Many homeowners may lose their real estate property unnecessarily. They do not realize they have the right to question their lender’s business practices to ensure that the lender has handled the mortgage in a professional manner. By challenging the validity of the lender’s processes and procedures, homeowners can determine whether or not their lender has set them up to land in foreclosure. Some borrowers are initiating the first shot and suing their lenders before foreclosure action can be initiated by the lender.
A few different ways exist to challenge lenders when they attempt to foreclose on a property.
In a foreclosure proceeding, the lender bears the burden of proving that there was a valid debt. Case law to support the debtor’s case can be found in the 1969 First National Bank of Montgomery versus Jerome Daly case heard in the Justice Court, state of Minnesota. As a consequence of this action, a debtor may challenge the validity of the debt in a claim against the bank to stop the foreclosure and sue for damages.
Because the right of redemption is an equitable right, foreclosure is an action in equity. To keep the right of redemption, the debtor can ask an equity court for an injunction.
If repossession is imminent, the debtor must seek a temporary restraining order. However, the debtor may have to post a bond in the amount of the debt. The bond protects the creditor if the attempt to stop foreclosure is simply an attempt to escape the debt.
Typically, lenders sell pools of hundreds, and oftentimes even larger pools, of mortgages. And, many sales forego legal steps. As a result, lenders who acquire the loans do not have the “legal standing” to pursue foreclosure. Homeowners can force lenders to prove they own the loan. Since many loans are sold in mortgage ”pools,” there is a tendency amongst lenders to sell the pools without following formal, legal requirements required for the sale of a mortgage and note. An “assignment” indicating transferred ownership has to be executed by the lender.
Many judges and courts are dismissing foreclosure action cases, whereby homeowners hire savvy attorneys who make the argument that without providing the court with a signed assignment, the lender has no legal standing. Lenders who sell the mortgage pools and then go defunct make it virtually impossible for the mortgage company who buys the loan to acquire the necessary signed “assignment” after the fact. Therefore, there is no party to foreclose on the person’s home.
There has been a huge windfall for many homeowners whose debt is essentially reduced to nothing.
Homeowners facing foreclosure should establish whether or not the initial loan contract (the actual documents) was legally valid. In this way, a homeowner is making allegations of fraud, overreaching, bad loan practices, and loan origination practices which violate the law. In essence homeowners are asking courts to “undo” their loans.
Many lenders have violated state and federal law by charging excessive fees and interest rates. Others misuse legally accepted loan practices, including disclosure requirements, fair lending requirements, and predatory lending practices, which covers improper marketing, underwriting, and pricing. In essence, homeowners make allegations within their foreclosure action that the lending practices of their lender in some way exploited them.
Consumers are encouraged to get the professional help they need to understand their loan agreements and demand their rights, both when they purchase property and when encountering problems.