Many homeowners have successfully stopped their lenders from foreclosing by filing wrongful foreclosure actions. A wrongful foreclosure action is a legal challenge to a lender’s right to foreclose and may be based on a variety of grounds including, but not limited to:
- Violation of federal and state consumer protection laws;
- Servicing Errors;
- Breach of contract; and
- Unconscionability (See Do I Need a Lawyer To File Wrongful Foreclosure?) .
Remedies and Damages in Wrongful Foreclosure Actions
The remedies available to a homeowner who successfully challenges a foreclosure vary depending on details of the wrongful foreclosure lawsuit and the laws of the state in which the lawsuit was filed.
- Truth-in-Lending Act (TILA) Violations – TILA requires lenders to disclose the actual cost of mortgage loans to borrowers. Such disclosures must be clearly and conspicuously made, in a meaningful and understandable sequence, in writing, and in a form which the homeowner may keep. If a homeowner wins a wrongful foreclosure action based upon TILA violations, a number of remedies are available to him, including:
- Recession (cancellation of the contract);
- Actual and statutory damages; and
- Attorney’s fees and court costs.
- Real Estate Settlement Procedures Act (RESPA) Violations – RESPA requires lenders to disclose the cost of settlement to borrowers and establishes guidelines for loan servicing and escrow account management by lenders. RESPA also prohibits kickbacks and referral fees. If a homeowner wins a wrongful foreclosure action in which he alleges RESPA violations, he may rescind the contract.
- Servicing Errors – It is not unusual for lenders and the company’s they employ to service loans to make mistakes in handling homeowners’ accounts. If a homeowner wins a wrongful foreclosure action based on servicing errors, the lender will be ordered to recalculate thereinstatement amount. Common servicing errors include:
- Crediting payments to the wrong account;
- Charging excessive fees;
- Charging unauthorized fees;
- Miscalculating or overstating the amount required to reinstate the loan; and
- Mishandling escrow accounts.
- Unconscionability – An unconscionable loan is one which is so unfair that is shocks the conscience of the judge or jury. If a homeowner wins a wrongful foreclosure action on the grounds of unconscionability, the court may cancel the loan in its entirety.
- Breach of Contract – In order to prevail in a breach of contract action, the homeowner must prove that the lender breached the original contract or breached a forbearance or loan modification agreement. If a homeowner successfully proves breach of contract, he may be entitled to monetary damages.
Getting Legal Help
If you believe you have a claim for wrongful foreclosure, you should speak with a qualified foreclosure attorney immediately. A foreclosure attorney will review the facts of your case to determine whether you have a valid claim and, if you do, will represent you in negotiations with and litigation against your lender.
