Until recently, successful defenses against foreclosure were relatively rare. But that is changing rapidly — more homeowners are successfully challenging foreclosure actions.

This change is due, in large part, to the unearthing of more and more evidence that the real estate industry has been rife with fraudulent and predatory lending practices. Because of this evidence, courts that once rubber-stamped foreclosure actions are now shifting their sympathies towards homeowners.

Homeowners and their attorneys are taking advantage of this change in judicial attitude, and challenging foreclosure actions in many different ways. Here’s a review of some of the most common defenses to foreclosure, and how to raise them in court

How to Raise a Defense to Foreclosure

In order to raise a defense to the foreclosure action, you must bring the issue before a judge. This is automatic in about half the states, where foreclosures are typically accomplished through civil lawsuits and judicial foreclosure orders.

In the other states, foreclosures typically take place outside of court (these are called nonjudicial foreclosures) and you have no automatic means to mount a legal challenge. To have your defenses ruled on by a judge in these states, you have to file a lawsuit alleging that the foreclosure is illegal for some reason and asking the court to put the foreclosure on hold — pending the court’s review of the case.

Common Foreclosure Defenses

As courts are increasingly sympathetic to challenges to foreclosure actions, attorneys across the country are raising many different types of defenses. Below is a description of the most common that I find helpful to sorting out a foreclosure or successfully defending against obtaining a judgment.

The Terms of the Mortgage Are Unconscionable

Over the years, attorneys have used a branch of law called “equity” to come up with a panoply of approaches to defending against foreclosure. The equity branch of law focuses on fairness in situations where a legal statute doesn’t provide adequate relief. It usually isn’t enough to simply claim that the foreclosure is unfair; rather, you have to come up with a specific justification for your position that has previously been recognized by the courts.

One such justification is a principle known as “UNCONSCIONABILITY”; that is, the terms of your mortgage, or the circumstances surrounding it, are so unfair that they “shock the conscience of the judge.” In one case where this defense was successful, the borrower spoke very little English, was pressured to agree to a loan that he obviously couldn’t repay, was not represented by an attorney, and was unaware of the harsh terms attached to the loan (such as an unaffordable balloon payment ).  The balloon payment was popular prior to the decline in the market in or about 2009.  We saw many of these in the courts defending foreclosures in both Bankruptcy Court and the Supreme Courts.

You Are a Service-member on Active Duty

If you’re on active military duty, the Service Members Civil Relief Act (SCRA) provides you with special protections. Most importantly, if you took out your mortgage before you were on active duty, your foreclosure must take place in court even if foreclosures in your state customarily occur outside of court. If a foreclosure is initiated while you’re on active duty, you can receive a postponement of the proceeding by requesting it from the court in writing.

The Foreclosing Party Didn’t Follow State Procedures

In some cases, the foreclosing party doesn’t follow state procedural requirements for bringing a foreclosure action (for example, it fails to properly serve you a notice of default required by state law). If this happens, you may be able to challenge the foreclosure. If your challenge is successful, the court will issue an order requiring the foreclosing party to start over

Virtually all judges will overlook errors that are inconsequential, such as the misspelling of a name. Similarly, if the foreclosing party’s error doesn’t actually cause you any harm, it may not be worth fighting over. More serious violations will get a more serious response from the court.

Improper Assignment

Many times your Note and Mortgage may have been assigned to other banks or servicers.  The client is normally expected to have received notice of the assignment. Furthermore, there are certain states which have, by statute, that govern how assignments must be done and how they should appear.

 

 

Denise A. Melville-Blackman, Esq.