The opinion
ILLINOIS OFFICIAL REPORTS
Appellate Court
CitiMortgage, Inc. v. Johnson, 2013 IL App (2d) 120719
Appellate Court CITIMORTGAGE, INC., Plaintiff-Appellee, v. QUENTIN B. JOHNSON
Caption and TONYA M. WHITAKER, Defendants-Appellants (The Lindent
Estates Homeowners Association, Mortgage Electronic Registration
Systems, Inc., Capital One Home Loans, LLC, Unknown Owners, and
Nonrecord Claimants, Defendants).
District & No. Second District
Docket No. 2-12-0719
Filed July 26, 2013
Held The order confirming the foreclosure sale of defendants’ property was
(Note: This syllabus vacated pursuant to section 15-1508(d-5) of the Code of Civil Procedure
constitutes no part of based on plaintiff’s violation of the Home Affordable Modification
the opinion of the court Program (HAMP) guidelines, and the cause was remanded to allow
but has been prepared plaintiff to properly consider defendants’ HAMP application, but the trial
by the Reporter of court did not abuse its discretion in refusing to impose sanctions under
Decisions for the Supreme Court Rule 137 in the absence of any allegations that plaintiff
convenience of the violated any established authority.
reader.)
Decision Under Appeal from the Circuit Court of Kane County, No. 09-CH-2986; the
Review Hon. Leonard J. Wojtecki, Judge, presiding.
Judgment Affirmed in part and reversed in part; cause remanded.
Counsel on Ronald A. Almiron, of Raiz Almiron LLC, of Naperville, for appellants.
Appeal
Rosa M. Tumialan, of Dykema Gossett PLLC, of Chicago, and Melissa
C. Brown, of Dykema Gossett PLLC, of Grand Rapids, Michigan, for
appellee.
Panel JUSTICE SPENCE delivered the judgment of the court, with opinion.
Justices Hutchinson and Birkett concurred in the judgment and opinion.
OPINION
¶1 Plaintiff, CitiMortgage, Inc., sought to foreclose on defendants Quentin B. Johnson and
Tonya M. Whitaker’s property, and the circuit court of Kane County granted summary
judgment in its favor. Plaintiff proceeded to a sheriff’s sale of the property, and, after the sale
but before its confirmation, defendants objected to the confirmation, arguing, in pertinent
part, that the sale should be vacated because plaintiff violated section 15-1508(d-5) of the
Code of Civil Procedure (Code) (735 ILCS 5/15-1508(d-5) (West 2010)). The trial court
denied defendants’ objection and their subsequent motion for reconsideration, and it
confirmed the sale of the property. Defendants appeal, arguing that the trial court erred in
denying their objection to the confirmation of the sale and in denying their motion for
sanctions against plaintiff. For the following reasons, we reverse the trial court’s denial of
defendants’ objection to the confirmation of the sale and affirm its denial of defendants’
motion for sanctions.
¶2 I. BACKGROUND
¶3 Plaintiff filed its complaint on August 20, 2009, seeking to foreclose a mortgage secured
by real property at 3358 Moraine Drive in Aurora, Illinois (the Property). Defendants owned
the Property. They filed pro se appearances and an answer to the complaint on November 20,
2009. Plaintiff filed its motion for summary judgment on February 4, 2010, and defendants
responded on February 25, 2010. Defendants’ pro se response was limited to one page.
Defendants raised three contentions: that (1) plaintiff “failed to comply with the FHA rules
regarding pre-foreclosure [sic] procedures,” (2) the original mortgage holder engaged in
potentially unfair lending practices, and (3) more information was necessary to determine the
total amount owed. Plaintiff filed its reply on March 11, 2010, arguing that defendants’
response was unsupported by facts or affidavit. The trial court agreed, entering an order on
March 18, 2010, granting plaintiff’s motion for summary judgment. The trial court also
entered that day a judgment of foreclosure and sale in favor of plaintiff.
