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No Acceleration Notice, No Foreclosure

By Erin Showerman.

Foreclosure defenses attorneys love to argue that a lender’s foreclosure action is barred because the lender “failed to satisfy a condition precedent” claiming the lender failed to send  a Grace Period Notice or a notice of acceleration to the borrower prior to filing the foreclosure action. With the sunset of the Grace Period Notice requirement of the Illinois Mortgage Foreclosure Law a failure to satisfy a condition precedent defense can now only be raised if there is a failure to satisfy a contractual condition precedent contained within the mortgage.

In Cathay Bank v. Accetturo, the appellate court found that a mortgage clause requiring that notice be given to the borrower before accelerating the loan was a condition precedent that must be satisfied before a foreclosure action can be filed. Cathay Bank v. Accetturo, 2016 IL App (1st) 152783, ¶37. The court further found that Cathay Bank failed to give Accetturo the required notice. Therefore, the Bank had no right to file its foreclosure action. Id. at ¶51. As a result the appellate court vacated the order approving the judicial sale and the judgment of foreclosure. Id.

The court revisited its decision in CitiMortgage, Inc. v. Bukowski where the court had stricken an affirmative defense of failure of a condition precedent after the borrowers argued that they had not received the notice. CitiMortgage v. Bukowski, 2015 IL App (1st) 140780, ¶16. The appellate court distinguished Bukowski from Accetturo because Accetturo instead argued that the notice sent by Cathay Bank did not comply with the notice requirements outlined in the mortgage. The court agreed with Accetturo finding that even though Cathay Bank sent 5 letters to Accetturo prior to filing its foreclosure action none of the letters contained the information required by the notice clause of the mortgage. The notice clause required Cathay Bank to specify (a) the default; (b) the action required to cure the default; (c) a date not less than 30 days later to cure the default; (d) that failure to cure the default would result in acceleration of the loan and foreclosure; and (e) that the borrower had a right to reinstate the loan and assert defenses.

It is standard for residential mortgages to contain a notice clause like the one found in Accetturo and commercial mortgages often also contain a similar pre-foreclosure notice provision. When we discussed CitiMortgage, Inc. v. Bukowski in April 2015 it was recommended that the best counterargument to a claim that the lender failed to send a proper notice of acceleration is to produce a copy of the notice that was sent with a detailed affidavit attesting to how and when it was sent. The Accetturo decision makes it clear that in addition to keeping good records regarding the sending of a pre-foreclosure notice lenders should additionally review the notice requirements contained within the mortgage to ensure that the notice that is sent contains all the required information.

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