Legal Question in Real Estate Law in Illinois

It is not clear whether you father also lived in Illinois. I will assume so.

While you should not rely on advice obtained on a site like this with limited opportunity for an attorney to explore the facts, it seems your mother would not have direct exposure for the home (the loan, maintaining it, etc.). That assumes she was not a party to the note given the lender and that she is not on title to the property.

Your father's estate could be responsible, which would limit any distribution to which your mother and all the children would be entitled (half the estate to spouse; half to children or descendants of any deceased child). Usually, however, when one spouse dies, most property passes by joint ownership, beneficiary designations, etc. Usually, there is not much that would pass through an estate.

If any assets should have passed through your father's estate, that may create exposure. For example, if he had money in an account in his own name or a vehicle in his own name, not jointly held with your mother, then those would be assets of his estate. If your mother and you and your siblings now have those assets, a creditor could seek to recover.

After confirming the circumstances in a consultation with an attorney and the completion of a title search, your mother should consider letting the home go. As a precaution, I feel it would be worth the expense of keeping the insurance in place until a foreclosure sale is complete.

Another alternative, if it has reasonable rental value and the home can be retained without putting much into it, is to evict your sister and rent the home. One would have to consider how much principal is being gained with the mortgage payments, how much income can be realized, whether there are necessary expenses, etc.

Usually, a short sale or deed in lieu of foreclosure would be considerations, but with the owner having passed and no probate estate, the situation may be too out-of-the-ordinary for the lender. Since it is likely that there is not any exposure, why bother with the drawn out process.

Again, get some advice by retaining an attorney.