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¶4 Defendants moved to reconsider the summary judgment ruling on June 11, 2010, arguing
that plaintiff had failed to supply the court with the original signed loan documents and that
plaintiff was not legally authorized to foreclose on defendants’ mortgage, because only the
holder of the note is so authorized. Defendants, still proceeding pro se, also filed an
emergency motion to vacate judgment on June 16, 2010, reiterating plaintiff’s lack of legal
standing to bring this suit. On July 14, 2010, defendants filed a hardship affidavit seeking a
loan modification under the Making Home Affordable Program (MHA) (see 12 U.S.C.
§ 5219 (Supp. III 2010)) through the Home Affordable Modification Program (HAMP)
(Handbook for Servicers of Non-GSE Mortgages (Dec. 13, 2012), available at
http://www.makinghomeaffordable.gov/for-partners/understanding-guidelines/
Documents/mhahandbook_41.pdf (last visited June 21, 2013) (hereinafter HAMP
Guidelines)). On August 2, 2010, plaintiff responded to defendants’ motion to vacate,
asserting that its attachment of a copy of the mortgage and the note to its complaint
established its standing. In defendants’ reply, they for the first time argued that plaintiff failed
to follow homeowner protection guidelines under section 15-1502.5 of the Code (735 ILCS
5/15-1502.5 (West 2010)). The trial court denied defendants’ motion to vacate on September
2, 2010.
¶5 The Property was sold at a sheriff’s sale on September 23, 2010. Defendants objected in
writing to the confirmation of the sale, reiterating that plaintiff had violated section 15-
1502.5 of the Code and attaching their hardship affidavit. On October 4, 2010, the court
heard plaintiff’s motion to confirm the sale. Defendants orally objected, and the court denied
their oral objection. However, the court did not confirm the sale. Instead, the court directed
defendants to file a written motion opposing confirmation under section 15-1508(d-5) of the
Code (735 ILCS 5/15-1508(d-5) (West 2010)), evidencing any application for a loan
modification under the MHA/HAMP and specifying any “material violations” of that
program’s requirements. Defendants filed their motion on October 15, 2010.
¶6 In their motion to deny confirmation of the sheriff’s sale, defendants alleged violations
of section 15-1502.5 of the Code (735 ILCS 5/15-1502.5 (West 2010)), including failure to
postpone the sheriff’s sale after defendants submitted a HAMP application on July 14, 2010,
and lack of communication from plaintiff regarding their application, and attached their
HAMP application. Plaintiff responded by pointing out that under section 15-1508(d-5),
defendants were required to show that they submitted a HAMP application and that plaintiff
materially violated the HAMP’s requirements for proceeding to a judicial sale. However,
plaintiff argued, defendants had shown only the submission of the application, not any
material violations of the HAMP. Plaintiff had denied defendants’ HAMP application on
September 17, 2010, on the basis of a negative net present value (NPV) of a loan
modification. Plaintiff attached a letter dated September 22, 2010, from plaintiff to
defendants denying their application. Defendants’ reply argued that plaintiff violated federal
guidelines under the MHA, including by providing inadequate notice before the sheriff’s
sale.
¶7 On December 28, 2010, the trial court granted defendants’ motion to deny confirmation
of the sale and set aside the sale. However, the court further ordered that the redemption
period had passed and the previously entered judgment remained in full force and effect, so
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plaintiff could proceed to sale with proper issuance of new notice. That is what plaintiff did,
issuing new notice for a sheriff’s sale scheduled for July 28, 2011, although later canceling
that sale and rescheduling it for November 17, 2011.
¶8 Meanwhile, on July 19, 2011, defendants filed a voluntary petition for chapter 7
bankruptcy (11 U.S.C. § 701 et seq. (2006)) in the Northern District of Illinois.1 Defendants
also filed a second HAMP application on October 21, 2011, requesting a loan modification.
On the second HAMP application, defendants indicated that their bankruptcy had been
discharged. Defendants faxed a copy of their application to plaintiff on November 3.
