What is Wrongful Foreclosure? Wrongful foreclosure is a legal claim which may be filed by a homeowner as a result of illegal, fraudulent, or other wrongful conduct on the part of a lender or loan servicer. Wrongful foreclosure lawsuits often involve one or more of the following allegations:
- Failure to follow state foreclosure laws;
- Real Estate Settlement Procedures Act (RESPA) violations;
- Truth-in-Lending Act (TILA) violations;
- Homeowner Equity Protection Act (HOEPA) violations;
- Violations of other state and federal consumer protection laws;
- Errors and mistakes in loan documents;
- Incorrect interest rate increases;
- Mishandling or escrow accounts;
- Misapplication of mortgage payments;
- Post-payoff abuses;
- Failure to adhere to the terms of a forbearance, loan modification, or short sale agreement;
- Refusal to communicate with the borrower about his loan;
- Imposition of excessive or unauthorized fees; and
- Improper handling of accounts of borrowers with confirmed Chapter 13 bankruptcy plans.
How a Wrongful Foreclosure Claim Works
If the lender has initiated a judicial foreclosure proceeding, the homeowner can raise wrongful foreclosure as a defense in his Answer. If the lender is utilizing non-judicial foreclosure proceedings, the homeowner may seek a temporary restraining order to stop the foreclosure. A homeowner may also file bankruptcy to stop the foreclosure. If a homeowner chooses bankruptcy, his lender may file a Motion for Relief from Stay in order to obtain the bankruptcy court’s authorization to foreclose. The homeowner may raise wrongful foreclosure allegations in his response to the lender’s Motion for Relief from Stay.
If the foreclosure has already taken place, the homeowner may be able to file a lawsuit seeking to have the foreclosure sale set aside. In the alternative he may file a wrongful foreclosure lawsuit in which he seeks monetary damages.
Value of a Forensic Loan Audit in Proving Wrongful Foreclosure
A forensic loan audit can be a valuable tool in a wrongful foreclosure action. A forensic loan audit is a thorough review of the loan documents, payment history, and circumstances surrounding the loan application and approval process. The purpose of a forensic loan audit is to identify violations of state and federal law. Any violations can be used by a homeowner in a wrongful foreclosure action or as leverage to get his lender to approve a loan modification, forbearance agreement, short sale, or deed-in-lieu of foreclosure.
Getting Legal Help
If you believe you have been the victim of a wrongful foreclosure, you should speak with a qualified foreclosure attorney. A foreclosure attorney will review the facts of your case and advise you of whether you have a valid claim.
