is the most effective means of protecting a home from foreclosure. a) Valid Defenses Exist: The defenses to a mortgage foreclosure are real and powerful. i) Illinois Mortgage Foreclosure Act: Summons, complaint, and procedural defects. ii) Illinois Mortgage Rescue Fraud Act: To combat schemes by criminals trying to take advantage of the financially devastated. iii) Illinois Consumer Fraud and Deceptive Business Practices Act: To combat the lenders and all involved in the potential conspiracy to defraud the borrower. iv) Federal Truth in Lending Act (TILA): To address whether the proper disclosures were accurately delivered and acknowledged by the borrower. v) Federal Home Ownership Equity Protection Act (HOEPA): That the loan issued to the borrower was necessary and the interest rate and terms fit within the prescribed guidelines. vi) Federal Real Estate Settlement Procedures Act (RESPA): To ensure proper disclosure of all fees and costs associated with the loan were received by the borrower. vii) Federal Bankruptcy Laws: To ensure that the borrower is able as a failsafe to use the bankruptcy legislation to the borrowers advantage. viii) Federal Fair Debt Collection Practices Act (FDCPA): To ensure that the lender observed each and every provision of the FDCPA in attempting to collect from the borrower. ix) Illinois Common Law: An evolving web of cases that influence outcomes in all cases before the court. 1. Common Law Fraud 2. Breach Of Fiduciary Duty 3. Breach Of Contract b) The Goals of a Foreclosure Defense i) Time to Find Solutions: Refinance, sale, new job, bankruptcy, etc. ii) Time to Discover any and all Affirmative Defenses: Will stop or seriously postpone the foreclosure process, again generating time. iii) Counterclaims: The lender may owe you money, which can offset the amount it claims that you owe. iv) Change in the Financial and Regulatory Environment: Each passing week brings with it massive government intervention. 3) Can I Get My Home Free and Clear? The short answer is, probably not. Although many people on the Internet believe that it is possible, and although it has happened in the past, it is highly unlikely that a successful foreclosure defense will result in the release of your mortgage and the cancellation of your debt obligation to the lender. Illinois courts have not shown that they are likely to give someone a home free and clear. Even in situations where the mortgage is voided, the

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SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD, SUITE 150 OAK BROOK, ILLINOIS 60523 TEL 630.575.8181 FAX 630.575.8188 SULAIMANLAW.COM

underlying loan obligation is not voided. This means that the borrower still owes the lender money. The goal of a foreclosure defense strategy is to give the home owner a position of strength from which to bargain. This may mean that the end goal is a loan modification; it may mean that the end goal is a consent foreclosure. Barring an extreme case, you are more likely to be hit by a meteor than you are to get your home free and clear.

4)

Can A Poorly Timed Bankruptcy Really Hurt Me?

Any poorly-planned legal action can be a bad idea. The U.S. Bankruptcy Code is rather complex. The factors that go into deciding which kind of bankruptcy to file include income, assets, consumer debt load, current debt payments, and others. Filing a Chapter 13 petition may put the brakes on your foreclosure case, but if you cannot make the payments each month, your case will be dismissed and the foreclosure will resume. Filing a Chapter 7 petition can also stall a foreclosure proceeding, but you will lose any non-exempt assets and the credit hit may not be worth it unless you have significant credit card or other consumer debt. For these reasons, it is highly important that you consult with a licensed attorney before making any decisions regarding filing for bankruptcy.

V. How Long Does It Take? Litigation can take a long time. Highly complex cases can last for years. Many foreclosure cases resolve themselves in a matter of months. Those cases are the ones that arent defended. A foreclosure defense case can last from six to eighteen months, with the vast majority likely falling somewhere in the middle. Ultimately, it depends on when the home owner takes action and how far along the case is when that action is taken. Even the most slam dunk case can last a long while; the procedural rules that protect defendants also protect plaintiffs. A motion to dismiss filed on March 1st may not be heard until May or June. The discovery process, where both sides request evidence and sworn statements from each other, can also be a lengthy process. Litigation will be frustrating for the impatient, but can be rewarding for those who are willing to wait.

VI. Can I Sue My Lender? In many situations, there may be a federal or state law that gives you a cause of action against your lender. Many of these statutes allow for specific damages, usually between $1,000 and $2,000. Its worth noting that these damages are usually not cumulative. If your servicer calls you 100 times in a year, even though you have asked it not to call you, its ultimate liability would be closer to $1,000 than $100,000. In extreme situations, it may be possible to claim some rather large damages. Those situations are generally not the norm. If you are considering pursuing a lawsuit against your lender, be sure that you have all of the facts before proceeding. Consulting with an attorney is the best start.

CONTACT OUR OFFICE NOW:

SULAIMAN LAW GROUP, LTD.

900 JORIE BOULEVARD SUITE 150 OAK BROOK, ILLINOIS 60523 PHONE (630) 575 8181 FAX (630) 575 8188 SULAIMANLAW.COM AHMAD.SULAIMAN@SULAIMANLAW.COM

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