Many property owners have found out that foreclosures are often conducted unfairly or not in accordance with the law. Unjust foreclosures continue to be a difficulty, but buyers are fighting back by suing over wrongful foreclosure.
Wrongful foreclosure occurs daily, whether because of maliciousness, negligence or a simple mistake. Foreclosures may seem like a statistic, but for the family and homeowner facing the nightmare, it’s maddening and disruptive.
What Is Wrongful Foreclosure?
Wrongful foreclosure is a foreclosure carried out inappropriately by the lender. There are specific rules which spell out the proper procedure. These laws are necessary considering the repercussions of taking someone’s home away. Every ‘I’ must be dotted and every ‘t’ crossed — or the foreclosure is not legitimate.
As banks exist to make a profit and not to help borrowers maintain their lifestyle, they can get trigger-happy and overreach. When a bank gets sloppy in carrying out a forfeiture, often laws are disregarded. The result is a family having their place grabbed unfairly, and often the family doesn’t know where to turn.
Penalties
The punishment for improper repossession is not carved in stone. For there to be a penalty, the borrower must speak up and act to fight the foreclosure. If the borrowers feel they have no recourse, the foreclosure will happen and nothing can rectify the situation.
Lawsuit
The most frequent result of suing over wrongful foreclosure is a settlement. A settlement means the lender will resolve the issue with an offer of cash or title because the case goes to trial. A variety of factors determine the amount borrowers may get in the settlement. Considerations include:
Mortgage amount
How egregious is the lender’s error and more. Just being behind on a mortgage doesn’t mean the bank can do whatever it wants.
There are some rules which are little-known to laypersons.
HBOR
The strongest legal theory for people facing foreclosure is the Homeowner Bill of Rights — or HBOR.
HBOR’s strongest rule is the one which prohibits ‘dual-tracking.’ Dual-tracking happens when a bank client is in the middle of getting a loan review while the bank proceeds with foreclosure — even while reviewing the loan modification request. It can be a scary game of chicken for the homeowner as the bank tries to foreclose before the modification is evaluated.
Dual-tracking regulations are complicated. To prove the lending institution is dual-tracking, the client has to prove a finished application was turned in with all the needed documentation. The client also has to prove the bank was conducting a review. Emailing a loan modification petition to the bank won’t do it. The law has carve-outs for this.
Although these types of cases are hard to prove, the sale can be stopped if a claim exists. Not only that, but the laws require the bank to cover your attorney fees. HBOR requires specific notices before sale as well.
Negligent Denial
Another common tool against the bank is negligence. California courts, for example, are beginning to impose a ‘duty of care’ on banks to handle modifications correctly. The duty put on banks is breached if the bank inappropriately denies a loan modification. Let’s say your income is $100K and the bank used $60K. If you can prove the bank’s refusal to use the proper numbers which would otherwise have been accepted, you can file suit for damages. Often, the courts stop a foreclosure until they evaluate the application using the proper information.