If you’re looking for a way to fight foreclosure rather than simply negotiating with your bank or letting them take your home from you, you may want to investigate some of these legal defenses to foreclosure.
Foreclosure is a legal process…just like the contract you entered with you lender. We often complain the government is too involved in our daily lives and that their involvement hurts more than it helps. But when it comes to purchasing a home, the fact that home buying is one of the nation’s most regulated activities may just help you out.
These are 13 of the 23 legal defenses that Attorney Troy Doucet describes in his book 23 Legal Defenses to Foreclosure. If you’re interested, you can check him and his book out at http://www.foreclosure-fight.com
1. Truth in Lending Act (TILA) violations enabling rescission.
As part of every loan transaction, the bank must provide you correct disclosures at 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. Rescission means the loan is cancelled and all money paid to the lender is refunded.
2. Truth in Lending Act (TILA) violations enabling damages.
If you purchased the property with the loan or used the proceeds to refinance and proper disclosures were not given, then you may be entitled to money damages to offset the foreclosure.
3. Home Ownership and Equity Protection Act (HOEPA).
This is a very powerful federal law governing high cost refinance loans. If your loan is under $150,000 or the initial rate was above 8%, you should evaluate your loan for violations of this act. Violations here enable rescission and substantial money damages that can be in excess of the loan’s dollar amount.
4. Failure to Provide a Correct Notice of the Right to Rescind.
There 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 closing date.
5. Breach of Contract.
Many times the lender will do things that are unfair or unjustified before starting the foreclosure process. 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.
6. 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.
7. Fair Debt Collection Practices Act.
This federal law requires servicers or lenders who obtain the mortgage after default follow specific protocol in attempting to collect on the debt. A failure to follow this law enables statutory damages and attorney’s fees.
8. Fair Credit Reporting Act.
This federal law governs lenders ability to report information about the mortgage and requires the accurate reporting of negative information. Violations of this act also enables damages and attorney’s fees. Punitive damages might be available under this act.
9. Real party in interest.
This is a procedural defense to foreclosure that can be extremely effective at stopping the lender’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.
10. 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.
11. Failure to state a claim upon which relief can be granted.
This general defense attacks the lender’s ability to foreclose and is can be used in conjunction with one of the other foreclosure defenses.
12. Failure to establish conditions precedent.
Want to get a foreclosure action thrown out of court right away? Use this defense that attacks the lender’s pre-foreclosure processes.
13. Failure to comply with 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.
This is just the start of Truth in Foreclosure’s coverage of legal defenses over the coming days. I know this post only scratches the surface, but hopefully it gives you someplace to start and if you have a question, please leave it as a comment to this article (don’t get too personal, though).
Tags: deed of trust, judicial foreclosure, law overview, litigation, mortgage deed, non-judicial foreclosure
March 9th, 2010 at 11:08 pm
Everybody fight! If they ‘lost’ all this paper work (which sounds pretty fishy already!) And can’t prove they own your property, why should you pay them? It’s not even them who lost money. Homeowners should side up with the investors and sue the ‘banks’ for misrepresentation and fraud!