United States: Missing Mortgage Details: At The End Of The Day These Mortgages Survived

Last Updated: June 19 2014
Article by Vicki Harding

In re Crane, 742 F.3d 702 (7th Cir. 2013)

Chapter 7 trustees sought to avoid mortgages in two separate cases using their strong-arm powers. They argued that failure to include the loan maturity date and interest rate in the mortgage meant that it did not provide constructive notice to a bona fide purchaser under Illinois law, and thus could be avoided. On appeal the 7th Circuit rejected this argument and affirmed summary judgments in favor of the mortgagees.

Under Section 544(a)(3) of the Bankruptcy Code a trustee may avoid a mortgage that is voidable by a hypothetical bona fide purchaser of real property. Typically state law provides that a bona fide purchaser can acquire property free of adverse interests unless it has actual or constructive knowledge of the interests. Section 544(a) provides that the strong arm powers can be exercised without regard to the knowledge of the trustee or any creditor. However, that leaves constructive notice – which more often than not means record notice (i.e. deemed notice of property recorded documents).

In this case, state law provided that constructive notice could be either (1) inquiry notice – i.e. facts sufficient to put someone on notice that they should inquire further, or (2) record notice – which "imputes to a purchaser knowledge that could be gained from an examination of the grantor-grantee index in the office of the Recorder of Deeds, as well as the probate, circuit and county court records for the county in which the land is situated."

Prior to a clarifying 2013 amendment, a state statute provided (emphasis added):

Mortgages of land may be substantially in the following form: The Mortgagor (here insert name or names), mortgages and warrants to (here insert name or names of mortgagee or mortgagees), to secure the payment of (here recite the nature and amount of indebtedness, showing when due and the rate of interest, and whether secured by a note or otherwise), the following described real estate (here insert description thereof), situated in the county of ..., in the state of Illinois.

Pursuant to the statute, a mortgage in this form "shall be deemed and held a good and sufficient mortgage in fee to secure the payment of the monies therein specified."

There was quite an uproar a few years ago when a couple of bankruptcy cases interpreted this language to mandate that a mortgage must include all of the identified pieces of information. Accordingly, if anything was missing, the argument was that the mortgage was not sufficient and did not provide constructive notice. If it did not provide constructive notice to a bona fide purchaser, it could be avoided by a trustee under Section 544.

The state legislature responded by amending the statute effective June 1, 2013 to state that the provisions in the form "are, and have always been, permissive and not mandatory." However, there are still pending cases – including the cases addressed in this opinion – that were decided under the statute in effect prior to the amendment.

In each of these cases the trustee argued that the failure to include the interest rate and maturity date of the debt in the mortgage was fatal. The court signaled its direction when it introduced its discussion of the issue by stating "We find it hard to imagine that any prospective buyers or mortgage lenders for these properties would, upon discovering the recorded mortgages in the chain of title in the county land records, conclude that the mortgages could not be enforced because the maturity dates and interest rates were missing, and go forward with the purchase or new loan without ensuring that the existing mortgages would be paid off as part of the transaction."

So, it is not surprising that the court concluded that the "better view" is that the form set forth in the statute has always been a permissive safe harbor. As long as a mortgage includes required elements under common law, then the recorded mortgage is sufficient to give constructive record notice so that it cannot be avoided using the trustee's strong-arm powers.

Given its holding, the court did not need to address an argument that incorporating the note by reference caused the mortgage to include the relevant terms of maturity date and interest rate.

Illinois is not the only state where a bankruptcy court has decided that what appears to be a permissive statutory safe harbor form should be interpreted as a mandatory form. This can pose difficulties in drafting and giving opinions since there are often reasons to omit some of the details included in these forms.

A couple of other interesting points:

  • In finding that it was not necessary to state the maturity date, the court noted a state statute that provides that "the lien of every mortgage ... in which no due date is stated upon the face ... shall cease by limitation after the expiration of 30 years from the date of the instrument creating the loan ..."

    Thirty years is a long time. However, it might come as a surprise to a mortgagee that a mortgage could become ineffective with the passage of time. (And note that other states have similar provisions with shorter time limits.)
  • Although the court concluded that a mortgage is not required to state the interest rate or maturity date, it noted other elements have been deemed essential.

    For example, it appears that if a mortgage does not set forth the amount of the underlying debt (or at least includes information so that it can be easily ascertained), the mortgage may be insufficient to provide constructive notice.
  • Although the focus is on documents recorded in the real estate records, apparently in Illinois constructive notice includes information in local probate, circuit and county court records.

It is always wise to remember that there can be many nuances in real estate law that vary by jurisdiction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Vicki Harding
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions