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In the Legal Brief, I discuss important issues about how the law affects us all. Subscribers are welcomed to write in about Foreclosure Defense and Bankruptcy Law or with any specific legal issue or question to be addressed. Your question may show up next!

- Daniel S. Khwaja, Attorney At Law

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Appellate Reversal:
U.S. Bank v. Hernandez

2nd District Appellate Court of Illinois, 10-12-2017
Defendant Attorney: Daniel S. Khwaja, Esq.
» view source | » view Reversal Opinion (PDF)

The matter of U.S. Bank v. Hernandez (Reversal):

Illinois Foreclosure Lawyer Daniel S. Khwaja's recent appellate reversal win in U.S. Bank v. Hernandez dealt with two important issues. The first is standing, and the second is 24 C.F.R. 203.604 of the Code of Federal Regulations. The Appellate Court did not rule in Defendants favor as to the first issue, standing. The record reflected that 4 months prior to the filing of the foreclosure complaint by U.S. Bank (January 2, 2014), there was an assignment of mortgage from Bank of America, N.A. executed on August 15, 2013 with language that stated, "together with the notes" that assigned both the mortgage and the note to Secretary of Housing and Urban Development, a non-party to the case. The assignment was signed, notarized, incorporated in Plaintiff's Motion for Summary Judgment, and recorded in the Lake County Recorder of Deeds.

It was Attorney Daniel S. Khwaja's position that this assignment of the Note executed within a few short months prior to the filing of the foreclosure created a genuine issue of material fact as to when U.S. Bank took position of the Note. The evidence in Attorney Khwaja's view strongly suggested that the Secretary of Housing and Urban Development had possession of the Note when the Complaint was filed.

The Appellate Court ruled against the Defendants because U.S. Bank had a "copy" of the Note attached with a blank endorsement. Generally, under 810 ILCS 5/3-201 a blank endorsement transfers a promissory note on possession alone. But the endorsement that was found on the Note was on behalf of Countrywide Bank, a legal entity which ceased to exist on April 27, 2009. The assignment of the Note was executed on behalf of Bank of America, N.A. (who countrywide merged into) nearly 4 years later. This made clear that in the timeline of events the assignment occurred after the endorsement found on the imaged copy of the Note, and that the assignment reflected the most recent transfer of the Note.

The second issue which the Defendants did win was regarding 24 C.F.R 203.604 which requires that letter be sent by the mortgagee by certified mail through the United States Postal Service offering the mortgagor a face-to-face meeting prior to the filing of the foreclosure, and before no more than three payments are due. It was Attorney Khwaja's position that the use of Federal Express as the method to send the letter was insufficient under the law and did not meet its substantive requirements.

Federal Express in Attorney Khwaja's view is neither through the postal service (as the regulation explicitly requires), and does not otherwise meet the definition of certified mail as defined by case law throughout the country. The Appellate Court in coming to its conclusion determined that the Federal Express label used in this instance did not demonstrate “proof of dispatch” as required under the law. The label was merely one that could be pre-printed off a computer screen, and did not provide any evidence that the purported letter incorporated in this federal express label was actually sent.

Conclusion: A Nice Win for Homeowners

The Second District Appellate Court ultimately vacated the summary judgment, and judgment of foreclosure and sale. The case has been remanded back to the Trial Court for further proceedings on this issue. This was a nice win for homeowners as we continue to deal with notice issues that are condition precedents in mortgage foreclosure actions, that deal with statutes, regulations, and provisions found within mortgage contracts.

» view source
» view Official Appellate Reversal Opinion (PDF)


Oral Argument (Audio):
U.S. Bank Trust National Association v. Lopez

2nd District Appellate Court of Illinois | Case 2-16-0967 on October 3, 2017Illinois Foreclosure Lawyer Daniel S. Khwaja Chicago - Illinois Court of Appeals Audio File Image

Listen to the complete oral argument conducted by Mr. Khwaja before the Second District Appellate Court of Illinois.

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Oral Argument (Audio):
Bayview Loan Servicing, LLC v. Cornejo (3-14-0412)

3rd District Appellate Court of Illinois, May 2015 | » view sourceIllinois Foreclosure Lawyer Daniel S. Khwaja Chicago - Illinois Court of Appeals Audio File Image

In the matter of Bayview Loan Servicing, LLC v. Cornejo (3-14-0412), Attorney Daniel S. Khwaja's pending appeal as counsel-of-record was selected for oral argument by the Third District Appellate Court of Illinois. The case raises issues of standing to foreclose as to the original Plaintiff, JP Morgan Chase Bank, N.A. and its purported successor Bayview Loan Servicing, LLC.