¶9 The rescheduled sheriff’s sale, for which plaintiff sent defendants notice via mail on
October 24, 2011, took place on November 17, 2011. On November 28, plaintiff moved to
confirm the sale and defendants moved to deny confirmation. In their motion, defendants
claimed that plaintiff violated section 15-1508(d-5) of the Code (735 ILCS 5/15-1508(d-5)
(West 2010)) by materially violating the HAMP guidelines by failing to process the
application as required, failing to postpone the sale, and failing to provide proper notice.2
Plaintiff filed a response on January 31, 2012, arguing that: (1) it did not violate section 5-
1508(d-5), because defendants did not identify a sufficient change in circumstance, as
necessary for a successive HAMP application, and (2) it had unrefuted evidence that it served
proper notice on defendants. Plaintiff further argued that, even if there had been a sufficient
change in circumstance, defendants still had not identified a material violation of the HAMP
guidelines. Defendants’ reply did not identify a change in circumstance. The reply mostly
restated arguments made in the initial motion and in prior motions in the course of the
litigation.
¶ 10 On March 29, 2012, the trial court denied defendants’ motion to deny confirmation of
the sale. The order stated that notice for the sale was proper and that no issues regarding
violations of the HAMP guidelines precluded confirmation of the sale. The court granted
plaintiff’s motion to confirm, approving the sale and distribution of the Property.
¶ 11 On April 17, 2012, defendants, now represented by counsel, filed a motion to reconsider
the March 29 order. Defendants argued that plaintiff violated section 15-1508(d-5) of the
Code when it let the sheriff’s sale proceed despite defendants’ October 21, 2011, HAMP
application, because (1) defendants’ discharge from bankruptcy on October 27, 2011, was
a sufficient change in circumstance because the elimination of debt would have changed the
outcome of the HAMP application, and (2) because defendants submitted a timely
application, it was not yet the province of the court to determine the merits of the HAMP
application, but only to stop the November 17 sale. Defendants argued that plaintiff did not
assert that it did not timely receive their HAMP application but rather that plaintiff chose to
ignore the application. Defendants argued that plaintiff’s reason for denying their
1
Defendants do not attach a copy of their bankruptcy petition or cite to the record to support
their filing. However, plaintiff concedes the filing, and we proceed with this disposition assuming
that defendants did file for bankruptcy as related in their brief.
2
Defendants claim that they never received notice of the sheriff’s sale and found out that the
sale had occurred only from a realtor who visited the home on November 22, 2011.
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application–that the loan had been paid off as of November 21, 2011–was tantamount to
telling defendants “too bad,” that plaintiff would not “waste time” considering their
application when it had already sold their property. Defendants further argued for sanctions
against plaintiff under Illinois Supreme Court Rule 137 (eff. Jan. 4, 2013) because plaintiff
knew that it should not have proceeded with the sale or sought confirmation of the sale when
in receipt of defendants’ application, yet did so anyway, requiring defendants to hire
attorneys and causing them financial hardship. Defendants also filed a motion to stay
disposition of the Property.
¶ 12 Plaintiff argued in its response that a second HAMP application in and of itself did not
require a delay of the sheriff’s sale and that a discharge from bankruptcy was not a sufficient
change in circumstance for a successive application. Furthermore, it argued that whether
defendants received certain documents was immaterial because the March 29 order was
based on a finding of no material violation of HAMP guidelines, and nonreceipt of
documents would not change that analysis. Finally, it denied that sanctions were warranted.
Defendants reiterated their original arguments in their reply, arguing that plaintiff’s assertion
that there was no sufficient change in circumstance was speculative and that plaintiff failed
to follow HAMP guidelines by not properly considering their second HAMP application.
¶ 13 On June 14, 2012, the trial court held a hearing regarding defendants’ motions to
reconsider the March 29 order, impose sanctions, and stay disposition of the Property. It
denied all motions.
¶ 14 Defendants timely appealed.
¶ 15 II. ANALYSIS
¶ 16 A. Standard of Review
¶ 17 Defendants contend that the proper standard of review is de novo because their motion
to reconsider challenged the trial court’s application of law in confirming the sale of the
Property. See JP Morgan Chase Bank v. Fankhauser, 383 Ill. App. 3d 254, 259 (2008)
(“[W]here a motion to reconsider raises a question of whether the trial court erred in its
previous application of existing law, we review de novo the trial court’s determinations of
legal issues.”). However, plaintiff disagrees, instead arguing for an abuse-of-discretion
standard, citing Household Bank, FSB v. Lewis, 229 Ill. 2d 173, 178 (2008) (“A court’s
decision to confirm or reject a judicial sale will not be disturbed absent an abuse of ***
discretion.”).
