Foreclosure Defenses: Failure to Comply With Procedural Requirements

If the servicer or lender doesn't follow procedural requirements, you might be able to force them to start the process over.

By , Attorney · University of Denver Sturm College of Law

Because a foreclosure ultimately results in someone losing a home, courts take the process very seriously. If the servicer or current loan holder (called the "lender" in this article) doesn't strictly follow state law and comply with the terms of the mortgage or deed of trust, you might be able to stop a foreclosure.

The actual foreclosure procedures will vary depending on the state and whether the process is judicial or nonjudicial. But generally, if the servicer or lender skips any of the required steps, you might have a defense that could save your home.

Required Foreclosure Procedures

In most foreclosures, the servicer and lender must do some or all of the following.

Preforeclosure Loss Mitigation Requirements

Many states have preforeclosure loss mitigation requirements. Typically, under these laws, the servicer or lender must inform the homeowner about mediation options, provide contact information so the homeowner can explore options to avoid foreclosure, and refer the homeowner to housing counseling agencies and legal services programs.

For example, California law requires the servicer to personally contact the homeowner by phone or in person 30 days before recording a notice of default (the official start to the foreclosure process in that state) to assess the homeowner's financial situation and explore options to avoid foreclosure. If the servicer can't reach the borrower, it has to satisfy specific attempt requirements.

A lender's failure to comply with preforeclosure loss mitigation requirements might serve as a basis for challenging the foreclosure.

Follow Federal Laws That Protect Homeowners During Foreclosure

Federal mortgage servicing laws protect homeowners when it comes to foreclosure. In most cases, the servicer has to:

  • contact you (the borrower) to discuss ways to avoid foreclosure
  • let you know in writing about your options
  • assign personnel to help you in the foreclosure avoidance process
  • hold off on starting a foreclosure until you're more than 120 days delinquent on the loan, and
  • refrain from dual tracking.

If the servicer doesn't comply with these requirements, you might have a defense to the foreclosure.

Mortgages and Deeds of Trusts Often Require a Breach Letter

Mortgages and deeds of trusts often contain a clause that requires the lender to send a notice, commonly called a "breach letter" or "demand letter." This letter informs the borrower that the loan is in default and that the lender will accelerate the loan if the debt isn't brought current.

The breach letter generally must specify the following:

  • the default
  • the action required to cure the default
  • a date, usually not less than 30 days from the date the notice is given to the borrower, by which the default must be cured, and
  • that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.

Because mortgages and deeds of trust are contracts, the lender must strictly comply with the terms. If the lender or servicer neglects to send the breach letter and you raise this issue with the court, the court might order the lender to start the foreclosure over.

The Lender Must Follow State Procedures

Based on state law, the servicer or lender must provide appropriate and timely notice of the foreclosure. As part of the foreclosure, the lender or servicer might be required to:

  • mail you a notice of default in a nonjudicial foreclosure
  • serve you with a copy of the complaint in a judicial foreclosure
  • record certain documents in the local land records office
  • serve you with a notice of foreclosure sale, and
  • publish notice of the foreclosure sale in the appropriate place or manner, usually for a certain number of weeks in a newspaper in the county where the property is located.

These notices all have specific time limits and specific content requirements. For example, the notice might have to describe the property that's being foreclosed, include the amount due, state the amount necessary to cure the default, and provide information about the person who you can contact to discuss the notice.

If a lender doesn't comply with all of the state-specific requirements, you might be able to force the lender to go back and re-do the foreclosure or at least correct the defect, which can provide you with valuable time to try to work out an alternative.

Some Errors Are More Serious than Others

Major violations of the law, like if the lender failed to send you a notice of default as required by state law or a breach letter as required by the deed of trust, will probably cause the lender to have to start the foreclosure over. In this type of situation, a court will usually require a restart because, if you don't receive proper notice, the foreclosure can come as a complete surprise. You might have little time to cure the default or work out a deal to avoid foreclosure. In general, courts aren't likely to allow errors that deprive you of valuable time to resolve the problem.

But if the error is minor and doesn't cause you any harm, then it probably won't stop the foreclosure. For example, violations such as the misspelling of a name are almost always considered inconsequential in a court's eyes. Some state statutes even specifically say that specific trivial procedural errors won't affect the foreclosure.

How to Fight the Foreclosure

If you think the lender committed a procedural error and want to fight the foreclosure, the way you go about it depends on whether the process is judicial or nonjudicial.

Judicial foreclosure. In a judicial foreclosure, the lender files a lawsuit in state court. You will receive a foreclosure complaint, petition, or similar document, along with a summons. In this type of foreclosure, you will have the opportunity to raise defenses and counterclaims in an answer to the foreclosure complaint.

Nonjudicial foreclosure. With a nonjudicial foreclosure, the foreclosure is typically completed outside of the court system. (Although, some states require minimal court involvement in the process.) So, you'll need to file your own lawsuit to bring up any procedural errors that the lender or servicer committed.

Why You Might Want to Fight a Foreclosure Based on Procedural Violations

Challenging a foreclosure based on procedural violations could buy you more time to live in the home and give you a better opportunity to work out a loss mitigation option.

Hiring an Attorney

Lenders and servicers often make errors in the foreclosure process. Yet, most of the time, errors go unchallenged by the homeowner. If you're facing foreclosure and think the lender or servicer hasn't complied with legal requirements, you should speak to a qualified attorney who can advise you about what to do in your circumstances.

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