Listen to the complete oral argument conducted by Mr. Khwaja before the Third District Appellate Court of Illinois.

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Families Facing Foreclosure:
Attorney Dan Khwaja explains the Gilbert decision requiring banks to file correct and complete complaints

By Nick Augustine, November 26, 2012 at 7:18 pm | » view interview logo image

Shouldn’t the banks be forced to have all their ducks in a row before foreclosing? The Illinois Court of Appeals for the Second District thinks so. When foreclosure defense attorney, Dan Khwaja, sent me a message on Facebook about the Gilbert holding I suspected there would be large fallout. Khwaja: “While most of the plaintiff’s attorneys for the banks were initially aware of the Gilbert decision, none of the foreclosure defense attorneys knew about Gilbert.” Why is this case such a big deal? Khwaja said, “My personal opinion is while this is a game changer in DuPage County, it may not have as strong of an effect in Cook County where they largely ignore many of these informalities. I think Gilbert will require reversals in the other counties to get these judges in lock step.”

The problem according to attorney Khwaja: “How can a plaintiff, such as GMAC Mortgage commence an action in foreclosure where a note is endorsed to another entity, Fannie Mae, who has the rights of foreclosure as evident by the loan documentation?”

The word on the street among many lawyers and homeowners is that the courts are pro-bank and let them get away with sloppy documentation, when banks seek to prove their case under the Illinois Mortgage Foreclosure Law (IMFL). Shouldn’t the banks be forced to prove their foreclosure case, by establishing they have a legal right to foreclose in the first place?

Augustine: Dan, what usually happens when the bank has incorrect documentation?

Khwaja: The plaintiff will often move to amend the Complaint, and subsequently “modify” the promissory note to reflect a date before the filing, with additional endorsements added to the promissory note to transfer title of the underlying debt. In a mortgage foreclosure action, the keys to foreclosure are being the “holder” of the underlying debt, this enables you the right to foreclose on someone’s property, and unless you are the holder, you have no verifiable right.

Dan Khwaja explains the holding in the Gilbert[i] case:

Mortgages involve endorsements. An endorsement on the promissory note in either specific (pay to the order) to the named plaintiff, or in blank. The endorsements are essentially an assignment or transfer of the loan moving title from one entity to another. The entity that is the “holder[ii]” of the note is the entity that has rights to foreclose.

In Illinois, A plaintiff does not have standing to commence an action in mortgage foreclosure if it does not have all loan documentation at the time of filing the complaint. Khwaja said, “What has often been the case in probably 80% of the cases I have seen is that the Plaintiff in fact did not have the requisite documents at the time of filing, i.e., the proper endorsement mentioned above.

Augustine: What is the effect of this decision in Gilbert?

Khwaja: Proper loan documentation at the time of filing is necessary to sustain a cause of action, and a Plaintiff will no longer have the ability to amend their Complaint to remedy deficiencies.

Augustine: What is the atmosphere in courtrooms following this decision?

Khwaja: I was the first attorney likely to raise this case, and a number of attorneys and even a couple pro se’s[iii] followed my lead that afternoon, and thanked me in the hallway for the information. One pro se was able to withstand a motion for summary judgment based on the Gilbert’s case, as it was clear from his case that the complaint had been amended on two occasions, to incorporate loan documents that did not exist at the time of filing. Without the Gilbert’s case, the motion for summary judgment would likely have been entered [against the pro se litigant]. That was the FIRST time I saw Judge Gibson rule the other way.

The amended complaint to cure these deficiencies will no longer stand, at least in DuPage County.

IL Foreclosure Lawyer Article

Avoiding the pitfalls of defending your foreclosure without a lawyer

An Article By
Nick Augustine, Freelance Legal Writer
and Syndicated Author for

Illinois Circuit Court Judges and Appellate Justices sometimes get it wrong. They could overlook a fact or law.  Appellate Justices are the public's resource to review what happened at the trial court level, a large and often heavy task.  When Chicago area individuals believe a trial court misapplied the laws or facts in their case, they turn to the Appellate Courts.  Making the appropriate legal argument to a court of appeals requires significant legal skill and precision.  Many trial court lawyers do not handle appellate work unless they do it often, and will refer their cases ripe for appeal to an appellate lawyer.  Imagine now, trying to handle it on your own, as a pro-se (without a lawyer) plaintiff or defendant.