¶ 18 Here, defendants moved to reconsider the trial court’s confirmation of the sale.
Defendants argue on appeal that the trial court should not have confirmed the sale and should
have vacated the sale. We agree with plaintiff that, under Lewis, the standard of review for
whether the trial court correctly confirmed the sale is the abuse-of-discretion standard.
However, we note that a trial court abuses its discretion when its ruling rests on an error of
law. Peeples v. Village of Johnsburg, 403 Ill. App. 3d 333, 339 (2010).
¶ 19 As to the denial of Rule 137 sanctions, defendants do not cite a standard of review, but
as plaintiff correctly cites, the standard of review is also for an abuse of discretion. Nelson
v. Chicago Park District, 408 Ill. App. 3d 53, 67 (2011); Medical Alliances, LLC v. Health
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Care Service Corp., 371 Ill. App. 3d 755, 756 (2007).
¶ 20 B. Order Approving and Confirming Sale and Distribution of the Property
¶ 21 Defendants’ appeal centers around the trial court’s March 29, 2012, order approving and
confirming the sale and distribution of the Property. Defendants advance two primary
arguments for why the trial court erred by entering the order and for why the sale should be
set aside: (1) the trial court misapprehended the facts regarding defendants’ HAMP
application, and (2) the court misapplied the law by confirming the sale despite material
violations of Illinois law (735 ILCS 5/15-1508(d-5) (West 2010)) and the HAMP guidelines.
¶ 22 Defendants argue that, had the trial court considered the following facts, the March 29
order would not have been entered. Their bankruptcy and subsequent discharge was a change
in circumstances for purposes of the HAMP guidelines. Plaintiff admitted that defendants
sought a loan modification under the HAMP on October 21, 2011, and that it even had a
homeowner support specialist send defendants a letter offering assistance. Plaintiff
corresponded with defendants on November 3, 2011, requesting documents in support of the
HAMP application, which defendants faxed plaintiff that same day. By receiving defendants’
timely HAMP application, plaintiff had actual notice of defendants’ application on
November 3. Yet, despite receipt of defendants’ application, plaintiff proceeded with the
sheriff’s sale and sought confirmation of the sale. The sale should not have proceeded for at
least two reasons: improper notice to defendants and a material violation of HAMP guideline
3.3. See HAMP Guidelines, supra, ch. II, § 3.3.
¶ 23 As to notice, defendants argue that notice was improper under section 15-1507 of the
Code (735 ILCS 5/15-1507 (West 2010)) because defendants did not receive notice before
the sale, the notice proffered by plaintiff did not have a file-stamp, and the notice in the trial
court file was not file-stamped until November 28, 2011, which was 11 days after the sale.
As to the HAMP violations, HAMP guideline 3.3 requires that “[w]hen a borrower submits
a request for HAMP consideration after a foreclosure sale date has been scheduled and the
request is received no later than midnight of the seventh business day prior to the foreclosure
sale date (Deadline), the servicer must suspend the sale as necessary to evaluate the borrower
for HAMP.” HAMP Guidelines, supra, ch. II, § 3.3. Here, plaintiff had at least 14 days’
notice of defendants’ HAMP application prior to the date scheduled for the sale but did not
stop the sale. The issue, therefore, is plaintiff’s failure to suspend the sale upon receipt of
defendants’ HAMP application, not whether defendants’ discharge from bankruptcy was a
sufficient change in circumstance (although defendants maintain that it was).
¶ 24 Turning from plaintiff’s conduct to the trial court’s application of law, defendants argue
that the court misapplied section 15-1508(d-5) (735 ILCS 5/15-1508(d-5) (West 2010)) and
the HAMP guidelines when it confirmed the sheriff’s sale. Section 15-1508(d-5) reads:
“The court that entered the judgment shall set aside a sale held pursuant to Section 15-
1507, upon motion of the mortgagor at any time prior to the confirmation of the sale, if
the mortgagor proves by a preponderance of the evidence that (i) the mortgagor has
applied for assistance under the Making Home Affordable Program established by the
United States Department of the Treasury pursuant to the Emergency Economic
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Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act
of 2009, and (ii) the mortgaged real estate was sold in material violation of the
program’s requirements for proceeding to a judicial sale.” (Emphasis added.) 735 ILCS
5/15-1508(d-5) (West 2010).
