Homeowner has quitclaimed to someone else under the same roof

[Robert E.]

I'm looking at a property due for auction sale in IL. A few weeks after the Lis Pendens was filed by the lender, the homeowner executed a quit claim deed to transfer ownership of the property to another person resident at the same address. For example... (and these are not the actual people's names or address)

Jeffrey Smith, an unmarried man, resident at 1234 Penny Lane, hereby quitclaims to Lucy Kelly a divorced woman resident at 1234 Penny Lane.

Jeffrey Smith is the borrower from the lender who is foreclosing. Lucy Kelly is not connected to the lender, i.e. she isn't on the mortgage loan that's being foreclosed on.

Does the state recognize this as a legitimate transfer of ownership from Jeffrey to Lucy?

If that were the case, then it seems if someone were to bid on this property at auction they'd be paying off Jeffrey's balance due to the mortgage lender, but not obtaining ownership of the property from Lucy, as ownership has been transferred to Lucy now. I must be missing something here.

What happens in these situations... where a borrower quitclaims to a friend or family member without first satisfying all loans attached to the property that's being foreclosed on?