FORECLOSURE DEFENSES

OUR SPECIALLY TRAINED EXAMINERS, EXAMINE YOUR MORTGAGE TRANSACTION SEARCHING OUT FACTS TO SUPPORT YOUR LOCAL ATTORNEY IN IDENTIFYING THESE TYPICAL FORECLOSURE DEFENSES

 

 

APPRAISAL FRAUD

Many appraisers inflate the value of a property to help a lender justify a predatory loan. Sometimes the appraiser does this to please particular lenders to obtain repeat business from those lenders; other times appraisers may be colluding with lenders and receiving kickbacks for fraudulent appraisals. Remedies for appraisal fraud can include actual damages, punitive damages, and attorney fees.

NOTARY FRAUD

Quite often the NotaryÂ’s Commission is invalid, or they notarized documents without observing/witnessing the borrower sign documents. This invalidates all documents and can lead to beneficial concessions from the lender, and possible punitive damages.

FAILURE TO ESTABLISH CONDITIONS PRECEDENT

Want to get a foreclosure action thrown out of court right away? Use this defense that attacks the lenderÂ’s pre-foreclosure processes.

BREACH OF CONTRACT

Just as you have an obligation to pay the mortgage, the lender has a responsibility not to interfere with your ability to do so – like force placing insurance making the payments substantially more expensive than they should have been. In addition, lenders who quietly reward brokers for brining borrowers to them—and subsequently passing on the cost of that reward to the borrower—may share liability for the broker’s breach of fiduciary duty.

UNCONSCIONABILITY

This defense is focused on the events surrounding the creation and closing of the mortgage loan. A violation here gives the court great leeway in deciding whether the mortgage should be voided or changed.

CREDIT REPUTATION DAMAGES

Upon determining that there has been a statutory violation, legal error, contract breach, or tortious conduct regarding the foreclosure, economic damage may have been inflicted on the home owner(s) as evidenced by the remarks in subscriber credit reports and erosion of the credit scores.

REAL PARTY IN INTEREST

This is a procedural defense to foreclosure that can be extremely effective at stopping the lenderÂ’s ability to foreclose. It essentially questions the ownership of the mortgage and questions whether the foreclosing party is, in fact, the holder of the mortgage and note.

UNFAIR AND DECEPTIVE PRACTICES

Over reaching mortgage transactions can often be challenged under state unfair and deceptive acts and practices (UDAP) law. Broker misconduct and yield spread premium, at least without disclosure, may violate a UDAP statute. There may be licensing violations. Transactions with lenders and/or brokers who are not licensed, but should be, may be void. It may be a UDAP violation for a lender to do business with an unlicensed broker.

FHA PRE-FORECLOSURE REQUIREMENTS

FHA requires every lender to mail a booklet called “How to Avoid Foreclosure” and set up a face-to-face meeting with the borrower before foreclosing (in most cases). If the lender does not take these steps, then it cannot foreclose.

INTERSTATE LAND SALES FULL DISCLOSURE ACT

The Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701, et seq., applies to sales of subdivisions containing 25 or more residential lots (potentially 100+) where interstate commerce is used to sell the subdivision’s lots. There are specific requirements and disclosures that need to be made to the consumer prior to the sale and at closing when a builder wants to sell of lots.

FAIR DEBT COLLECTION PRACTICES ACT

The FDCPA kicks in after the borrower goes into default and then contact is initiated by a new servicer, lender, or collection agency. Consumers may bring lawsuits against debt collectors violating the FDCPA, and may obtain damages from the debt collector. Damages may include actual damages costs of the lawsuit, and reasonable attorneyÂ’s fees. Actual damages can include compensable credit reputation damages.

EQUAL CREDIT OPPORTUNITY ACT

Bait-and-switch tactics can state a claim under the ECOA. ECOA provides private remedies for actual and punitive damages, equitable relief, and attorney fees.

TRUTH IN LENDING ACT

UAs part of every loan transaction, the bank must provide the homeowner correct disclosures at or before the time of closing, like the amount of the finance charge and APR. If these disclosures are inaccurate, the loan may be statutorily rescindable under TILA. The lender must also provide a “Notice of the Right to Rescind.” This is a specific notice that must be provided to refinance customers at closing. If this form is inaccurate or incorrect, the loan is rescindable up to three years after the date of closing.

REAL ESTATE SETTLEMENT PROCEDURES ACT

This federal law governs many types of disclosures that lenders must provide at the time of closing, in addition to prohibiting things like kickbacks and unearned fees. It enables damages, and sometimes rescission if the error triggers TILA.

HOME OWNERSHIP AND EQUITY PROTECTION ACT

This is a very powerful federal law governing high cost refinance loans. Violations here enable rescission and substantial money damages that can be in excess of the loanÂ’s dollar amount.

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