REFORMATION: FIXING A MISTAKE ON A MORTGAGE

Most adults at some point have received a loan from a bank and given that bank a mortgage in return.  The mortgage acts as security to ensure you will pay back the loan.  Mortgages encumber specific property – typically the same property that you used the loan to purchase.

A mortgage defines the property it encumbers in three ways, 1) common address, 2) permanent index number, or “PIN”, and 3) legal description.

The common address is what you and the post office use to identify your house, for example, 123 Main Street, Crystal Lake, Illinois 60014.  In addition, every property is assigned a PIN.  Your county’s tax assessor uses the PIN to identify your property and the amount you owe in real estate taxes each year.  Different counties use alternate formats for PINs, but all involve a string of numbers designed to specifically identify your property, for example, “12-34-567-8910.”

Finally, every parcel of property in Illinois has its own legal description.  A legal description often takes the following format:

LOT [X], BLOCK [Y] OF [SUBDIVISION], BEING THE [WEST ½] OF THE [NORTHEAST ¼] OF SECTION [Z], TOWNSHIP [XX] NORTH, RANGE [YY] EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED [DATE] AS DOCUMENT [NUMBER], IN THE OFFICE OF THE RECORDER OF DEEDS OF MCHENRY COUNTY, ILLINOIS.

Occasionally, banks make a mistake when putting a legal description on a mortgage.  The Lot or Block number could be wrong, the name of the subdivision could be misspelled, or the legal description for a completely different property could be accidentally placed on the mortgage.

Banks solve problems or typos in the legal description through Reformation.  By asking an Illinois Court to Reform the mortgage, the Court may correct it so that it a valid and enforceable lien.  Court’s base their decision to Reform the mortgage on whether it appears the mortgage, with its incorrect legal description, does not reflect the intent of the parties to the mortgage.  In other words, the parties to the mortgage made a mutual mistake in placing the wrong legal description on the mortgage.

Evidence that the parties made mutual mistake can include that the common address and PIN on your mortgage correctly describe your property.  In that situation, it is likely that the parties intended to put the right legal description on the mortgage.

Having a good attorney can help understanding how Reformation may affect your mortgage.  It can clear up confusion you may have as a property owner so you do not have to face a lawsuit down the road.