Wrongful foreclosure is a type of legal claim which may be filed by a homeowner against a lender or servicer. Wrongful foreclosure lawsuits arise when a homeowner has been harmed by the illegal, fraudulent, or other wrongful acts of a lender or loan servicer.
Types of Wrongful Foreclosure Claims
Wrongful foreclosure lawsuits may be based on a variety of wrongful acts by a lender or servicer. Typically, wrongful foreclosure lawsuits involve allegations of:
- Errors and mistakes in loan documents;
- Incorrect interest rate increases;
- Mishandling of escrow accounts;
- Misapplication of mortgage payments;
- Post-payoff abuses;
- Failure or refusal to communicate with a borrower or a borrower’s designated representative about the loan;
- Failure to adhere to the terms of a forbearance agreement;
- Unnecessary forced place insurance;
- Imposition of excessive or unauthorized fees;
- Improper handling of accounts of borrowers with confirmed Chapter 13 plans;
- Failure to follow state laws governing foreclosure sales;
- Errors or impropriety in how the foreclosure sale was conducted; and
- Violation of RESPA, TILA, and other consumer protection laws.
How to Handle a Wrongful Foreclosure
The options for handling a wrongful foreclosure vary depending on whether the foreclosure is pending or has already occurred. If the foreclosure sale is pending, a borrower may:
- Seek at temporary restraining order (TRO) to stop the foreclosure; or
- File bankruptcy to stop the foreclosure and litigate the issues as part of the bankruptcy case.
If the foreclosure sale has already taken place, a borrower may:
- Seek a TRO to stop the eviction process;
- Seek an order setting aside the foreclosure sale; or
- File a wrongful foreclosure lawsuit seeking damages.
Lender Misconduct While a Borrower Is In Bankruptcy
It has become more and more common for lenders to mishandle the accounts of borrowers who are in bankruptcy. The result is that many lenders seek permission from the bankruptcy court to foreclosure even though a borrower has made all post-petition mortgage payments. These errors occur because many lenders wrongfully insist on applying post petition payments to the delinquency which arose before the bankruptcy was filed.
Once a debtor has filed bankruptcy, some lenders, in an effort to avoid violating the automatic stay, cease all communication with the borrower, failing to notify a borrower of an escrow deficiency. Such a failure can be a violation of both federal and state law.
Getting Legal Help
If you believe you have been the victim of a wrongful foreclosure, you should contact an experienced foreclosure defense attorney immediately. A foreclosure defense attorney will review the facts of your case, examine your loan documents, and counsel you on whether you have a valid claim for wrongful foreclosure.