Defendants argue that plaintiff materially violated HAMP guideline 3.3 because it was aware
of defendants’ timely HAMP application yet did not act on it by stalling the sheriff’s sale.
Moreover, HAMP guideline 1.2 provides that a loan that was initially rejected for, inter alia,
a negative NPV “may be reconsidered for HAMP at a future time if the borrower experiences
a change in circumstance.” HAMP Guidelines, supra, ch. II, § 1.2. Defendants contend that
their discharge from bankruptcy would have led to a change in their credit scores, thus
affecting an NPV analysis–the type of analysis that led to the rejection of their first HAMP
application. This was a change in circumstance that should have allowed for HAMP
reconsideration, and all that was necessary to halt the sale was the reconsideration, not the
outcome of the reconsideration. Therefore, because defendants made a timely application for
reconsideration after experiencing a change in circumstance, plaintiff violated HAMP
guideline 3.3 by proceeding with the sale despite actual notice of the timely application, and
the trial court should have set aside the sale pursuant to section 15-1508(d-5) (735 ILCS
5/15-1508(d-5) (West 2010)).
¶ 25 Plaintiff responds to defendants’ arguments as follows. As a threshold matter, defendants
have the burden of developing a sufficient record for review. However, with regard to
whether defendants’ second HAMP application represented a change in circumstance such
that reconsideration was required under HAMP guideline 1.2, there is little
evidence–defendants present only their applications from July 14, 2010, and November 3,
2011, and, of the two applications, only the November 2011 application contained
defendants’ financial information. Therefore, defendants’ argument that plaintiff materially
violated HAMP guidelines and thus the trial court should have set aside the sale pursuant to
section 15-1508(d-5) (735 ILCS 5/15-1508(d-5) (West 2010)) should be deemed forfeited
under Illinois Supreme Court Rule 341(h)(7) (eff. Feb. 6, 2013), because there is an
insufficient record to support the argument. We find, however, that there is a sufficient
record to address the issues presented on appeal, and we therefore address the substance of
defendants’ arguments.
¶ 26 Plaintiff next argues that defendants’ arguments fail on their merits. Although plaintiff
concedes that defendants’ second HAMP application qualified for reconsideration, qualifying
is not synonymous with experiencing a change in circumstance that requires reconsideration.
Plaintiff focuses on the lack of evidence–specifically defendants’ failure to demonstrate a
change in their financial circumstances–to establish a change in circumstance that would
have affected their NPV calculation, which was the basis for denial of their first HAMP
application. A postbankruptcy status, standing alone, is not a change in circumstance under
the HAMP guidelines. Although successive HAMP applications are possible and anticipated
under the guidelines, the mere filing of a successive application does not trigger MHA
protections; a change in circumstance is a necessary condition for reconsideration, and the
change in circumstance must relate to the reason the original application was denied, here,
the negative NPV calculation. Without financial data from both the first and second
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applications, defendants have not demonstrated a change in their financial circumstances that
could have affected their NPV calculation. Moreover, defendants cite no support in the
record or authority for the proposition that a bankruptcy discharge constitutes a change in
circumstance necessary for reconsideration under the HAMP guidelines.
¶ 27 Moreover, plaintiff argues, defendants’ arguments lead to an absurd result–that is, if all
a defendants has to do to delay proceedings is file a HAMP application without an
accompanying change in circumstance, then a defendant could unilaterally delay a sheriff’s
sale into perpetuity. Plaintiff argues that the purpose of the HAMP guidelines and the MHA
is to provide assistance to homeowners to reduce monthly payments so that they may keep
their homes, not to let homeowners recycle denied applications to stave off inevitable sales.
¶ 28 Plaintiff also argues that defendants’ contention that they did not receive proper notice
of the sheriff’s sale fails. However, plaintiff offers little in the way of support for this
argument, other than asserting that “defendants offer nothing, save a passing reference in
their brief, to compel a different conclusion” and that, since defendants “knew to submit”
their second HAMP application on November 3, 2011–two weeks before the date set for the
sheriff’s sale–they must have been aware of the sale, implying that they had notice.
