The Journal of The DuPage County Bar Association

Back Issues > Vol. 26 (2013-14)

Enforcing MHA/HAMP Loss Mitigation Guidelines through Illinois Mortgage Foreclosure Law
By Stephanie Arsenty

Introduction. In the aftermath of the economic meltdown of 2008, mortgage foreclosures in Illinois continue to affect many more lives than ever before. In an effort to save their properties, many Illinois borrowers facing foreclosure turn to the federal Home Affordable Modification Program (HAMP) under the Making Home Affordable Program (MHA) to modify their mortgage loans. MHA/HAMP was instituted on October 3, 2008 through the Emergency Economic Stabilization Act via the Troubled Asset Relief Program (TARP).1 MHA/HAMP was originally set to expire on December 31, 2013 but has recently been extended through the end of 2015.2

The federal government negotiated certain mortgage servicers’ participation in MHA/HAMP by requiring that servicers offer modified loans to borrowers under specific servicing guidelines and in accordance with Servicer Participation Agreements (SPAs) in exchange for financial incentives. Servicers, however, were not well-regulated, and MHA/HAMP noncompliance was and continues to be rampant. This widespread noncompliance resulted in the country’s five largest mortgage servicers entering into a $25 billion settlement with Attorneys General across the nation in February 2012, which in turn has led to further crackdowns due to continued noncompliance by these servicers as of October 2013.3

So how do Illinois borrowers address servicer noncompliance and enforce the right to be reviewed for loss mitigation options while in foreclosure? Unfortunately, the ability to address MHA/HAMP noncompliance in Illinois courts is limited. Even though MHA/HAMP noncompliance is disturbingly commonplace, very few Illinois appellate court cases have been published on the issue of noncompliance and its impact on the mortgage foreclosure process. However, two recent second district appellate court opinions, CitiMortgage v. Johnson4 and Chase Home Finance, LLC v. Nolan5 analyze the Illinois Mortgage Foreclosure Law (IMFL)6 provision surrounding MHA/HAMP noncompliance and foreclosure sales.

Further, a recent seventh circuit federal court case, Wigod v. Wells Fargo, NA7, gained attention for its ruling that MHA/HAMP noncompliance can trigger state law causes of action. In addition, new Illinois Supreme Court Rule 114 assists borrowers in that it requires lenders/servicers to comply with the loss mitigation programs available and to file an affidavit setting forth the steps taken to mitigate loss and to avoid foreclosure.8

MHA/HAMP and the IMFL. A newer provision of the Illinois Mortgage Foreclosure Law (IMFL) targets the foreclosure sales process and addresses servicer noncompliance. On July 23, 2010, the Illinois legislature amended the IMFL to add a provision at Section 15-1508(d-5) whereby courts shall set aside a foreclosure sale when material non-compliance with MHA/HAMP guidelines for proceeding to sale is proven by a preponderance of the evidence.9

735 ILCS 5/15-1508(d-5) reads:

“Making Home Affordable Program. The court that entered the judgment shall set aside a sale held pursuant to Section 15-1507, upon motion of the mortgagor at any time prior to the confirmation of the sale, if the mortgagor proves by a preponderance of the evidence that (i) the mortgagor has applied for assistance under the Making Home Affordable Program established by the United States Department of the Treasury pursuant to the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009, and (ii) the mortgaged real estate was sold in material violation of the program's requirements for proceeding to a judicial sale…”10

The IMFL provision, although helpful, is vulnerable to unpredictable and wide-ranging interpretation because it requires Illinois courts to navigate the ever-changing and complex MHA/HAMP servicing guidelines and to decipher a potential “material violation” (which is not explicitly defined). The provision also requires defendant borrowers and/or their counsel to be sufficiently versed in the latest servicing guidelines to determine whether a material violation occurred and when to take action. MHA/HAMP servicing guidelines are thorny because there are different sets of guidelines for each type of loan, including non-government sponsored loans, FHA, VA, Fannie Mae, and Freddie Mac loans, all of which are amended frequently.11

The IMFL provision is also extremely limited in scope because it solely addresses noncompliance “for proceeding to a judicial sale” and instances where the property has already been sold at judicial sale. Unfortunately, the IMFL does not address other instances of servicer MHA/HAMP noncompliance.

