Illinois Foreclosure Defense Answer, Counterclaims & Loss Mitigation Package

Illinois Foreclosure Defense Answer, Counterclaims & Loss Mitigation Package

Part 1 — Pre-Defense Intake Checklist

Borrower / Client Information

Document Collection Checklist

☐ Original Note (front and back; check for endorsements / allonges)
☐ Recorded Mortgage and all assignments (pull from county Recorder of Deeds)
☐ HUD-1 / Closing Disclosure
☐ All loan modification offers, agreements, and trial period plans
☐ All correspondence from servicer (12 months back)
☐ All payment records / bank statements showing payments made
☐ All servicer escrow analyses
☐ Force-placed insurance notices
☐ Foreclosure complaint, summons, and lis pendens (735 ILCS 5/15-1503)
☐ Any prior bankruptcy filings and discharge orders
☐ Hardship documentation (medical, job loss, divorce, military, death)

Threshold IMFL Compliance Audit

☐ Was a recorded Notice of Foreclosure / lis pendens filed under 735 ILCS 5/15-1503?
☐ Does complaint contain all 12 allegations required by 735 ILCS 5/15-1504(a)?
☐ Is the Note attached as required by Ill. Sup. Ct. R. 113(b)?
☐ Is the Mortgage attached?
☐ Are all assignments in the chain of title recorded and attached?
☐ Was plaintiff the holder of the Note on the date the complaint was filed (Bayview v. Cornejo)?
☐ Was a 30-day Notice of Default / acceleration sent under the mortgage's paragraph 22?
☐ Was a CFPB Reg X early intervention notice sent under 12 C.F.R. § 1024.39?
☐ Was the borrower a "covered borrower" under CFPB Reg X requiring 120-day delinquency before referral to foreclosure (12 C.F.R. § 1024.41(f)(1))?
☐ Is the property in Cook County or Lake County (mandatory mediation programs apply)?
☐ Is the SOL (10 years under 735 ILCS 5/13-206) potentially expired based on acceleration date?

Part 2 — Verified Answer, Affirmative Defenses, and Counterclaims

Case No. [____________________]

Property Address: [________________________________]

VERIFIED ANSWER, AFFIRMATIVE DEFENSES, AND COUNTERCLAIMS

NOW COMES Defendant, [BORROWER NAME] ("Defendant" or "Borrower"), by and through undersigned counsel, and for the Defendant's Verified Answer, Affirmative Defenses, and Counterclaims to the Verified Complaint to Foreclose Mortgage filed by Plaintiff [LENDER NAME], states as follows:

Answer to Allegations Required by 735 ILCS 5/15-1504(a)

1. As to the allegations regarding the nature of the instrument (¶ 3(a) of the form complaint), Defendant: ☐ admits ☐ denies ☐ lacks sufficient knowledge to admit or deny, and therefore demands strict proof.

2. As to the date of the mortgage and parties (¶ 3(b)–(c)): ☐ admits ☐ denies ☐ lacks sufficient knowledge.

3. As to the legal description of the mortgaged real estate (¶ 3(e)): ☐ admits ☐ denies.

4. As to the statement of capacity in which Plaintiff brings the action (¶ 3(g)): DENIES and demands strict proof that Plaintiff is the legal holder of the indebtedness and the present mortgagee of record on the date the Complaint was filed.

5. As to the alleged default (¶ 3(h)): ☐ admits ☐ denies. Defendant specifically denies the amount alleged due and demands an itemized accounting consistent with 12 C.F.R. § 1026.41 (Regulation Z periodic statements).

6. As to all remaining allegations not specifically admitted, Defendant DENIES same and demands strict proof thereof.

First Affirmative Defense — Lack of Standing / Real Party in Interest

Plaintiff lacks standing to prosecute this action because Plaintiff was not the legal holder of the original promissory Note, nor the assignee of the Mortgage, on the date the Complaint was filed. See Bayview Loan Servicing, LLC v. Cornejo, 2015 IL App (3d) 140412; Rosestone Investments, LLC v. Garner, 2013 IL App (1st) 123422. Plaintiff has failed to attach (a) an original or true-and-correct copy of the Note containing a chain of endorsements terminating in Plaintiff, or (b) recorded assignments establishing that Plaintiff held the Mortgage on [__/__/____] (date of filing).