¶ 29 Defendants reply by arguing that there is no difference between qualifying for
consideration and reconsideration of a HAMP application. What is important, they argue, is
that they submitted a timely HAMP application following a discharge from bankruptcy, more
than seven days before the scheduled sheriff’s sale. Following a developing common theme
here–one that we find cuts against both parties, at least at times–defendants contend that
plaintiff lacks supporting authority for its positions.
¶ 30 Defendants also cite HAMP guideline 1.2, which says that a borrower who has received
a chapter 7 bankruptcy discharge in a case involving a first lien mortgage and who did not
reaffirm the mortgage debt under applicable law is eligible for HAMP. HAMP Guidelines,
supra, ch. II, § 1.2. Defendants argue that this guideline provides that a bankruptcy discharge
is, in fact, a change in circumstance that allowed them to submit a successive HAMP
application. Furthermore, the HAMP guidelines do not require a material change in
circumstance; materiality, according to defendants, is relevant only to plaintiff’s violation
of the HAMP guidelines, i.e., the requirement under section 15-1508(d-5) of the Code (735
ILCS 5/15-1508(d-5) (West 2010)) that the sale proceeded in material violation of the MHA,
and thus the HAMP guidelines. Moreover, defendants deny that consideration of their second
HAMP application–following a discharge from bankruptcy that would affect their credit
score, thereby possibly altering an NPV analysis–would lead to an absurd result of endless,
successive filings to delay a sheriff’s sale. Rather, they merely submitted a second
application after circumstances changed in such a way that they might qualify under the
MHA to modify and pay down their loan.
¶ 31 We begin our analysis by recognizing that any relief here stemming from violations of
HAMP guidelines must derive from section 15-1508(d-5).3 For the following reasons, we
3
Defendants do not explicitly argue for relief stemming from HAMP violations under
another section of Illinois law, although they do argue that notice was improper under section 15-
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find that the trial court should have granted defendants’ motion to deny confirmation of the
sale under section 15-1508(d-5) (735 ILCS 5/15-1508(d-5) (West 2010)).
¶ 32 We agree with defendants that the initial, operative question is whether they qualified for
reconsideration and disagree with plaintiff that qualifying for reconsideration is somehow
a wholly separate inquiry from experiencing a change in circumstance. Per HAMP guideline
1.2, a mortgage loan may be reconsidered under HAMP if, after meeting basic criteria but
being disqualified due to a negative NPV–as was defendants’ first application in July
2010–the borrower experiences a change in circumstance. HAMP Guidelines, supra, ch. II,
§ 1.2; see also Home Affordable Modification Program–Borrower Outreach and
Communication Supplemental Directive 10-02, at 9 (Mar. 24, 2010), available at
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer /sd1002.pdf (last visited
June 21, 2013). However, guideline 1.2 does not end there. It continues, “Servicers must
have an internal written policy which defines what the servicer considers a change in
circumstance and outlines when a borrower will be reevaluated for HAMP.” HAMP
Guidelines, supra, ch. II, § 1.2. Furthermore, although a servicer’s policy may limit the
number of reconsiderations, the guidelines require the servicer to allow at least one
reconsideration, and this was defendants’ first such request for reconsideration. HAMP
Guidelines, supra, ch. II, § 1.2. Conspicuously missing from plaintiff’s brief is any reference
to its own internal policy that would define or limit what it considers a change in
circumstance. Given that plaintiff has not ruled out a bankruptcy discharge as a change in
circumstance per its policy, and given that a borrower’s credit score is a factor input in an
NPV calculation (see HAMP Guidelines, supra, ch. II, §§ 2.2, 7.6.1, 7.8), it stands to reason
that a bankruptcy discharge could be a change in a borrower’s circumstance that would affect
the outcome of the very analysis that was the basis for their first application’s denial: a
negative NPV.4 Whether a discharge from bankruptcy would lead to a positive NPV, or to
even a more negative NPV, we do not know. But that is the point. The purpose of HAMP,
and the purpose of a reconsideration after a change in circumstance, is to evaluate the status
of borrowers to determine if they qualify under the MHA for loan assistance or modification
and thus to prevent avoidable foreclosures after the collapse of the housing market in 2008.
See Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 554 (7th Cir. 2012). Bankruptcy affects
a credit score, which in turn affects an NPV analysis, which in turn affects whether a
borrower will receive assistance under HAMP. We find that, absent an internal policy to the
contrary, a borrower’s discharge from chapter 7 bankruptcy is a change in circumstance that
1508(b). We address notice after addressing the alleged HAMP violations.
4
Defendants argue that HAMP guideline 1.2 supports that a discharge from chapter 7
bankruptcy is a change in circumstance. The portion of the guideline they cite states that
“[b]orrowers who have received a Chapter 7 bankruptcy discharge in a case involving a first lien
mortgage *** are eligible for HAMP.” HAMP Guidelines, supra, ch. II, § 1.2. However, this
provision merely affirms that a borrower discharged from bankruptcy is eligible for HAMP in
general but does not speak to continued eligibility for a successive application due to a change in
circumstance.
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can trigger continued eligibility for a successive HAMP application under HAMP guideline
1.2. Cf. Santelises v. Bank of America, N.A., No. 12-11164-NMG, 2012 WL 6045986 (D.
Mass. Oct. 22, 2012) (defendants failed to allege a change in circumstance, which the court
described as an increase in income or other assets).
¶ 33 Finding that the bankruptcy discharge qualified defendants to apply for HAMP
reconsideration only gets their proverbial feet in the door. In order to set a sale aside, section
15-1508(d-5) requires that a defendant file a motion before confirmation of the sale and
prove, by a preponderance of the evidence, that the defendant applied for assistance under
the MHA and that the sale took place in material violation of the MHA’s requirements, i.e.,
the HAMP guidelines, for proceeding to a judicial sale. 735 ILCS 5/15-1508(d-5) (West
2010). Defendants correctly contend that this is where materiality matters, that is, whether
plaintiff materially violated HAMP and not whether the change in circumstance was a
material one.
¶ 34 Defendants focus on HAMP guideline 3.3, which says that a servicer must suspend a sale
as necessary to evaluate the borrower for HAMP if a timely application is submitted. Here,
defendants’ submission two weeks before the sale was timely. They were eligible for
reconsideration because of their change in circumstance, and plaintiff did not complete the
evaluation of their application until after the sale, indicating that suspension of the sale was
necessary to allow for sufficient time to complete the evaluation. Given that the purpose of
the HAMP is to assist borrowers in maintaining their properties, proceeding to sale in
violation of a guideline that mandates that a servicer “must suspend the sale” is clearly the
type of material violation contemplated in section 15-1508(d-5).
¶ 35 There are, however, four circumstances where a servicer such as plaintiff is not required
to suspend a foreclosure sale; none applies here. HAMP Guidelines, supra, ch. II, § 3.3. The
first is when a HAMP application is untimely, that is, received after the deadline of seven
business days prior to the scheduled sale. We have already found that defendants’ application
was timely. The second regards the situation where a borrower has received a permanent loan
modification, which is inapplicable here because defendants never received any sort of loan
modification. The third involves a trial period plan (TPP), which again does not apply
because defendants never received a TPP. Finally, a servicer does not have to suspend a sale
if it finds a borrower ineligible under HAMP. Although that is essentially what plaintiff
argues on appeal–that defendants did not qualify to file a successive HAMP application–it
did not deny defendants’ second application on this basis. Instead, it proceeded to sale
without resolving the HAMP application one way or another, and, only after the sale, it
informed defendants that their application was denied because the loan had been paid off
(via, impliedly, the sale). Moreover, we have already found that defendants were eligible for
a successive HAMP application due to their change in circumstance, and therefore plaintiff’s
argument fails regardless.
¶ 36 Although the trial court had discretion to decide whether to confirm the sale, we review
the construction of statutes de novo. See Household Bank, FSB, 229 Ill. 2d at 178. We find
that a “material violation” under section 15-1508(d-5) occurred where plaintiff proceeded
to sale in violation of HAMP guideline 3.3, which required suspension of the sale upon
defendants’ successive HAMP application. Had the trial court construed the law this way,
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it surely would have sustained defendants’ objection to confirmation of the sale. Therefore,
the trial court abused its discretion when it confirmed the sale of the Property. To hold
otherwise would be to effectively ignore our legislature’s promulgation of section 15-1508(d-
5).
