ILLINOIS OFFICIAL REPORTS

Appellate Court

CitiMortgage, Inc. v. Johnson, 2013 IL App (2d) 120719

Appellate Court

Caption

CITIMORTGAGE,INC., Plaintiff-Appellee, v.QUENTINB.JOHNSON

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

(Note: This syllabus

constitutes no part of

the opinion of the court

but has been prepared

by the Reporter of

Decisions for the

convenience of the

reader.)

The order confirming the foreclosure sale of defendants’ property was

vacated pursuant to section 15-1508(d-5) of the Code of Civil Procedure

based on plaintiff’s violation of the Home Affordable Modification

Program (HAMP) guidelines, and the cause was remanded to allow

plaintiff to properly consider defendants’ HAMP application, but the trial

court did not abuse its discretion in refusing to impose sanctions under

Supreme Court Rule 137 in the absence of any allegations that plaintiff

violated any established authority.

Decision Under 

Review

Appeal from the Circuit Court of Kane County, No. 09-CH-2986; the

Hon. Leonard J. Wojtecki, Judge, presiding.

Judgment Affirmed in part and reversed in part; cause remanded.
Counsel on

Appeal

Ronald A. Almiron, of Raiz Almiron LLC, of Naperville, for appellants.

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

potentiallyunfair lending practices, and (3) more information was necessaryto 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 summaryjudgment 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, theyfor 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. Defendants 1

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

Defendants do not attach a copy of their bankruptcy petition or cite to the record to support

1

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.

Defendants claim that they never received notice of the sheriff’s sale and found out that the 2

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 Illinoislaw (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 plaintiffthat same day. Byreceiving 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 materiallyviolated 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 “maybe 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 asfollows. 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

concedesthat defendants’second HAMP application qualified for reconsideration, qualifying

is not synonymous with experiencing a change in circumstance that requiresreconsideration.

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 theysubmitted a timelyHAMP 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 denythat 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). For the following reasons, we 3

Defendants do not explicitly argue for relief stemming from HAMP violations under

3

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 whetherthey 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. Conspicuouslymissing 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. Whether a discharge from bankruptcy would lead to a positive NPV, or to

4

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.

Defendants argue that HAMP guideline 1.2 supports that a discharge from chapter 7

4

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 mustsuspend 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 effectivelyignore our legislature’s promulgation ofsection 15-1508(d5).

¶ 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(d5) 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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