15-1401.1.Short sale in foreclosure.

Article XV. Mortgage Foreclosure · Part 14. Methods of Terminating · Last amended 2019 · Last verified July 20, 2026

In one sentenceSection 15-1401.1 requires a mortgagee, within 90 days, to respond to a homeowner's written short-sale offer on primary residential property, while making clear that rejecting it doesn't stay the foreclosure, and it shields certain nonprofit-financed buyback arrangements from occupancy restrictions.

Full Text of 735 ILCS 5/15-1401.1

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(a) As used in this Section:

"Certified community development financial institution" means a community development financial institution that is certified by the Community Development Financial Institutions Fund in the U.S. Department of Treasury under 12 U.S.C. 4701 et seq.

"Short sale" means the sale of real estate that is subject to a mortgage for an amount that is less than the amount owed to the mortgagee on the outstanding mortgage note.

"Residential property" means real property on which there is a dwelling unit with accommodations for 4 or fewer separate households and occupied, or to be occupied, in whole or in part, by the mortgagor; however:

(i) "residential property" is limited to the primary residence of a person;

(ii) "residential property" does not include an investment property or residence other than a primary residence; and

(iii) "residential property" does not include residential property taken in whole or in part as collateral for a commercial loan. (b) In a foreclosure of residential real estate, if (i) the mortgagor presents to the mortgagee a bona fide written offer from a third party to purchase the property that is the subject of the foreclosure proceeding, (ii) the written offer to purchase is for an amount which constitutes a short sale of the property, and (iii) the mortgagor makes a written request to the mortgagee to approve the sale on the terms of the offer to purchase, the mortgagee must respond to the mortgagor within 90 days after receipt of the written offer and written request.

(c) The mortgagee shall determine whether to accept the mortgagor's short sale offer. Failure to accept the offer shall not impair or abrogate in any way the rights of the mortgagee or affect the status of the foreclosure proceedings. The 90-day period shall not operate as a stay of the proceedings.

(d) If an offer to purchase either a mortgage or residential property is made by an entity with a tax-exempt filing status under Section 501(c)(3) of the Internal Revenue Code for the purpose of reselling that mortgage or residential property to the mortgagor, and financing for the repurchase will be provided by a certified community development financial institution, an affidavit, statement, agreement, or addendum limiting ownership or occupancy of the residential property by the mortgagor shall not provide a basis to avoid a sale or transfer, nor is it enforceable against the acquiring entity or any real estate broker, mortgagor, or settlement agent named in the affidavit, statement, agreement, or addendum. At the time of the offer, the following disclosures shall be made to the mortgagee by the mortgagor in connection with any purchase or sale under this subsection: (i) the entity seeking to purchase shall disclose its tax-exempt status; (ii) the entity that will finance the sale following the purchase shall disclose its status as a certified community development financial institution; and (iii) the disclosure shall state whether the residential property is to be sold back to the mortgagor. Upon request by the mortgagee, a certified community development financial institution shall provide documentation evidencing its current certification status. Nothing in this subsection shall impair, abrogate, or abridge in any manner the rights of the mortgagee pursuant to subsection (c) to accept or reject an offer to purchase either a mortgage or residential property, nor shall it give rise to a cause of action.

End

Plain-English Summary

A short sale lets a struggling homeowner sell for less than what's owed on the mortgage. Section 15-1401.1 gives that option a statutory timeline. "Residential property" here means the mortgagor's primary residence with room for four or fewer households -- not an investment property, a second home, or property pledged as collateral for a commercial loan. When a mortgagor brings the mortgagee a bona fide third-party purchase offer at a short-sale price and asks in writing for approval, the mortgagee must respond within 90 days of receiving that offer and request.

The mortgagee still decides whether to accept. Turning down the offer doesn't impair the mortgagee's rights or change the status of the foreclosure, and the 90-day response window doesn't stay the case. In other words, the short-sale process runs alongside the foreclosure, not in place of it.

Subsection (d) addresses a narrower scenario: a tax-exempt nonprofit under Section 501(c)(3) of the Internal Revenue Code offering to buy the mortgage or the property in order to resell it back to the mortgagor, financed by a certified community development financial institution. In that setup, restrictions on ownership or occupancy in an affidavit or similar document can't be used to block the sale or enforced against the buying entity, broker, mortgagor, or settlement agent -- as long as the required disclosures about tax-exempt status, CDFI financing, and any planned resale to the mortgagor are made. None of this limits the mortgagee's right under subsection (c) to accept or reject any offer.

Frequently Asked Questions

How long does a mortgagee have to respond to a short-sale offer under Section 15-1401.1?

90 days after receiving the mortgagor's written offer to purchase and written request for approval.

Does a short-sale request pause the Illinois foreclosure case?

No. Section 15-1401.1(c) states the 90-day period does not operate as a stay of the proceedings, and rejecting the offer doesn't impair the mortgagee's rights or the foreclosure's status.

What property qualifies as 'residential property' for the short-sale rule?

Real property with a dwelling for four or fewer households that is the mortgagor's primary residence -- not an investment property, a non-primary residence, or property taken as collateral for a commercial loan.

Is the mortgagee required to accept a short-sale offer?

No. Section 15-1401.1(c) leaves the decision to accept or reject to the mortgagee.

What disclosures does a nonprofit buyer have to make when repurchasing a mortgage for resale to the mortgagor?

Under subsection (d), it must disclose its tax-exempt status, the financing entity's status as a certified community development financial institution, and whether the property will be sold back to the mortgagor.

Amendment History

(Source: P.A. 101-396, eff. 8-16-19.)

Source & verification. Section text and amendment history are reproduced verbatim from the Illinois Compiled Statutes, published by the Illinois Compiled Statutes, Illinois General Assembly / Legislative Reference Bureau. Last verified July 20, 2026. · Official source

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