There is a large class of pro-se defendants in trial courts overseeing mortgage foreclosure cases.  Let's face it, when we cannot pay the mortgage payments and may be behind on other bills like utilities, cars and credit cards, it can take all our energy and resources to keep the lights and phones on.  In these situations, some Illinois homeowners decide to file for bankruptcy protection.  Other homeowners choose to fight to keep their homes and assets for which they have worked hard over years in a dicey economy.

The Internet is an excellent resource with information about defending foreclosure actions. Many homeowners who chose to stand up to the banks and mortgage companies have a story to tell; their stories often suggest the loan servicers and financial institutions are playing tricks and pulling dirty punches.  Whether this is true, is a matter for the court.  So it goes, many pro-se litigants proceed in court to fight and expose wrongdoing.  When it comes to having your day in court, many pro-se litigants end up losing and do not even understand how or why.  Ending pennywise and pound foolish, an experienced foreclosure attorney might have been able to save them from losing their homes.

Illinois courts, following other states, are adopting legal theories and generally ruling that banks seeking to foreclose, must have all their documents lined up before they file a foreclosure suit.

The Second District Court of Appeals, reviewing a DuPage County foreclosure case, Deutsche Bank Nat. Trust Co. v. Gilbert , ruled that a foreclosure case should have been dismissed by the trial court because the Plaintiff who sued to foreclose was not the proper holder (owner) of the mortgage, with a right to foreclose. The issue in Gilbert, argued by the homeowner’s attorney, involved an assignment (that demonstrated a transfer/sale of the mortgage interest) from one party to the Plaintiff. The legal problem was that the assignment document had not been dated or proven to exist prior to the Plaintiff filing the foreclosure matter. The court noted that, Gilbert’s documentary evidence demonstrated that Deutsche Bank did not own the loan (the mortgage and the note, and an assignment executed after the date of filing) constituted prima facie evidence of lack of standing. The court in this opinion made clear, in order to file a foreclosure suit, you must actually own the loan prior to the filing of the complaint.

In another recent case, a homeowner, in the First District Court of Appeals, sought the review of a Cook County foreclosure case, Rosestone Investments LLC v. Garner. The homeowner represented himself, pro-se, and cited the Gilbert case in support of his similar argument, that the Plaintiff financial institution, seeking to foreclose, did not have standing (the legal right to sue) because the assignment was executed (completed) several days after the case was filed. Many non-attorneys might rely on what they read online and assume their case, assuming the facts are true and the scenario the same, would win. This pro-se defendant lost. For several reasons we address in our analysis of the two cases, the foreclosure defendant, Garner, might have won his case if he had articulated his legal arguments appropriately and followed proper procedure. The pro-se defendant in Garner filed many motions and pleadings, failed to attend hearings in the case, and ultimately lost his home.

The time to properly defend any legal action is the first time around.

Foreclosure cases at the trial court and appellate levels have official court records of everything that was filed and all that happened in the case. It can be difficult for lawyers and judges to unravel a significant mess. The boxes of documents showing all the motions and pleadings filed in the Garner case are likely enough to drown anyone who needs to review them. The more opportunities for error, the more it may be possible for an error to occur.

If, however, a homeowner goes at defending their foreclosure case on his or her own, and loses as a pro-se litigant, the home may be sold and gone before the homeowner hires an experienced foreclosure defense lawyer, and then it may be too late. Yes, the homeowner may win their appeal, but at what cost?

Illinois trial and appellate courts do not always agree on the others’ interpretation of the facts and law. One court may follow one line of cases and another court may disagree, with their own theory why they are correct in their holding. Once again, the work required of a non-attorney, in feeding through precedential decisions and having a reasonable prediction of how a court may rule, is likely insurmountable.

We will keep you up to date and help you learn more about Illinois foreclosure law and defense.

As the attorneys and courts work to keep up with the legal decisions involving mortgage foreclosures, this blog will be updated as we publish articles with news and resources we use as mortgage foreclosure defense attorneys to make sure the finance companies and loan servicers follow the law and do not improperly foreclose upon and seize your home.

