Illinois Appellate Court Holds November 2020 Foreclosure Sale Was Not Improper in Light of COVID Moratorium Banner Image

Banking, Title Insurance, and Real Estate Litigation Blog

Illinois Appellate Court Holds November 2020 Foreclosure Sale Was Not Improper in Light of COVID Moratorium

May 17, 2022

The Illinois Court of Appeals recently found that Fannie Mae’s COVID-related instruction for servicers to suspend foreclosure related activities beginning in March 2020 was not grounds to vacate a February 2020 foreclosure judgment or a November 2020 foreclosure sale. See Bayview Loan Servicing, LLC v. Starks, 2022 IL App (2d) 210056, ¶ 3 (Ill. App. Ct. May 5, 2022).  In the case, defendant defaulted on her mortgage with plaintiff.  In February 2020, the trial court entered an order of default and a foreclosure judgment, and defendant’s redemption period expired in May 2020.  In July 2020, the trial court entered an order continuing the case to July 23, 2021 and citing “Other: GSE moratorium hold” as the case status.  Nonetheless, the property was sold at a judicial sale in November 2020.  In December 2020, defendant filed a motion to vacate the default and the sale, and seeking to assert an answer and counterclaims alleging intentional torts committed by plaintiff.  The trial court denied the motion, but expressly stated that the decision did not bar defendant from bringing her claims in a separate action.  Defendant appealed, arguing that the denial unjustly prohibited her from litigating her claims against plaintiff and that the sale was improper in light of Fannie Mae’s March 2020 Lender Letter that instructed loan services to suspend “foreclosure-related activities” due to COVID.

On appeal, the Appellate Court affirmed.  First, the Court found that although claims “related to the mortgage or the subject property” that were not raised in a foreclosure action would be barred in future actions, defendant’s proposed counterclaim alleged intentional torts that would not be barred.  More importantly, the trial court expressly stated that “[t]his ruling is without prejudice as to Defendant filing any separate claims that she may seek to file and does not operate as a bar  to any such filings.”  Second, the Court found that the trial court was not required to halt the foreclosure process pursuant to Fannie Mae’s Lender Letter, noting that the final judgment was entered in February 2020:  “All of these events occurred before Fannie Mae disseminated its lender letter. While [defendant] may have hoped that the case would be on hold following the trial court's July 24, 2020, order continuing the case to July 23, 2021, which cited the ‘GSE Moratorium hold’ as the reason, her expectations do not render the court's actions arbitrary or unreasonable. [Defendant] acquiesced in the foreclosure of her home when she declined to file an answer.”  Finally, the Court noted that there was no evidence defendant raised this argument to the trial court and accordingly forfeited this argument on appeal.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

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Michael R. O'Donnell

Michael R. O'Donnell
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​Desiree McDonald

​Desiree McDonald
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