Second Affirmative Defense — Failure to Provide Paragraph 22 Notice of Default

The Mortgage at paragraph 22 (Fannie/Freddie uniform instrument) requires the lender to send a written notice of default specifying (1) the default, (2) the action required to cure, (3) a date not less than 30 days from the date of notice by which the default must be cured, and (4) that failure to cure may result in acceleration and foreclosure. Strict compliance is a condition precedent. Plaintiff failed to send a compliant paragraph 22 notice on or before [__/__/____].

Third Affirmative Defense — Failure to Comply with CFPB Regulation X (12 C.F.R. § 1024.41(f))

Plaintiff and/or its servicer referred the loan to foreclosure before the borrower was more than 120 days delinquent, in violation of 12 C.F.R. § 1024.41(f)(1), OR filed the foreclosure complaint while a complete loss mitigation application was pending in violation of 12 C.F.R. § 1024.41(g) (dual-tracking prohibition).

Fourth Affirmative Defense — Statute of Limitations (735 ILCS 5/13-206)

The promissory note was accelerated on or about [__/__/____]; the present action was filed more than ten (10) years after acceleration and is therefore barred by 735 ILCS 5/13-206.

Fifth Affirmative Defense — Payment / Tender / Reinstatement Right

Defendant tendered the full reinstatement amount on [__/__/____] within the 90-day reinstatement period afforded by 735 ILCS 5/15-1602, which tender Plaintiff wrongfully refused.

Sixth Affirmative Defense — Unclean Hands / Equitable Estoppel

Plaintiff and its servicer induced Defendant to default by representing that Defendant must be in default to qualify for a loan modification under HAMP/Flex Modification programs, then refused to evaluate the modification application in good faith.

Seventh Affirmative Defense — TILA Recoupment (15 U.S.C. § 1640(e))

Defendant asserts by way of recoupment any actual damages and statutory damages arising from material TILA disclosure violations at origination.

COUNTERCLAIMS

Count I — Violation of RESPA / Regulation X (12 U.S.C. § 2605; 12 C.F.R. § 1024.36, .41)

Defendant sent qualified written requests / Notices of Error / Requests for Information on [__/__/____]. Servicer failed to acknowledge within 5 business days and/or substantively respond within 30 business days. Defendant seeks actual damages, statutory damages up to $2,000 per violation, costs, and attorneys' fees.

Count II — Violation of Fair Debt Collection Practices Act (15 U.S.C. § 1692e, 1692f, 1692g)

Plaintiff and/or its counsel are "debt collectors" under the FDCPA as applied to mortgage foreclosure (see Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019), for limited applicability; full FDCPA coverage where collection activity exceeds nonjudicial enforcement). Defendant alleges misrepresentation of the amount, character, or legal status of the debt and seeks statutory damages, actual damages, and attorneys' fees.

Count III — Violation of Fair Credit Reporting Act (15 U.S.C. § 1681s-2(b))

After Defendant disputed the tradeline with the consumer reporting agencies on [__/__/____], Plaintiff failed to conduct a reasonable investigation and continued to report inaccurate delinquency / balance information. Defendant seeks actual and statutory damages.

Count IV — Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2)

Plaintiff engaged in unfair and deceptive practices including [__________________________________] proximately causing Defendant actual damages. Defendant seeks actual damages, punitive damages, costs, and attorneys' fees under 815 ILCS 505/10a.

WHEREFORE, Defendant prays that this Honorable Court:

a. Deny entry of a Judgment of Foreclosure and dismiss the Complaint with prejudice;
b. Enter judgment in Defendant's favor on Counts I–IV of the Counterclaims;
c. Award actual, statutory, and punitive damages, costs, and reasonable attorneys' fees;
d. Refer the matter to the [Cook County / 19th Circuit Lake County / other] Mortgage Foreclosure Mediation Program; and
e. Grant such other and further relief as the Court deems just.

