Loan is an inevitable element in human being’s life and livelihood. A person without any loan especially in the digital era is seen in sparse. The number of lenders increased when the demand for loan increased. But the lenders should be secured and be far away from risk even during the nonpayment of borrowed money. This article gives an over view of foreclosure and the defenses of foreclosure.
The term itself refers to the specific legal process in which a lender attempts to recover the balance of loan from a borrower who has stopped making payments to lender by forcing the sale of asset used as collateral for the loan. A lender obtains a security interest from the borrower who mortgages or pledges the asset to secure the loan. If the borrow defaults lender tries to repossess the property to avoid the risk incurred during the nonpayment of money. In BFP v. Resolution Trust Corporation it was held that the courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. The equitable right acts as a blanket which bars the lender from repossessing the property. There are mainly two kinds of foreclosures-judicial and non judicial foreclosure, foreclosure by judicial sale and by power of sale.
Length of the foreclosure may depend on the state. Home owners may avoid foreclosure by refinancing, short sale, alternate financing, bankruptcy or agreement with lender. It has three steps.
- Timeline beginning with initial missed payments
- Schedule sale
- Redemption period if available
Though there are no sufficient defenses to the foreclosure, some of the common defenses raised can be briefly described below.
- Terms of mortgage are unconscionable: Principle of unconscionability means the term of your mortgage or the circumstance surrounding it are so unfair that they shock the conscience of the judge.
- Service member on active duty: Service member’s civil relief Act provides special protection to the active military members. If mortgage is made during active duty they will be provided with 9 months postponement by request made to the court in writing.
- Foreclosing party did not follow state procedures: Non following of state procedure by the foreclosing party may fail to gain the worth to fight against borrower. If serious violations are made the court may give serious responses.
- Failure to prove mortgage: It is mandatory that the foreclosing party must prove it own mortgage. Failure to prove the same act as defense.
- The mortgage service provider made a serious mistake: The grounds on which foreclosure may be challenged based on mistakes are
- Crediting payments to wrong party
- Imposing excessive fees or fees not authorized by lender or owner
- Substantially overstating the amount you must pay to reinstate your mortgage.
- Original lender engaged in unfair lending practices: It is a defense that if borrower proves that the lender has violated the state law designed to protect borrowers from illegal lending practices.
Judiciary is not simply to decide the case but to balance the social economic and cultural justice. The lender may be a risk when he is not restored. This is a privilege while he is immune from mal-practicing his privilege. So the defense is made available to the borrowers by the judiciary. Therefore we can conclude that that number of defenses will increase when the number of privileges increases.