Shouldn’t the banks be forced to have all their ducks in a row before foreclosing? The Illinois Court of Appeals for the Second District thinks so. When foreclosure defense attorney, Dan Khwaja, sent me a message on Facebook about the Gilbert holding I suspected there would be large fallout. Khwaja: “While most of the plaintiff’s attorneys for the banks were initially aware of the Gilbert decision, none of the foreclosure defense attorneys knew about Gilbert.” Why is this case such a big deal? Khwaja said, “My personal opinion is while this is a game changer in DuPage County, it may not have as strong of an effect in Cook County where they largely ignore many of these informalities. I think Gilbert will require reversals in the other counties to get these judges in lock step.”
The problem according to attorney Khwaja: “How can a plaintiff, such as GMAC Mortgage commence an action in foreclosure where a note is endorsed to another entity, Fannie Mae, who has the rights of foreclosure as evident by the loan documentation?”
The word on the street among many lawyers and homeowners is that the courts are pro-bank and let them get away with sloppy documentation, when banks seek to prove their case under the Illinois Mortgage Foreclosure Law (IMFL). Shouldn’t the banks be forced to prove their foreclosure case, by establishing they have a legal right to foreclose in the first place?
Augustine: Dan, what usually happens when the bank has incorrect documentation?
Khwaja: The plaintiff will often move to amend the Complaint, and subsequently “modify” the promissory note to reflect a date before the filing, with additional endorsements added to the promissory note to transfer title of the underlying debt. In a mortgage foreclosure action, the keys to foreclosure are being the “holder” of the underlying debt, this enables you the right to foreclose on someone’s property, and unless you are the holder, you have no verifiable right.
Dan Khwaja explains the holding in the Gilbert[i] case:
Mortgages involve endorsements. An endorsement on the promissory note in either specific (pay to the order) to the named plaintiff, or in blank. The endorsements are essentially an assignment or transfer of the loan moving title from one entity to another. The entity that is the “holder[ii]” of the note is the entity that has rights to foreclose.
In Illinois, A plaintiff does not have standing to commence an action in mortgage foreclosure if it does not have all loan documentation at the time of filing the complaint. Khwaja said, “What has often been the case in probably 80% of the cases I have seen is that the Plaintiff in fact did not have the requisite documents at the time of filing, i.e., the proper endorsement mentioned above.
Augustine: What is the effect of this decision in Gilbert?
Khwaja: Proper loan documentation at the time of filing is necessary to sustain a cause of action, and a Plaintiff will no longer have the ability to amend their Complaint to remedy deficiencies.
Augustine: What is the atmosphere in courtrooms following this decision?
Khwaja: I was the first attorney likely to raise this case, and a number of attorneys and even a couple pro se’s[iii] followed my lead that afternoon, and thanked me in the hallway for the information. One pro se was able to withstand a motion for summary judgment based on the Gilbert’s case, as it was clear from his case that the complaint had been amended on two occasions, to incorporate loan documents that did not exist at the time of filing. Without the Gilbert’s case, the motion for summary judgment would likely have been entered [against the pro se litigant]. That was the FIRST time I saw Judge Gibson rule the other way.
The amended complaint to cure these deficiencies will no longer stand, at least in DuPage County.
About Dan and his firm: Dan Khwaja is an attorney at Joseph P. McCaffery & Associates in Aurora. The firm has represented hundreds of mortgage foreclosure clients representing tens of millions of dollars in properties. There are Federal laws and state laws that protect consumers from unfair debt collection practices. Infractions of those laws actually create legal and financial liability to the collector that can be used to reduce debt owed. Banks make mistakes too, and those mistakes can help you in a mortgage foreclosure case.
[i] Deutsche Bank National Trust Company v. James L. Gilbert. 2012 IL App (2d) 120164, filed In The Appellate Court of Illinois Second District on September 25, 2012.
[ii] The term holder n. a general term for anyone in possession of property, but usually referring to anyone holding a promissory note, check, bond or other paper, either handed to the holder (delivery) or signed over by endorsement, for which he/she/it is entitled to receive payment as stated in the document.
[iii] Pro Se refers to representing yourself in court alone, and not by an attorney.