Due to the amount of foreclosures in recent years, there have been a large number of errors and violations found in the mortgage process. This has led courts to have a more sympathetic attitude toward borrowers. In many states, foreclosure actions must be filed in court. If you are not in a state that has this requirement, you will have to file a lawsuit.

Defenses to Mortgage Action

The number of defenses to mortgage action has significantly increased. The following is a list of defenses to foreclosures based on the most common errors found in the mortgage process:

Unconscionable Mortgage Terms

When a party claims that a mortgage has unconscionable terms, they are essentially claiming that the mortgage is unfair because the requirements are so appalling that they “shock the conscience” of the court. Unconscionability is a defense against a mortgage foreclosure that is recognized by the courts and means that either the mortgage terms, or the details around it, are so shocking that judicial action is justified.

Active Duty Military

The Servicemembers Civil Relief Act (SCRA) provides special protection to active duty service members. If you are an active duty service member, any foreclosure action against you must take place in court, even if you live in a state that doesn’t require it. You can also have the proceedings postponed if the mortgage foreclosure action is initiated during the time you are on active duty status.

Failure to Follow Required Procedures

When a foreclosing party fails to follow the proper procedure when filing a foreclosure action, the court may be willing to rule that the foreclosing party must start over. The court will not generally grant this relief for minor violations like misspellings or other errors that cause no harm. However, serious violations, especially those having to do with proper notice, will likely be recognized.

Failure to Prove Mortgage Ownership

The only party that can bring a foreclosure action is the mortgage owner or its representative. Because many mortgages have been sold and resold to many entities, it is often difficult to prove ownership. Foreclosing parties frequently have difficulty providing the proper documentation to prove ownership.

Serious Errors by the Mortgage Servicer

The companies or institutions that mortgage owners use to handle the routine needs of the mortgage are called mortgage servicers. These entities commit a surprising number of errors that often are grounds to challenge a foreclosure action. Some of these errors include charging excessive and/or unauthorized fees and allocating payments incorrectly, often to the wrong account or party. Sometimes mortgage servicers will significantly exaggerate the cost to reinstate a mortgage.

Unfair Lending Practices by the Original Lender

The Truth in Lending Act (TILA) and an amendment to the TILA, the Home Ownership and Equity Protection Act (HOEPA), are federal laws intended to protect borrowers from unfair lending practices that sometimes occur in residential mortgages. If you can prove that your lender violated either of these laws, you may be able to challenge a foreclosure action. The major remedy for borrowers rescission of the loan, though other remedies are allowed under TILA and HOEPA.



Lawrence Tucker