In some cases of foreclosure, there may be enough instances of misconduct by the lender to show that the entire process constitutes a wrongful foreclosure. Many states even have common law regarding this issue, as well as a cause of action specifically for “wrongful foreclosure.” Although the claim has not been popular in recent history, homeowners may be able to use this claim after losing their home.
When extreme circumstances affect the process of taking the home back, homeowners may have a better case to make for wrongful foreclosure. Instances of mortgage servicing abuse, for instance, have been used in the past as a complete defense to foreclosure. When notices are not given to borrowers or the servicing company refuses to negotiate for an alternative solution to foreclosure, there may be a defense to the entire action.
When homeowners are unable to get through to the lender to negotiate for a loan modification or other solution, claims of wrongful foreclosure may be raised. Many different types of mortgage contracts (FHA, for instance) require some sort of preforeclosure meetings or negotiation, and courts have held that foreclosure is such a harsh remedy that it should be relied upon as a last resort.
However, many banks are notoriously difficult to communicate with, often calling homeowners dozens of times a day, but with no real resolution to the problem even if the borrowers answer and want to negotiate. Collection calls rarely turn into productive discussions of alternatives to paying back all of the arrears at once, entering into an expensive repayment plan, or losing the home to foreclosure.
When borrowers are unable to get through to someone authorized to make a decision about their account, and the foreclosure process keeps moving through the courts, there may be a case for wrongful foreclosure. Homeowners may want to resolve the situation, but no good alternative is considered by the bank beyond lawsuits or the sale of the property at a county auction.
A wrongful foreclosure claim may also be raised in instances where the lender or servicing company has added excessive late fees, interest charges, home inspection fees, appraisal charges, improper escrow advances, forced placed insurance, and other charges. Lenders will add these fees in order to create a small default on a property with substantial amounts of equity, and then to eat up any remaining equity between the time of default and the sheriff sale.
Homeowners should be aware that there is relatively little recent case law on the claim of wrongful foreclosure; however, depending on the circumstances, it may be worth raising it as part of a defense to foreclosure. As always, state statutes and laws will affect how much this claim is worth pursuing, so it may be in the best interests of the borrowers to speak with a knowledgeable attorney.
Latest posts by Nick H (see all)
- Paramilitary SWAT Teams Now Enforcing Eviction Orders - November 13, 2012
- Options for Homeowners in Mortgage Distress - February 19, 2010
- Don’t Count on Credit Cards to Help You Stop Foreclosure - February 3, 2010