A “Material Violation” and “Change in Circumstance”: CitiMortgage v. Johnson. In a recent Second Appellate District decision, CitiMortgage v. Johnson12, the court addressed IMFL Section 15-1508(d-5) and the issue of a “material violation.” The Johnson court examined the instance where a borrower applied for a modification, was denied, and then re-applied due to a change in circumstance.13 The court found that CitiMortgage improperly failed to suspend a foreclosure sale upon its receipt of the borrower’s timely MHA/HAMP re-application based on a change in circumstance. It held that the borrower’s discharge from Chapter 7 bankruptcy is a change in circumstance that can trigger continued eligibility for a successive re-application under the MHA/HAMP servicer guidelines. The bank’s failure to suspend the sale constituted a material violation of MHA/HAMP guidelines under IMFL Section 15-1508(d-5).

Johnson discussed in depth the MHA/HAMP servicing guidelines concerning a borrower’s re-application and the prerequisite of a change in circumstance from a prior application to qualify for reconsideration. The court essentially stated that examining a successive application’s viability is a crucial step to determining whether the servicer has properly considered the re-application, and thus whether a “material violation” occurred, not merely whether the re-application was made.

Although the court ultimately found in favor of the borrowers, the added prerequisite of viability is potentially troublesome to re-applying borrowers facing foreclosure sale. Under general non-GSE MHA/HAMP guidelines, a suspension of sale is required simply “[w]hen a borrower submits a request for HAMP consideration after a foreclosure sale date has been scheduled…” and the request is received within the appropriate timeframe.14 However, the Johnson court found that more is required upon re-application than in an original application, stating that borrowers must not only re-apply, but must “qualify for reconsideration” of a re-application through a change of circumstance to suspend a foreclosure sale. Ostensibly, this means that if no change in circumstance exists, the re-application is therefore not viable. And although a borrower has re-applied within the appropriate timeframe, the servicer need not consider the re-application, and in proceeding to foreclosure sale, there would be no material violation of MHA/HAMP for purposes of Section 15-1508(d-5).

“At any Time Prior to Confirmation of Sale”: Chase Home Finance, LLC v. Nolan. (Please note that this is an Illinois Supreme Court Rule 23 decision.) Where Johnson answers the questions of what is a change in circumstance and what is a material violation another Second District opinion, Chase Home Finance, LLC v. Nolan,15, answers the question of when a motion under Section 15-1508(d-5)can be brought. In Nolan, the borrower attempted to vacate the sale under Section 15-1508(d-5) but her motion was not heard by the circuit court because it did not receive a copy of the noticed motion in its file and the borrower’s request for a continuance was denied. Chase later argued that the motion was not properly noticed in accordance with local rules.16 The appellate court reversed the circuit court’s ruling and found that it should have heard the borrower’s motion or granted a continuance because the motion was filed and brought before the confirmation of sale.17

The Nolan court found that a motion under this Section can indeed be brought, according to the plain language of 15-1508(d-5) itself, “at any time prior to the confirmation of the sale.” In reaching this conclusion, the court compared the language of 15-1508(d-5) with the language of 15-1508(b), which differs in its definition of notice. Section 15-1508(b) indicates that notice shall be made “…in accordance with the court rules applicable to motions generally.” The court analyzed a canon of statutory construction in finding that Section 15-1508(d-5) notice requirements are not as restrictive as the requirements of Section 15-1508(b).18 The motion can therefore be brought in written form or otherwise, at any time up to the point where the court enters an order confirming the sale, regardless of whether its notice conforms to local rules.

