Wrongful Foreclosure

A wrongful foreclosure occurs when a mortgage servicer violates either the state or federal law that governs the foreclosure process. Some of these requirements are governed by the Homeowners Bill of Rights (HBOR) which was a series of changes to the California Civil Code governing foreclosure that were put in place in 2013 to protect homeowners trying to modify the predatory mortgages they received during the previous run-up to the foreclosure crisis. Although many of the statutes protecting the loan modification process have sunsetted (no longer apply) beginning in January 2018, the protection against “dual tracking” still remains although there are plenty of loopholes for the servicers to skip through.

Wrongful foreclosure can also occur when a servicer tries to block you from reinstating or repaying your mortgage – which is your right by statute. Pursuant to California Civil Code §2924c(e), a borrower has a right to reinstate (or pay off) a mortgage until five business days prior to a scheduled foreclosure sale and your right to repayment exists up until the time of sale. Although it seems counter-intuitive for a mortgage servicer to force a borrower into foreclosure by refusing payments this happens because mortgage servicers are not beneficiaries that benefit by repayment, they are servicers that benefit by late fees, penalties, and foreclosure and this sometimes induces them to interfere with a borrower’s reinstatement rights. The mortgage servicer may try to confuse you by sending you a “payoff” amount which is the full repayment of the mortgage instead of the reinstatement amount which is only the amount to bring your loan current.

Wrongful foreclosure can also occur when a mortgage servicer induces a borrower to rely on a promise and the borrower takes some action or neglects to take some action, such as bankruptcy, based on that promise. These cases where there are a promise and reliance give rise to a cause of action for Promissory Estoppel. These promises are often verbal so that they can later be denied.

A Wrongful Foreclosure can also occur when the party foreclosing lacks standing to foreclose. This can occur when an investment bank tries to foreclose on a mortgage for which they do not retain servicing rights based on a VOID Assignment in your chain of title. California Case law requires substantial evidence to make such a pre-foreclosure claim of lack of standing to foreclose and such evidence is obtained by a close study of the recorded documents in your chain of title.

Helping Homeowners Hold Lenders Responsible for Wrongful Actions

Because proving wrongful foreclosure is complex, the task is best undertaken by an experienced attorney who knows the applicable lending laws and has the resources to fully investigate documents relating to your loan. It’s also important to have an attorney with the experience to deal with big banks and other lenders. At Advocate Legal, we fight for homeowners facing the unjust or unlawful foreclosure of their homes through no fault of their own. Using our years of experience, we work diligently and aggressively to hold lenders responsible when their negligence or fraud seriously harms individuals and families.

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Fraud or negligence

A wrongful foreclosure occurs when a bank or other lender improperly foreclose on a property and thereby causes the owner to suffer damages. Lenders often foreclose wrongfully because of bank negligence and resulting errors. An example would be when a bank mistakenly reports that payments are late or that a mortgage is in default. When one lender sells a mortgage to another, records may be misplaced or lost, and some or all payments may not be credited. In such cases, the bank is at fault and foreclosure on the home is unlawful.

Lenders may also be held liable for wrongful foreclosure because of fraudulent practices, fraudulent actions and certain predatory tactics. For example, a lender may trick the homeowner into default by promising a loan modification only after late payments are made.

Breach of Contract

Homeowners may sue a lender for breach of contract if the lender has provided a loan modification and then unilaterally tries to change it. This occurs with regularity as interest rates get higher, property values increase and lenders decide to renege on the modification they gave you a year ago. If you have a modification agreement and the lender suddenly switches the terms unilaterally, this is a breach of contract and you have the right to sue. 

You may also sue for if the lender has taken trial payments from you and then denied you a modification with no good reason. This cause of action is called promissory estoppel and it can be asserted if you have made these trial payments based on the promise of a modification. Promissory estoppel is similar to a breach of contract but does not require a written contract.

Lack of Standing to Foreclose

Lack of standing to foreclose may occur if there is a void assignment of your loan at any time in your loan’s history. If your loan was a sub-prime loan originated between 2004 and 2009, there is a good chance that it was sold to a real estate investment trust (REIT) and the assignment may have been illegal and void. One of the ways we assert wrongful foreclosure is through the use of a loan audit, along with a review of the documents recorded by your lender with the local county recorder. The part of the loan audit that tracks your loan’s purchase into a REIT is called a securitized audit or a Bloomberg audit.

You can best fight a wrongful foreclosure by catching the bank’s mistake early and notifying the bank of all errors. When the bank is given notice that its information is incorrect, it should not proceed with a foreclosure. One way our attorneys assist clients in stopping foreclosures is through audits. In a regular audit, we conduct an investigation of all recorded documents relating to the loan with the goal of finding evidence of fraud by the lender. A securitized audit also called a Bloomberg audit, tracks your loan when it is sold to a REIT and becomes part of a pool of loans bought and sold like stocks. A securitized audit includes a title search, review of documents for fraud, the name of the REIT that bought the loan and other relevant information.

Breaks in the chain of title may be discovered during the Bloomberg audit and provide evidence in a client’s case. These are tools that are best used effectively in the hands of an experienced attorney because there are always multiple issues to consider. In a non-judicial state such as California, the fact that the deed of trust has become separated from the promissory note is not sufficient grounds to stop a foreclosure, but it is a piece of the puzzle. Many additional facts may contribute to your case, such as showing that the lender no longer has possession of the note or the deed of trust or that the original note cannot be found, or showing that there are mistakes in the recorded documents that reveal fraud.

If you are post-foreclosure and have already lost possession, an eviction defense attorney at Advocate Legal can sue your lender while also working to keep you in your home as long as possible.

Contact Attorneys Dedicated to Fighting for the Rights of Homeowners

Lenders and servicers are not on your side and will do almost anything to avoid modifying your loan and to trick you into foreclosure. You need an advocate who will be on your side and who knows the tricks the lenders play. At Advocate Legal, our attorneys devote their time and resources to protecting the rights of homeowners facing wrongful foreclosure. To learn how we can help you, contact our firm online to schedule an appointment.