Throughout the U.S., many homeowners have successfully challenged foreclosure actions by going to court and offering a variety of foreclosure defenses. A foreclosure defense is a factual or legal reason why a lender should not be allowed to foreclose.
Ownership of the Loan
In some jurisdictions, homeowners have successfully offered the “show me the note” defense to challenge a lender’s right to foreclosure. In these jurisdictions, a lender must prove ownership of the loan by producing the promissory note or a properly executed and recorded assignment. Moreover, courts have refused to allow loan servicers to foreclose because, they have no legal interest in the loan and, therefore, lack standing (the legal right) to foreclose.
Truth-in-Lending Violations
The Truth-in-Lending Act (TILA) requires lenders to disclose to borrowers the actual cost of mortgage loans. The disclosures required under TILA must be made clearly and conspicuously, in a meaningful and understandable sequence, in writing, and in a form which a borrower may keep. A lender that violates TILA is liable to the borrower regardless of whether the borrower actually suffered harm unless the lender corrects the violation within 60 days of its discovery and prior to any written notification, demand, or lawsuit from or by the borrower and the error occurred despite implementation of compliance procedures meant to avoid such violations.
Real Estate Settlement Procedures Act
The Real Estate Settlement Procedures Act (RESPA) requires that certain disclosures be made to a borrower regarding the costs of settlement or closing services and sets forth guidelines for lender servicing and escrow account management. RESPA violations may subject a lender to both civil and criminal penalties and may be used by a borrower as leverage to force a lender to agree to a loan modification, short sale, or other workout plan.
Unconscionability
A homeowner may challenge a foreclosure action on the grounds that the terms of the loan or the circumstances surrounding the loan transaction are unconscionable (unfair). To successfully challenge a foreclosure on the ground of unconscionability, a borrower must demonstrate that the loan was so unfair as to “shock the conscious” of the judge or jury.
Getting Legal Help
There are a number of other foreclosure defenses that may be available to a homeowner depending of the facts and circumstances of his case. They include:
- Servicing Errors;
- Breach of Contract;
- Failure to Comply with State Foreclosure Laws and Procedures; and
- Consumer Protection Violations.
An experienced foreclosure defense attorney will review your case and advise you of all possible defenses you may have.