Dated: [__/__/____]

VERIFICATION (735 ILCS 5/1-109)

Under penalties as provided by law pursuant to 735 ILCS 5/1-109, the undersigned certifies that the statements set forth in this instrument are true and correct, except as to matters therein stated to be on information and belief and as to such matters the undersigned certifies as aforesaid that he/she verily believes the same to be true.

_____________________________
[BORROWER NAME], Defendant

Part 3 — Motion to Dismiss for Lack of Standing (735 ILCS 5/2-619.1)

MOTION TO DISMISS PURSUANT TO 735 ILCS 5/2-619.1

Defendant moves to dismiss the Verified Complaint under 735 ILCS 5/2-619(a)(9) (affirmative matter defeating the claim) and 735 ILCS 5/2-615 (insufficient pleading), and in support states:

1. Standing must exist at the time of filing. Lebron v. Gottlieb Mem'l Hosp., 237 Ill. 2d 217 (2010); Deutsche Bank Nat'l Trust Co. v. Gilbert, 2012 IL App (2d) 120164.

2. Plaintiff failed to plead and prove holder status as of the filing date of [__/__/____]. The Note attached to the Complaint contains [no endorsement / a blank endorsement from [_______] / a special endorsement to [_______]] that does not terminate in Plaintiff.

3. Assignment(s) of Mortgage were recorded on [__/__/____], after the Complaint was filed, and therefore cannot retroactively confer standing.

4. Rule 113(b) violation. Illinois Supreme Court Rule 113(b) requires the Note to be attached to the Complaint; the document attached does not satisfy this requirement.

WHEREFORE, Defendant respectfully requests that this Court dismiss the Complaint with prejudice, or in the alternative, without prejudice with leave to amend within 28 days.

Part 4 — Loss Mitigation Application Package (CFPB Regulation X — 12 C.F.R. § 1024.41)

Cover Letter to Servicer

Date: [__/__/____]

Enclosed please find the Borrower's complete loss mitigation application. This submission triggers the protections of 12 C.F.R. § 1024.41, including (a) the duty to acknowledge receipt within five (5) business days, (b) the duty to evaluate for all available loss mitigation options within thirty (30) days of a complete application, and (c) the prohibition on moving for foreclosure judgment or order of sale while the application is pending (the "dual-tracking" prohibition).

Loss Mitigation Application — Borrower Financial Information

Hardship Statement

The Borrower's hardship is: ☐ job loss ☐ income reduction ☐ medical emergency ☐ divorce/separation ☐ death of co-borrower ☐ disaster ☐ military deployment ☐ other: [____________]

Narrative description: [____________________________________________________________]

Loss Mitigation Options Requested (rank in order of preference)

☐ Loan Modification (rate reduction, term extension, principal forbearance, principal forgiveness)
☐ Repayment Plan
☐ Forbearance Plan
☐ Short Sale
☐ Deed-in-Lieu of Foreclosure
☐ Cash-for-Keys / Relocation Assistance
☐ Reinstatement Quote (735 ILCS 5/15-1602)

Required Supporting Documentation Checklist

☐ Last two (2) pay stubs for each wage earner
☐ Last two (2) years' federal tax returns (or transcripts)
☐ Last two (2) months of bank statements (all accounts)
☐ Profit-and-loss statement (if self-employed)
☐ Award letters for SSA, SSDI, pension, child support
☐ Utility bills demonstrating occupancy
☐ Signed IRS Form 4506-C
☐ Signed Form 710 Uniform Borrower Assistance Form (Fannie/Freddie)
☐ Hardship affidavit

Part 5 — Loan Modification Request Letter

Date: [__/__/____]

Pursuant to the investor's modification waterfall (Fannie Mae Flex Modification / Freddie Mac Flex Modification / FHA-HAMP / VA Modification / USDA Modification / private investor program), Borrower requests evaluation for a permanent loan modification targeting a post-modification housing-expense-to-income ratio of approximately 31% (or other applicable target).

Requested modification terms (subject to investor waterfall):

Borrower acknowledges that any modification offer remains subject to investor approval, satisfactory completion of any trial period plan (TPP), and execution of final modification documents.