The court went on to address the fact that a Section 15-1508(d-5) motion may serve as an objection to confirmation of sale under 735 ILCS 5/15-1508(b) in that it is “subsumed by the more general question of whether ‘justice was done’” through the 15-1508(b) objection to a motion to confirm a sale in that “justice was otherwise not done” in proceeding to sale.19

MHA/HAMP in Federal Court. Although the IMFL only addresses noncompliance in proceeding to foreclosure sale, servicer noncompliance can take various forms throughout the foreclosure process. This includes cases of MHA/HAMP trial modification plans that, although required under trial agreements, do not come to fruition as permanent modifications. The Seventh Circuit Court of Appeals recently addressed noncompliance in the case of trial agreements not leading to permanent modifications.

In Wigod v. Wells Fargo Bank, N.A.,20 a borrower attempted to enforce a trial modification agreement that provided for a permanent modification if the borrower complied with all the terms of the trial agreement. The borrower successfully completed the terms of the trial agreement but was nonetheless denied a permanent modification by Wells Fargo. Although the court confirmed that no private right of action exists under MHA/HAMP or a Servicer Participation Agreement (SPA) (an agreement that participating lenders have with the federal government), the court held that the lack of a private right of action under MHA/HAMP does not preempt the right to bring claims under other theories of liability.21 It held that a borrower may bring causes of action for violations of the trial agreement under the state law claims of breach of contract or promissory estoppel, fraudulent misrepresentation, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.22

Wigod is a victory for Illinois borrowers. It allows borrowers to challenge servicers when trial agreements are made and not performed, where otherwise the borrowers would have no recourse and would be at the mercy of the servicer in making trial payments and hoping for the servicer to fulfill its promises.

Illinois Supreme Court Rule 114. The Illinois Supreme Court instituted a new Rule 114 effective May 1, 2013,23 requiring that a foreclosure lender/servicer plaintiff comply with all loss mitigation programs applying to the subject loan where a mortgagor has appeared and answered or filed a responsive pleading. It also requires that a plaintiff file an affidavit outlining its loss mitigation efforts when it moves for a judgment of foreclosure. The intent of the Supreme Court in adding this extra requirement, according to its Committee comments, is: “…to prevent the entry of a judgment of foreclosure where the plaintiff has theretofore failed to comply with applicable loss mitigation requirements…”24

The rule is intended to prevent judgments where plaintiffs are not in compliance with loss mitigation requirements. However, the rule itself provides a sample affidavit and allows plaintiffs to merely fill in the blanks of the given affidavit, literally. Further, lender/servicer plaintiffs are, in some courts 25 allowed to move for summary judgment and are granted summary judgment without the Rule 114 affidavit. These courts reason that plaintiffs are allowed to move only for summary judgment on the pleadings and can reserve judgment of foreclosure until after a Rule 114 affidavit is later filed with the court. This is because Rule 114 requires an affidavit to be filed “prior to or at the time of moving for a judgment of foreclosure” but does not mention summary judgment.

This interpretation of Rule 114, in the author’s view, circumvents the rule’s true requirements and defeats the intent of the Illinois Supreme Court in instituting this rule. This is because after summary judgment on the pleadings has been entered, it is only a short time before a perfunctory “judgment of foreclosure” can be entered after a Rule 114 affidavit is filed with the court quickly and without sufficient scrutiny. If summary judgment is already entered, a defendant borrower is not typically allowed sufficient time to review the affidavit or dispute its contents.

Some plaintiff’s attorneys even argue that the Illinois Supreme Court Rule does not allow for a defendant borrower to object to the affidavit, and that the affidavit is merely a “report to the court.” Fortunately, most courts dismiss this argument and allow time for a defendant borrower’s objections. It is the author’s view that basic due process rights require the court to allow borrowers the ability to object to the affidavit presented as evidence against them.