If you received notices that your home is in risk of foreclosure we may be able to help you with a variety of legal options to save your home loan or defend your foreclosure case in court to minimize your loss and force the banks to get it right and prove case, if they truly have one.

Daniel S. Khwaja, Illinois foreclosure lawyer, is fighting for justice. The website and Foreclosure Questions & Answers located at contain a library of information so you, the educated homeowner, can better understand Illinois foreclosure law and defense. The better you understand, the better you can help us do our job to represent your best interests, in and out of court. You may also stay in touch with us on social media on Facebook, Google Plus, Twitter and LinkedIn. To speak to Illinois Foreclosure Defense Attorney Daniel S. Khwaja, call 1-312-933-4015.

Real Estate Law

Mortgage Foreclosure and Standing to Sue

An Article By
Steven B. Bashaw

Recent cases have wrestled with a critical question in the "foreclosure crisis:" when do and don't lenders have standing to foreclose on homeowners? Cases are all over the map. Here's a review, and a thought about why it's important.

We have just completed five years of the so-called "mortgage foreclosure crisis." A recurring legal issue over that time - who has standing to file and prosecute a suit to foreclose a mortgage - has spawned a significant body of appellate decisions. Some cases favor lender plaintiffs, others borrower defendants. Here's a look a key rulings.

Lack of standing and "affirmative defense"

The case that began the standing debate was Bayview Loan Servicing, L.L.C. v. Nelson, 382 Ill. App.3d 1184; 890 N.E.2d 940 (5th Dist. 2008). The court held that the plaintiff's mere allegation of standing under the Illinois Mortgage Foreclosure Law (where there the original lender made no assignment(s) to the plaintiff and the note attached to complaint is not endorsed to the named plaintiff) did not give it standing to foreclose in the context of summary judgment.

When defendants began using this ruling in trial courts to challenge standing in foreclosure complaints, lender plaintiffs argued that Bayview does not apply at the pleading stage of a foreclosure. They said the mere allegation of standing is sufficient under IMFL if the lender pleads the statutory form complaint, citing the second district opinion in U.S. National Bank v. Sauer, 392 Ill.App.3d 942, 913 N.E.2d 70, 332 Ill.Dec. 475 (2nd Dist. 2009).

The Sauer court held that "[u]nder Illinois Law, a plaintiff need not allege facts establishing standing.…Rather, it is the defendant's burden to plead and prove lack of standing….Where standing is challenged by way of a motion to dismiss, a court must accept as true all well-pleaded facts in the plaintiff's complaint…[under Section 2-615]."

Reaching back a few decades, lender's counsel also cited Greer v. Illinois Housing Development Authority, 122 Ill.2d 462 (1988). Greer holds that a lack of standing in a civil case is an affirmative defense and not a basis for a motion to dismiss under 2-615. That means the defendant must plead and has the burden of proving the plaintiff lender's lack of standing.

Lenders were buoyed by MERS v. Barnes, 406 Ill.App.3d 1, 940 N.E.2d 118 (1st Dist. 2010) and Deutsche Bank National Trust Company v. Snick, 2011 IL App (3d) 100436, 957 N.E.2d 1273, both of which held that "standing" is (a) an affirmative defense that is waived if not asserted and (b) must be raised prior to the confirmation of sale, when the court's review is limited to the four elements set forth in IMFL section 1508.

But this latter holding in Barnes was specifically rejected in November by the second district in Wells Fargo Bank v. McCluskey, 2012 IL App (2nd) 110961, when it held that a motion to vacate can be brought at the time of the confirmation of sale regardless of the limitations of section 15-1508.

Standing and the Illinois Banking Act

The case of Standard Bank and Trust Co. v. Madonia, 2011 IL App (1st) 103516, deals with standing in a different context. There, lender plaintiff Standard Bank acquired the foreclosed-upon mortgage loan through a series of mergers rather than by assignment or endorsement and transfer. It argued that it had standing based on section 205 ILCS 5/28 of the Illinois Banking Act, which provides for transfer of all liabilities and interest to the bank that results from a bank merger.

Citing Barnes and holding that a foreclosure complaint is sufficient if it contains the averments required by IMFL under section 5/15-1504(a), the court held that since Standard Bank employed the statutory form complaint, pled that it was the mortgagee, and attached a copy of the mortgage and note, its complaint withstood a standing challenge.