_____________________________
[BORROWER NAME]

Part 6 — Discovery Demand

NOTICE OF SERVICE OF DISCOVERY (Ill. Sup. Ct. R. 201)

To Plaintiff, please respond within 28 days under Ill. Sup. Ct. R. 213 and 214:

Interrogatories (selected)

1. State the full name, address, and capacity of every person and entity that owned, held, or claimed a beneficial interest in the Note from origination to the present.
2. State the date Plaintiff first acquired possession of the original Note.
3. State whether the Note is or was held in a securitization trust; if so, identify the trust, the PSA, the cut-off date, and the closing date.
4. Identify each loss mitigation application received from Borrower and the disposition of each.
5. Identify every employee or agent who reviewed the foreclosure referral for compliance with 12 C.F.R. § 1024.41(f).

Requests for Production (selected)

☐ The original Note (for inspection at counsel's office)
☐ All allonges and endorsements
☐ Complete loan payment history from origination
☐ All assignment instruments
☐ The Pooling and Servicing Agreement and Mortgage Loan Schedule
☐ All loss mitigation correspondence
☐ The investor's servicing guidelines applicable to this loan
☐ All communications with the borrower for the prior 36 months
☐ The complete escrow analysis history

Requests to Admit (Ill. Sup. Ct. R. 216)

1. Admit Plaintiff did not possess the original Note on [__/__/____].
2. Admit no recorded assignment named Plaintiff as assignee before [__/__/____].
3. Admit Plaintiff did not send a paragraph 22 notice complying with the Mortgage.

Part 7 — TRO / Preliminary Injunction (Reserved — Limited Use)

If sale scheduled in violation of Reg X dual-tracking or active TPP, file:

☐ Emergency Motion to Stay Sale under 735 ILCS 5/15-1508(b)
☐ Motion to Vacate Sale under 735 ILCS 5/15-1508(d-5) (if applicable)
☐ Motion to Reopen / Reconsider judgment

Required showing: (1) likelihood of success on merits; (2) irreparable harm (loss of primary residence is per se irreparable); (3) no adequate remedy at law; (4) balance of equities; (5) public interest.

Part 8 — Bankruptcy Referral Checklist

☐ Calculate "means test" — Form 122A-1; compare household income to Illinois median
☐ Confirm 180-day prior filing rule (11 U.S.C. § 109(g)) — no dismissal for willful failure to comply within 180 days
☐ Confirm credit counseling completed within 180 days pre-filing (11 U.S.C. § 109(h))
☐ Determine chapter:
☐ Chapter 13 — preferred for foreclosure defense; allows 3–5 year cure of arrears under § 1322(b)(5); strips wholly-unsecured junior mortgages
☐ Chapter 7 — for surrender of property or where no equity / no reorganization needed
☐ Chapter 11 (Subchapter V) — for small business / investment property
☐ Verify automatic stay protection (11 U.S.C. § 362(a)) — sale scheduled within filing window stayed
☐ Verify no prior § 362(c)(3) or § 362(c)(4) stay limitation (one filing in prior year → 30-day stay; two filings → no stay)
☐ Calculate Chapter 13 plan payment to cure arrears over 60 months
☐ Schedule property at fair market value to assess avoidability of junior liens
☐ Refer to: [Bankruptcy attorney name / firm / phone]

Part 9 — Critical Illinois Deadlines Summary

Sources and References

• Illinois Compiled Statutes, Chapter 735, Act 5, Article XV (IMFL): https://www.ilga.gov/legislation/ilcs/
• Cook County Circuit Court Mortgage Foreclosure Mediation Program (CCCH 0102, CCCH 0105): https://www.cookcountycourtil.gov/
• 19th Judicial Circuit (Lake County) Mortgage Foreclosure Mediation: https://19thcircuitcourt.state.il.us/1421/
• CFPB Mortgage Servicing Rules — Regulation X (12 C.F.R. Part 1024): https://www.consumerfinance.gov/rules-policy/regulations/1024/
• Illinois Supreme Court Rule 113 (mortgage foreclosure documentation): https://courts.illinois.gov/
• Bayview Loan Servicing, LLC v. Cornejo, 2015 IL App (3d) 140412
• Deutsche Bank Nat'l Trust Co. v. Roongseang, 2019 IL App (1st) 180948