Because the rule is so new, it remains to be seen how effective it will be in preventing further noncompliance, but it is one of the recent steps the Illinois Supreme Court has taken to protect borrowers facing foreclosure.

Conclusion. The economic meltdown and subsequent foreclosure crisis seems to be reaching an end; however, corporate banks and lender/servicers continue to be poorly regulated, taking advantage of borrowers in and out of court and benefitting from government funds they receive for instituting regulations that they do not follow. The burden of keeping these banks in check has unreasonably been placed on the shoulders of residential borrowers who are unsophisticated and (for the most part) unable to properly prosecute for violations of federal regulations. The Illinois legislature and Illinois Supreme Court have attempted to offset this imbalance by passing new provisions and rules. However laudable these efforts have been, they are no match for the corporate disregard of federal regulations.  

1 P.L. 110–343, 122 Stat. 3765, 12 U.S.C. §§ 5211-5241. (codified as amended at 12 U.S.C. §§ 5201-5253).

2 See U.S. Dept. of Treasury, “Obama Administration Extends Application Deadline for Making Home Affordable Program,” May 30, 2013 at (last visited Sept. 29, 2013).

3 See (for information about the national mortgage settlement); and “National Foreclosure Settlement Rules Tweaked Amid Complaints” by Mary Ellen Podmolik, Chicago Tribune, Oct. 1, 2013 at,0,4912956.story (last visited Oct. 9, 2013).

4 CitiMortgage, Inc. v. Johnson, 2013 Ill. App. 2d 120719 (July 26, 2013).

5 Chase Home Finance, LLC v. Nolan, 2013 Ill. App. 2d 130075 (Sept. 18, 2013). Please note that this is an Ill. S. Ct. R. 23 decision.

6 735 ILCS 5/15-1101, et seq.

7 Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012).

8 Ill. S. Ct. R. 114.

9 See P.A. 96-1245, effective July 23, 2010.

10 735 ILCS 5/15-1508(d-5) (West 2010). This provision is set to expire on January 1, 2014 for all foreclosure actions filed after December 31, 2013 in which the mortgagor did not apply for assistance under the Making Home Affordable Program on or before December 31, 2013. However, since the HAMP program has been extended through 2015, Section15-1508(d-5) is expected to be extended through the end of 2015 by the Illinois legislature.

11 See (for non-GSE loans); (for FHA loans); (for VA loans, basic program guidance at Circular 26-10-6, last revised July 5, 2012); (for Fannie Mae loans); and (for Freddie Mac loans, although quite opaquely, some servicing guidelines require a “Servicing Technology Tools” ID and password) (last visited Oct. 9, 2013).

12 CitiMortgage, Inc. v. Johnson, 2013 Ill. App. 2d 120719 (July 26, 2013).

13 Resulting in either additional income or fewer expenses, typically, and giving the borrower the ability to re-apply after having been previously denied.

14 Id. at ¶23.

15 Chase Home Finance, LLC v. Nolan, 2013 Ill. App. 2d 130075 (Sept. 18, 2013). Please note that this is an Ill. S. Ct. R. 23 decision.

16 Id. at ¶¶17-21.

17 Id. at ¶34.

18 Id. at ¶31.

19 Id. at ¶¶32-33.

20 Wigod v. Wells Fargo Bank, N.A., 673 F. 3d 547 (7th Cir. 2012).

21 Id. at 560-566, 574.

22 Id. at 576-586.

23 Ill. S. Ct. R. 114 (in addition to Rule 113 also addressing mortgage foreclosure cases).

24 See Committee Comments on Ill. Sup. Ct. Rule 114, April 8, 2013, at (last visited Sept. 29, 2013).

25 From my personal courtroom experience. 

Stephanie Arsenty is a solo practitioner who concentrates her practice in real estate law. She serves as an investigator on the Chicago Bar Association’s Judicial Evaluation Committee and volunteers as foreclosure mediation counsel for Chicago Volunteer Legal Services.

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