Standing and timing

Deutsche Bank v. Gilbert, 2012 IL App (2d) 120164, however, is a standing case in which the defendant prevailed. Gilbert raised standing as an affirmative defense, noting that when the complaint was filed (March 10, 2008), the mortgage assignment to Deutsche Bank had not yet been executed. The assignment was signed on August 25, 2008, and the bank contended that the August execution was "simply memorializing an earlier transfer of interest" on November 1, 2005.

The court wrote that "[l]ack of standing to bring an action is an affirmative defense, and the burden of proving the defense is on the party asserting it." But where the documents in evidence show on their face that the assignment did not occur until months after the foreclosure was filed, the defendant met its burden.

Though not strictly speaking a standing case between mortgagor and mortgagee, Patrick L. Cogswell v. Citifinancial Mortgage Company, 624 F.3d 395 (7th Cir. 2010), holds that under Illinois law only the holder of a note may foreclose on property. Transferring a mortgage is not enough by itself to confer the right to foreclose upon property. The Patrick Group could not prove it was a note holder, and therefore it was not entitled to foreclose.

In Bank of America v. Basman EBT, LLC, 2012 IL App (2d) 110729, the court held that in challenging a plaintiff's standing, a defendant cannot attack the "sufficiency" of an assignment but is limited to asserting that an assignment is void.

Another very recent standing case, handed down in October, is Cavalry Portfolio Services v. Rocha, 2012 IL App (1st) 111690. In Rocha, standing arose in the context of a section 2-1401 motion to vacate a judgment on a line of credit with Washington Mutual Bank. The plaintiff was the assignee in a line of a very confusing and less than perfect transfers of Rocha's account by assignment.

Almost two years after the judgment was entered, Rocha filed his motion alleging a meritorious defense based on Cavalry's lack of standing. The account assignments attached to the complaint failed to meet the requirements of Section 8b of the Collection Agency Act, and this "standing" flaw, together with the mandate that substantial justice be considered in vacating a default judgment, supported the reversal of the trial court's denial of the 1401 petition to vacate the judgment.

The missing piece

"Standing" is a highly technical legal doctrine, and all of these cases point to something missing in the mortgagor/mortgagee relationship that is important in court and in the context of foreclosure. Outside of litigation, borrowers and attorneys general in various states are increasingly demanding responsiveness from mortgage lenders, investors, and servicers, even in the midst of a default, to requests for forbearance, loan modification, and loss mitigation.

Borrowers are frustrated by servicers who refer them to faceless investor trusts that refuse to address requests for foreclosure alternatives. They are frustrated that they can be sued in foreclosure by a party with whom they have no relationship yet somehow has "standing" to sue to take away their home. They are frustrated by mortgage servicers/lenders/investors who refuse to listen and respond in a meaningful way that can lead to recovery.

In other words, lender accountability and responsibility are what's missing in the foreclosure crisis. That is the human context in which sophisticated and technical "standing" battles are fought.

Lisle attorney Steven B. Bashaw is a past chair of the ISBA Real Estate Section Council, current director of the Illinois Real Estate Lawyers Association, and a member of the Association of Foreclosure Defense Attorneys.

Illinois Lawyer Daniel S. Khwaja handles cases pertaining to Chapter 7 bankruptcy, foreclosure defense, foreclosure rescue, lender fraud, and renter eviction defense. Schedule Your FREE Initial Consultation.

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Illinois foreclosure attorney Daniel Khwaja wants people facing foreclosure to know they have options. The biggest misconception is that they cannot afford a lawyer; however, Mr. Khwaja offers very affordable rates.

During the FREE initial consultation, he outlines several options including the "Cash for Keys" program, loan modification, and the required "hard proof" lenders MUST have to attempt foreclosing.

Contact Daniel S. Khwaja, Esq. for a free Foreclosure case evaluation.

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Attorney Daniel S. Khwaja has worked with countless Illinois homeowners facing the tragedy of foreclosure. He has saved homeowners from losing their properties. Each case of foreclosure and outcome may differ, each situation is unique, and the goals of homeowners differ.

So Attorney Daniel S. Khwaja does not take a "one size-fits-all” approach, but takes time to know each client to fashion a legal strategy around their particular needs. He has clients, not "cases", and defends real people fighting to save their homes in the midst of one of the worst real estate depressions in modern history.


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