¶ 37 We also disagree with plaintiff that our holding will lead to an absurd result. Successive
applications cannot be made ad infinitum under our holding. In fact, unless a defendant can
declare and receive a discharge from bankruptcy multiple times–and all before a scheduled
sale–then a defendant cannot use our holding to perpetually suspend a sale. A change in
circumstance is necessary to qualify a defendant for a successive application, and the HAMP
guidelines require that a servicer allow at least one reconsideration based on a change in
circumstance. The proper course is for a servicer such as plaintiff to define in its internal
policy what qualifies as a change in circumstance, and, if it receives a successive application
that does not qualify due to a lack of change in circumstance, to timely deny the application
based on that fact.
¶ 38 As to defendants’ argument of improper notice, the trial court did not abuse its discretion
in finding that notice was proper under section 15-1508(b-5). The notice filed with the court,
albeit not file-stamped until after the sale, attested to the fact that plaintiff mailed notice of
the November 17, 2011, sale on October 24, 2011. Defendants offer nothing more than their
own protestations that they did not receive the mail. However, this argument is moot because
confirmation of the sale should have been denied based on a violation of section 15-1508(d-
5) for a material violation of the HAMP guidelines.
¶ 39 C. Rule 137 Sanctions
¶ 40 Defendants argue that plaintiff’s failure to suspend the sale per HAMP guideline 3.3 is
alone reason to sanction plaintiff. Defendants also try to paint a picture of blatant disregard
for rules and procedures as plaintiff rushed to complete the sale of the Property. However,
defendants provide no legal standard by which we can assess whether the trial court abused
its discretion and should have imposed sanctions.
¶ 41 Illinois Supreme Court Rule 137 (eff. Jan. 4, 2013) requires that an attorney certify that
a pleading, motion, or other document is “to the best of his knowledge, information, and
belief formed after reasonable inquiry” and “is well grounded in fact and is warranted by
existing law or a good-faith argument for the extension, modification, or reversal of existing
law, and that it is not interposed for any improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of litigation.” “The purpose of Rule 137
is to prevent abuse of the judicial process by penalizing claimants who bring vexatious and
harassing actions.” Sundance Homes, Inc. v. County of Du Page, 195 Ill. 2d 257, 285-86
(2001). Rule 137 sanctions are punitive, so the rule should be strictly construed. Sadler v.
Creekmur, 354 Ill. App. 3d 1029, 1045 (2004).
¶ 42 The trial court here denied the motion for sanctions, and we will not reverse absent an
abuse of discretion. E.g., Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460, 487 (1998);
Edwards v. City of Henry, 385 Ill. App. 3d 1026, 1034 (2008). There is no contention that
plaintiff’s actions were not grounded in fact. Defendants argue that throughout the course of
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the litigation, plaintiff “treated Defendants egregiously.” They also contend that proceeding
to sale, in violation of HAMP guideline 3.3, was an unwarranted, sanctionable action.
However, defendants’ characterization of plaintiff’s conduct is overly generalized. The only
specific conduct that defendants focus our attention on is plaintiff’s proceeding with the
November sale of the Property despite its receipt of defendants’ second HAMP application.
Plaintiff’s conduct over the course of the litigation can reasonably be viewed as that of a
servicer, acting in its best interests, merely trying to expedite the sale of the Property after
receiving a judgment in its favor. Furthermore, the law in this area was unclear; neither party
was able to cite authority that a bankruptcy discharge was a change in circumstance that
qualified defendants for a successive HAMP application. Absent some allegation that
plaintiff proceeded contrary to established authority in this case, we cannot find plaintiff’s
actions sanctionable under Rule 137.
¶ 43 III. CONCLUSION
¶ 44 For the reasons stated, we reverse the Kane County circuit court’s order granting
confirmation of the sale of the Property, vacate the sale, and remand the cause so that
plaintiff can properly consider defendants’ HAMP application. We affirm the Kane County
circuit court’s order denying Rule 137 sanctions.
¶ 45 Affirmed in part and reversed in part; cause remanded.
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