Q What Are The Defenses To Foreclosure?
There are a few key defenses that get you traction and can become a bridge to a settlement: (1) standing; (2) predatory lending; (3) document irregularities; and (4) modification fraud. Every defense is unique.
Standing: Maybe the bank is missing the original Note, key assignment documents, or you are being sued by a strange foreign Trust. You may have a defense that the party suing you really has an interest in your loan, or more importantly, legal authority and an ability to negotiate with you to settle. A “stranger to the transaction” who has no “dog in the fight,” such as a servicer, Trustee, or nominee, should not be the one you have to negotiate with you. It is unfair for several reasons: (1) they may not really have authority to settle with you; (2) they may not stand to lose anything, making it unfair for you to have to sell your case to them; and (3) they may just simply have no legal right to be involved in your case. Judges have grown increasingly insensitive and callous to this defense, but if it is presented properly, the law is fairly clear, and in appropriate cases, this can be a powerful weapon.
Predatory Lending: If you have an adjustable rate loan that kept jumping up every few years, based on a stated application, have a pick-a-payment loan, a jumbo loan, or a loan that exceeded the property value, this raises the question… did the bank really expect you to pay this loan back?... and did you go into this with eyes wide open or were you duped? A Judge is going to view any fraud in the origination of the loan as a violation of the law, and depending on what actions you took to raise the issue, it can be an impediment to the bank moving forward. One of the biggest problems with predatory lending is that there are short windows of time to raise these issues, and many foreclosures occur after the expiration of the time to protest these issues has passed.
Document Irregularities: If the people who examine your loan documents don’t have “personal knowledge” how can anyone be sure that the right decision is being made in the litigation? For this reason, a missing Note, or the failure of anyone to actually physically look at the Note, can be a roadblock.
Modification Fraud: Right now this is the hot issue. Judges are furious at banks for stringing along homeowners. The original loan might have been ok, or not that bad. The bank might have did a good/passable job originating, and they may have their documents in order. But, if they led you down the primrose path believing a modification was in the offing and then slammed the door in your face by suing you without warning – you have a case against them for that independent fraud – and one that has a lot of emotional force to get everyone involved (from bank’s attorney, to Court, to Loss Mitigation people, to mediator) to help you get a settlement and get the case out of Court.