Information For Homeowners Facing Foreclosure

How Do Recent Foreclosure “Freezes” Affect Your Pending Foreclosure?

By now, if you are reading this, you probably realize that two major lenders in the U.S., (actually, but the time you are reading this, it is probably more than two!) Ally Financial, which is GMAC Mortgage, and JPMorgan Chase Bank have suspended their foreclosure efforts in 23 states across the country.  These states are all what are known as judicial foreclosure states, meaning the lender must file a lawsuit and be granted an order by a judge to allow them to sell the property at a foreclosure sale.  These suspensions, freezes, whatever you want to call them have been done because the banks have all but admitted that they filed dubious documents with the various courts in support of their Complaints, Petitions, or whatever else they filed to foreclose on properties.

Essentially, the banks have realized, and admitted that they employed “robo-signors” who signed off on Affidavits or other supporting documents used in the foreclosure process, either without knowledge of the actual facts of the case stated in the Affidavits, or that the Affidavits themselves included incorrect or untrue facts.  This is a huge problem, namely, because these were sworn documents, filed in a court of law, attesting that all of the facts stated were true.  Essentially, the lenders have committed perjury.

These Affidavits were not only the basis of the Complaint to Foreclose, but also in support of Motions for Summary Judgment when a homeowner retained an attorney to defend them.  To put a number on the people who have lost their homes due to these dubious, untrue documents would be impossible, it may number in the millions.

Now that these two banks have frozen their foreclosures in judicial states, at least a few of the homeowners are safe.  But what happens to those homeowners who have already lost their homes due to these types of foreclosures? What happens to those homeowners who are facing foreclosure by different lenders, such as Bank of America, Citi or Wells Fargo? Better yet, what happens to the homeowners in non-judicial states, such as Missouri, who are still being foreclosed against? The short answer is, we don’t know, the long answer, at least in my opinion, can be found below.

Homeowners already foreclosed on:

Despite what many may think, homeowners who’s home or property has already been foreclosed upon and sold, may still have claims against their lender.  In some cases, these claims may even be able to overturn the sale of the property and reinstate an owner’s rights.

Most states have what is called a right of redemption law, which allows a homeowner to repurchase their home or property for a certain period of time after the date of the sale, if the buyer of the property was the lender or investor.  Therefore, if the property was purchased by the lender, or by the investor (typically Fannie Mae or Freddie Mac), the homeowner may be able to get title to their property, even after the sale.

With the latest “admissions” by some lenders that they have filed false, untrue documents with the court in support of foreclosure, the claims for fraud against these lenders by homeowners who have already been foreclosed on will skyrocket.  It will be extremely difficult for a lender to come back and argue that they did not defraud their customer (the homeowner) and/or the court by filing these documents.

Additionally, a homeowner who has already lost their home to foreclosure may have claims for negligence, breach of contract, or wrongful foreclosure against a lender who has already sold their home at a foreclosure sale.  Again, these claims relate back to the averments and assertions made on behalf of the lender to the court.  Claims that the foreclosing party was the holder of the note, or that they were assigned an interest in the note may prove to be false.  These types of statements, when false, give rise to a multitude of claims against the lender.

While these will not always be enough to return a house to its previous owner, they may be enough for a significant damages award to be rendered against the lender.  These damages awards may be enough to get a homeowner who wrongfully lost their home, a fresh start monetarily.

Homeowners facing foreclosure by other lenders:

The first thing for these homeowners to do is to watch the news and see if, or better yet, when, their lender declares a halt to foreclosures as well.  With the recent media surrounding the foreclosure freezes by Chase and GMAC, it is only a matter of time before other lenders follow suit.  It is not like this problem which caused the freeze is unique to only Chase and GMAC.

In addition to keeping their eyes peeled for their lender to join the parade, homeowners facing foreclosure in a judicial state by a lender who has not yet frozen their foreclosure process, is to file an Answer or Entry, or to retain an attorney to represent them.  If you fail to appear before the court by the required date, you may waive your defenses, or even potentially other claims you may have against the lender.  The worst thing you can do is fail to Answer or Appear in time and be held in default.

If a foreclosure is already in the process, an Answer has been filed, and a homeowner is currently facing a Motion for Summary Judgment, the best answer is to contact an expert who can inspect your loan documents for errors, and who can testify as to why your lender’s supporting Affidavits or exhibits may be false.  While it is fairly limited as to who may be an expert on this, there are many people out there who have already been qualified by the courts to testify as to these issues.  If you hire an expert, they can nearly always create a question of fact to defeat summary judgment.

