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Section 11 of Conveyances Act Clarified as of June 1, 2013

The uncertainty stemming from bankruptcy court decisions in 2012 regarding whether a mortgage could be voided following bankruptcy filing if the mortgage did not specify all components, including interest rate and term of the underlying note, should now be put to rest with the June 1st effective date of CBAI-initiated legislation that was enacted as part of Public Act 97-1164. Section 11 of the Conveyances Act now unambiguously states that the suggested mortgage language therein is discretionary; has never been intended as mandatory; and that any mortgage lacking one or more of those suggested terms remains valid and fully enforceable, regardless of when the mortgage was recorded.

On a related note, the federal Court of Appeals recently issued a favorable decision in the last lingering case in which an argument was made that Section 11 contained a mandate that would make a mortgage filing deficient if it lacked the Section 11 components. To read CBAI General Counsel Jerry Cavanaugh’s report on that case, click here.