What is a mortgage?
A mortgage is an interest in real property (your home) that a homeowner gives to a lender as security for a loan. When you go to the bank to get a loan for your house, you give the bank a mortgage, or an interest in your property, that they keep as collateral in case you are unable to pay the loan back. If you default on the loan, the bank may force the sale of your home via a foreclosure action in order to recover the principal and interest remaining due on the loan.
What is foreclosure?
Foreclosure is a process by which the mortgagor’s (the homeowner’s) interest in the property is terminated. The mortgagee, or bank in most cases, applies to the court for a judicial sale and the property is sold to satisfy the loan.
What rights do I have in foreclosure?
You have the right to force the bank to prove that they have the right to sell your home right out from under you. This may seem like a simple question and an overly simple answer; however, asking the bank to prove that they can sell your home has the potential to create an extraordinarily complicated legal battle that homeowners can leverage to their benefit.
Why should I fight the foreclosure if I owe the money? What do I have to gain?
Just because you took out a loan and signed a mortgage, doesn’t necessarily mean that the Mortgagee (Bank) can quickly take your house if you cannot pay. There is much more to the process. Most homeowners are unaware that there was a systematic and broad based fraud committed against the homeowners by mortgage brokers and lenders alike. In many cases, lenders authorized illegal fees on behalf of brokers. In other cases, lenders encouraged brokers to falsify documents and otherwise put homeowners into loan products that were entirely unsuitable for them. The existence of any of these circumstances in conjunction with your loan may dramatically change your foreclosure case.
The consumer credit laws are extraordinarily strong in the context of refinancing transactions. The Truth in Lending Act (15 USC § 1601, et seq.), the Real Estate Settlement Procedures Act (12 U.S.C § 2601 et seq.), The New Jersey Fair Foreclosure Act, and the New Jersey Consumer Fraud Act all provide strict rules and powerful penalties for lenders who violate these laws.
By pressing your rights against the bank, it may be possible for you to recapture equity in your home. If your lender violated the law when closing your transaction, you may have the right to rescind the transaction. If you are able to rescind, the bank will be forced to tear up the mortgage and the bank will have to sue you outside of foreclosure to recover the loan proceeds. In some cases, if the bank’s violations were egregious enough, the court will tear up the note as well as the mortgage. Although this is an extraordinary remedy, it has happened in at least one Federal District Court case in New Jersey. Otherwise, the court may award damages to you that may be used as a set-off against the amount of money you owe on the note. Last, and certainly not least, if you are able to prevail on a counterclaim against your lender, the court may require the lender to pay your attorney’s fees.