Filing Foreclosures Against Deceased Borrowers

When filing a foreclosure suit against a deceased borrower, banks have generally filed in rem actions; in other words, banks have assumed that the foreclosure suit is based on the parcel of real estate for which mortgage payments have not been made. As a result, many banks have obtained default judgments against deceased borrowers, simply because the mortgagor is deceased and was thus never served.

In ABN-AMRO Mortgage Group, Inc. v. McGawhan, No. 107954 2010 WL 2222123 (Ill. Sup. Ct.), the Illinois Supreme Court rendered a decision that changed how banks must file foreclosure suits. The court determined that a foreclosure suit should not be an in rem proceeding. Rather, it should be a quasi in rem proceeding. In other words, the suit must be brought against an actual person, not just a piece of land. In lieu of the deceased, the deceased’s personal representative must be named. If the deceased’s personal representative is named in the suit, he must be served, and therefore, he will receive notice of the suit.

The court’s decision indirectly assists people in keeping their homes. If mortgage payments stopped after the borrower died, the banks will have to notify the deceased’s personal representive. As a result of this notice, the deceased’s heirs will have an opportunity to catch up on the payments (although the bank may not allow this if their borrower is no longer alive). If payments continued after the borrower died, but the family member who was making the payments eventually stops for any reason, the banks will have to notify the deceased’s personal representative, who may then have an opportunity to rectify the situation. Either way, the Illinois Supreme Court’s decision increases the chances that the deceased’s loved ones will be able to keep their home.