Financial Institutions I FEBRUARY 7, 2024

Major Commercial Foreclosure Filed in Illinois

For the past few months, practitioners and pundits in Illinois have been predicting a return by lending institutions to full use of their creditor’s rights arsenals during Fiscal Quarter 1 2024.  Economic indicators, increased lawsuits in other States, relaxed enforcement of COVID protection, and a return to Pre-Covid activity levels for bank examiners have been the leading factors influencing this prediction.  This week, a $51 million commercial foreclosure action was filed in Federal Court in Illinois.  This lawsuit by lenders involves a major multi-State Midwest business operating in the health care industry - an area that enjoyed sacred protection under the Covid regulations and climate.

The return of this level of foreclosure action, which has not been seen in some time now, should be viewed as a major warning that the barometer is shifting, Courts are no longer afraid to foreclose, and examiners will once again be flagging loan files for review and action.  Currently, most of the loan files we see heading for foreclosure have been looming on lenders’ “risk” or “watch” lists since before Covid.  It was only a matter of time before these loans needed action.  All of them, of course, will not require the drastic remedy of foreclosure.  Often times workouts or Forbearance Agreements offer a better alternative.  Whether non-performing loans are old or new, and no matter the remedy needed, prudent lenders should be prepared to take action in the coming days.