ILLINOIS APPELLATE COURT FINDS BANK HAD STANDING AS NOTE HOLDER & AFFIRMS FORECLOSURE JUDGMENT

Diaz Anselmo & Associates and Fifth Third Bank celebrated a victory earlier this month when the First District Appellate Court of Illinois affirmed Fifth Third Bank’s foreclosure judgment rejecting the borrowers’, Derrick and Naomi Rumbolt (the Rumbolts), argument that Freddie Mac was the owner of their loan so Fifth Third lacked standing to foreclose. Fifth Third Bank v. Rumbolt, 2024 IL App (1st) 231083-U, ¶ 1.[i]

Fifth Third originated the Rumbolts’ loan in 2008 and modified it in 2010 due to financial hardship suffered by the Rumbolts.[ii] The modification restructured some loan terms, but explicitly stated that “except as expressly modified” the terms of the note and mortgage remained “in full force and effect.”[iii] Because the modification was affected under the Home Affordable Modification Agreement, Freddie Mac became an investor of the loan and was identified as such in the modification agreement.[iv]

The Rumbolts defaulted on the modified loan in 2014 so Fifth Third initiated foreclosure proceedings.[v] Fifth Third asserted both holder status and the fact it was the mortgagee as the basis for its standing to foreclose.[vi] The Rumbolts challenged Fifth Third’s standing on the basis the modified loan documents identified Freddie Mac as the owner of the loan.[vii] The Rumbolts sought summary judgment on this basis, but the court denied their motion finding ownership of the note and mortgage irrelevant to the issue of standing since Fifth Third was the holder of the note.[viii]

Fifth Third then proceeded to summary judgment relying on a copy of the note, mortgage, modification, and an affidavit to support its standing and entitlement to summary judgment.[ix] The court granted Fifth Third’s motion and the Rumbolts appealed the foreclosure judgment based primarily on Fifth Third’s alleged lack of standing.[x] The First District affirmed the foreclosure judgment explaining that “Illinois does not require that a foreclosure action be filed by the owner of the note and mortgage”[xi] and clarifying that “the legal holder of the indebtedness, a pledgee, an agent, or a trustee” all have the authority to bring a foreclosure suit.[xii]

The First DCA refused to entertain other arguments the Rumbolts raised finding the arguments lacked merit or were insufficiently briefed.[xiii] The Court pointed out, even though the Rumbolts were proceedings pro se, the Court was entitled “to have issues clearly defined with pertinent authority cited and coherent arguments presented.”[xiv] The Court concluded the Rumbolts “forfeited review of any other alleged error” by failing to adequately brief the other issues.[xv] Although lacking precedential impact, this decision further clarifies and limits evidentiary proof required to establish standing and can be cited to persuade and educate lower courts on the issue of standing.

[i] The Court issued an order rather than a written opinion in this case. Therefore, the decision is non-precedential and can only be relied upon “for persuasive purposes” and “to support contentions of double jeopardy, res judicata, collateral estoppel or law of the case.” Ill. Sup. Ct. R. 23(e)(1).

[ii] Rumbolt, at ¶4.

[iii] Rumbolt, at ¶26.

[iv] Rumbolt, at ¶4.

[v] Rumbolt, at ¶6.

[vi] Rumbolt, at ¶7.

[vii] Rumbolt, at ¶8.

[viii] Rumbolt, at ¶12.

[ix] Rumbolt, at ¶¶12, 13, 17.

[x] Rumbolt, at ¶23.

[xi] Rumbolt, at ¶24 (quoting Mortgage Electronic Registration Systems, Inc. v. Barnes, 406 Ill. App. 3d 1, 7 (2010)).

[xii] Rumbolt, at ¶24 (citing 735 ILCS 5/15-1504(a)(3)(N) (West 2020)).

[xiii] Rumbolt, at ¶27.

[xiv] Rumbolt, at ¶24 (quoting Holmstrom v. Kunis, 221 Ill. App. 3d 317, 325 (1991)).

[xv] Rumbolt, at ¶27.