With the recent mess created by Chase and GMAC stopping foreclosures, there should be an increased level of judicial scrutiny when a lender files for a foreclosure.  However, the fact may be that many judges and courts do not even know that this is an issue.  Many people do not watch the news, read the paper or surf the internet on a daily basis.  Therefore, it is the job of attorneys, and homeowners representing themselves pro se to inform the court, or their individual judge of these issues by filing motions or requesting judicial notice of the issue.  Unless your judge knows of these problems the banks are having, they will continue with business as usual.

Homeowners in non-judicial states:

Homeowners facing foreclosure in non-judicial states face the largest hill to climb in defeating a foreclosure and protecting their homes.  This is because in a non-judicial state, the lender does not need to file a lawsuit, or any type of court document or proceeding, in order to foreclose.  Instead, the lender simply must publish notice of a pending sale and notify the homeowner according to the rules of their individual state, and then conduct a sale of the property.

However, that does not mean that a homeowner has no recourse.  Again, just as with homeowners in judicial states who are facing foreclosure from a lender who has not yet halted their foreclosure efforts, the first step is putting the court and judge on notice of what is going on.  Many of these judges may already be aware, but it never hurts to let them know again, and make sure they know that the lenders in other states have stopped foreclosures, but are still proceeding in your state.

If you can get a court to take judicial notice of the fact that lenders are filing false Affidavits in other states, or have done so in the past, especially if that is the same lender foreclosing on you, then it may raise the bar for them in an unlawful detainer action.  An unlawful detainer is essentially a suit filed to allow the lender to evict.  In a non-judicial state, typically, a lender cannot evict the occupant of the house without filing a court action and being granted an order, just like a foreclosure in a judicial state.  However, it is almost never the actual lender who purchases the house at the Trustee’s Sale, instead, it is the investor, either Fannie Mae or Freddie Mac.  Therefore, the lenders have every incentive to go through with foreclosures in these states, as they will almost never have to affirm that they were the holder of the note, or that they had any interest in the property at all.  Therefore, the lender is at very little, or no risk, when foreclosing in a non-judicial state.

However, homeowners still have recourse against these lenders following the sale.  A suit for wrongful foreclosure may, and should, include allegations that the lender was not the note holder, or did not have an interest in the property giving them a right to foreclose.  In support of these allegations, the lender’s admission that they were filing false documents to foreclose when they had no interest in other states may be judicially acknowledged.

It is my belief that the happenings in judicial states will come to bear, and will bear great precedent, for wrongful foreclosure actions in non-judicial states as well.  These admitted mistakes or frauds committed by banks in judicial states will be firm evidence, or at least cast a shadow of doubt on the lender’s ability or right to foreclose.  If the bar is raised on the lender’s burden of proof, they will oftentimes not be able to meet that burden.  Therefore, wrongful foreclosure suits should be more effective than ever in non-judicial states based on these recent developments.

Additionally, just like a homeowner who has lost their home in a judicial foreclosure, a homeowner whose house was sold at a Trustee’s Sale may have numerous claims against the lender for damages.  Claims such as fraud, negligence and breach of contract also exist in these cases.  The only claim that these property owners would lack is fraud on the court, because there was no court to perpetuate a fraud on.  However, that claim would arise the moment the lender files a false or misleading Affidavit or other supporting document with the court, in defense of a wrongful foreclosure claim.

Conclusion:

Despite the belief by many homeowners and others, there are defenses against foreclosure other than filing bankruptcy, settling up with the bank, or walking away from your home.  There are numerous defenses, mostly based upon errors made by the lenders in the lending process, or the chain of title of the loan.  These defenses change depending on the state the home is located in, and the individual foreclosure laws of that state.

The one thing that every homeowner facing foreclosure can, and should do, is speak with an attorney as soon as they are notified of a foreclosure action.  An experienced, knowledgeable, foreclosure defense attorney can analyze the situation of each individual homeowner, and determine what defenses they have against a foreclosure.  If a homeowner has already been foreclosed on, the attorney can determine what viable claims they may have for damages, or even for overturning the foreclosure sale itself.

The author, Rusty Reinoehl, is a foreclosure defense attorney with offices in St. Louis, Missouri.  He is engaged in helping homeowners defend their houses and property against wrongful foreclosures throughout Missouri and Illinois.  He operates the blog http://www.stlforeclosuredefense.wordpress.com and can be reached at stlforeclosuredefense@yahoo.com.

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