What is a Loss Mitigation Affidavit?

The Illinois Supreme Court requires that foreclosing banks file a “loss mitigation affidavit,” also known as a Rule 114 Affidavit for the specific rule. This affidavit must be filed at the time the bank is moving for judgment. This includes default judgment and summary judgment.

The purpose of the affidavit is to apprise the court of the status of any loss mitigation effort, including loan modifications, short sales, deeds-in-lieu, or forbearances. The way it works in practice is that the foreclosing bank supplies minimal and often inaccurate information. The affidavit often will say something along the lines of “Foreclosing Bank solicited homeowners for loss mitigation on these dates, and the homeowners did not respond.” Or “Foreclosing Bank solicited homeowners for loss mitigation on these dates and determined the homeowners do not qualify for any loss mitigation.”

Such statements do not really provide much if any information to the court. To make matters worse, the foreclosing bank often gets the information wrong. Oftentimes the loss mitigation affidavit is completed months (or years!) before the bank moves for judgment, so by the time the bank files the affidavit with the court the information is terribly outdated.

Since the affidavit is a requirement for the bank to obtain judgment (the court is given discretion to approve, deny, or delay entry of judgment if no affidavit is presented or if the affidavit is found to be inadequate), it is important to scrutinize the affidavit for errors and inconsistencies. Judges may delay entering judgment based on arguments raised in response to a loss mitigation affidavit. This can buy the homeowner crucial time to obtain a loan modification and delay any foreclosure auction that may arise.

In particular, verify the dates of solicitation letters are correct, check if any loss mitigation affidavits are currently pending and unreported, and check if the information conflicts with itself.

 


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Should I Participate in Foreclosure Mediation?

Cook County, Lake County, and Will County all offer foreclosure mediation programs with varying results. At its heart, mediation is the court-sanctioned opportunity for the homeowner to sit down with the foreclosing bank’s representative and hash out an agreement to either permit the homeowner to stay, via a loan modification, or permit the homeowner to walk away without a personal deficiency, via a short sale, deed-in-lieu, or consent foreclosure.

Out of the three programs, Lake County’s appears to be the most effective. Lake County was actually created by the Chancery Division of the 19th Judicial Circuit Court along with a non-profit organization called the Affordable Housing Corporation. The AHC administers the mediation. Part of the success of Lake County’s program is due to the fact that it was created after Cook County’s program, and therefore some of the pitfalls of that program have been avoided.

All three programs begin the same way. The Court provides an opportunity to go to mediation before the foreclosure process really takes off. The summons and complaint often includes a mailer alerting the homeowner to the mediation program. To attend the program in Lake County, the homeowner need only contact the AHC to start the process, whereas in Cook and Will Counties the homeowner must show up to the initial case management hearing and request that the court send the matter to mediation.

Once in the program, the homeowner is required to submit a complete application to the foreclosing bank before the actual mediation date. In Lake County, the AHC obtains the documents from the homeowner and then submits it to the bank. In Cook and Will County, it is the homeowner’s responsibility to get a complete application to the bank before mediation.

If the bank receives a complete application, they can then provide some sort of answer to the homeowner at the mediation session. Ideally, this would be a loan modification. However, it often does not work that way, and the bank may instead show up to the mediation and simply ask for more documentation and schedule a new mediation session, or may deny the homeowner for any loss mitigation and terminate the mediation session.

The mediators can send notice to the court if one party is not participating in the mediation in good faith. The court may issue an order directing the party to participate, or may even sanction the party if the conduct was awful enough. A tip for a homeowner or a homeowner’s attorney: be sure all documentation asked for from the bank has been submitted, and keep evidence of the submission. Always consider that you may have to prove that all documents were submitted as banks often “lose” loan modification documents or state they never received them.

Mediation is a great tool to work out a loss mitigation option, and for 99% of homeowners it is worthwhile to attend.

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