Foreclosure Defenses: The Lender's Failure to Comply With Procedural Requirements

If the foreclosing lender does not follow procedural requirements in your foreclosure, you may be able to force the lender to start over.

Because a foreclosure ultimately results in someone losing a home, courts take the process very seriously. If your lender does not strictly follow state law and act in accordance with the terms of the mortgage or deed of trust, you may be able to stop the foreclosure.

Read on to learn more about typical foreclosure requirements, which types of errors could provide grounds to stop the foreclosure, and how you can challenge the foreclosure if the lender doesn’t comply with all of the procedural requirements.

(If you are struggling to pay your mortgage or facing imminent foreclosure, visit our Foreclosure section for help.)

Typical Foreclosure Requirements

In most foreclosures, the lender must do some or all of the following things to properly foreclose, though the actual procedure will vary depending on the state and whether the foreclosure is judicial or nonjudicial. (To learn about the differences between judicial and nonjudicial foreclosures, see Nolo's Judicial v. Nonjudicial Foreclosure topic area.)

Foreclosing Party Must Meet Pre-Foreclosure Loss Mitigation Requirements

During the foreclosure crisis, several states enacted pre-foreclosure loss mitigation requirements. Typically, under these laws, the foreclosing party (lender) must:

  • inform the homeowner about mediation options
  • provide contact information so the homeowner can explore options to avoid foreclosure, and/or
  • refer the homeowner to housing counseling agencies and legal services programs.

For example, California law requires that the lender or mortgage servicer 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.

A lender’s failure to comply with pre-foreclosure loss mitigation requirements may serve as a basis for challenging 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, informing you that your loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)

The breach letter generally must specify:

  • 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.

Since mortgages and deeds of trust are contracts, the lender must strictly comply with the terms to properly foreclose. If the lender or servicer neglects to send the breach letter and you raise this issue with the court, the lender may have to start the process over.

(To learn more about mortgages and deeds of trust, see our article What’s the Difference Between a Mortgage and Deed of Trust?)

The Lender Must Follow State Procedures

Based on state law, the lender must provide appropriate and timely notice of the foreclosure. As part of the foreclosure, the lender may 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 certain content requirements. For example, the notice might have to describe the property that is 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.

When it comes to foreclosure defenses in this area, the term "regularities of sale" often appears. When a court looks at the regularities of the foreclosure sale process, it conducts an examination to determine whether proper procedures were followed or whether there was some defect in the sale. Whether the court does this in all or most cases, or only under certain circumstances, depends on state law and foreclosure procedure. In Georgia, for example, most foreclosures are nonjudicial but the court must confirm the sale if the lender wants to pursue a deficiency judgment against the homeowner. As part of the hearing to confirm the foreclosure sale, the court will routinely evaluate the regularity of the sale. At the hearing to confirm the sale, the court will review whether or not the lender followed proper foreclosure procedures by looking at things such as:

  • the notices that the lender sent to the borrower
  • the foreclosure sale advertisement that the lender published, and
  • whether there was any fraud or other irregularities in the sale.

If the foreclosure sale was not proper, the court may order a resale of the property.

If a lender does not comply with all of the state-specific requirements, you may 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 to foreclosure with your lender.

Some Errors Are More Serious than Others

Major violations of the law, such as 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. This is because if you don’t receive proper notice, the foreclosure can come as a complete surprise leaving you little time to try to cure the default or work out a deal with your lender to avoid foreclosure. In general, courts are not likely to allow errors that deprive you of valuable time to resolve the problem.

However, if the error is minor and does not 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 the eyes of the court. In fact, some state statutes even specifically state that certain trivial procedural errors will not 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. (To learn more, read our article How to Fight a Foreclosure in Court: Judicial Foreclosure.)

Nonjudicial foreclosure. With a nonjudicial foreclosure, the foreclosure is completed completely outside of the court system. There is no court hearing or other opportunity for you to raise defenses or counterclaims so you'll need to file your own lawsuit to bring up any procedural errors committed by the lender. (To learn more, read our article How to Fight a Foreclosure in Court: Nonjudicial Foreclosure.)

(For more information about the difference between judicial and nonjudicial foreclosures, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)

When to Hire an Attorney

Lenders and servicers often make procedural errors in the foreclosure process, yet most of the time these errors go unchallenged by the homeowner. If you are facing foreclosure and think that the lender has not complied with procedural requirements, you should speak to a qualified attorney who can advise you about what to do in your circumstances.

To learn more about different foreclosure defenses, see our Fighting Foreclosure in Court area.

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