Legal Challenges to Foreclosure
California has a nonjudicial foreclosure process, meaning that foreclosures are conducted outside of court. If there is a legal basis for it though, homeowners have a right to challenge a foreclosure in court, preferably with a foreclosure attorney involved. Traditionally, there are two popular reasons for legitimately challenging a foreclosure in court. The first would deal with the improper execution of the foreclosure process as required by California law, and the second would relate to the illegal or questionable origination of the home loan, or servicing of the home loan, on the property being foreclosed.
A third set of challenges has recently emerged (Carlos S. Reyes vs. Saxon Mortgage Services, and Lynne Huxtable and Jeffrey A. Agnew vs. Timothy Geithner) where homeowners are objecting to foreclosure when they have been denied a loan modification or loan workout option through the Home Affordable Modification Program (HAMP). The objections specifically are based on breach of contract, violation of the Rosenthal Act (California’s Fair Debt Collection Act), and denial of due process, a violation of the Fifth Amendment. It is premature to guess whether the court will determine these arguments to be fair, so meanwhile we’ll continue to discuss the first two reasons for presenting a legal defense against foreclosure.
Help from a Foreclosure Attorney & Other Assistance
To legally challenge a foreclosure, a homeowner will almost certainly have to hire an attorney familiar with foreclosures to represent them, costing up to several thousand dollars, so this is not an option for everyone.
Low-Income Aid
For low-income homeowners, free legal aid may be available:
Self-Help Resources
Self-help legal resources are also available, but these are probably more useful for doing research than actually carrying out a lawsuit:
- California Courts Self-Help Center
- California Legal Aid and Self-Help Resources
- A more comprehensive guide for Legal Resources and Assistance
Trusted and Reputable Attorneys
If you need an attorney and you don’t qualify for low-income assistance you can find one through a reputable referral service.
The Legal Process
California’s non-judicial foreclosures require that the homeowner file a lawsuit in order to bring any violations up for review in front of a judge. You will probably only be able to delay a foreclosure by a few weeks if you are only able to prove a technical procedural violation, so it’s a good idea that your foreclosure attorney certifies that you have a good case. The attorney will generally ask for a temporary restraining order, followed by a preliminary injunction, and finally request a permanent injunction.
The temporary restraining order (TRO) will usually last until the date set for a hearing when the court will decide whether it should issue a preliminary injunction, a court order that would temporarily halt the foreclosure sale to give the homeowner the opportunity to argue for a permanent injunction. Typically bringing a case to trial for a permanent injunction takes a year or two. That means that if a homeowner gets a preliminary injunction it is essentially a victory.
In the end though, the homeowner would have to plead his/her case proving that the bank or servicer violated either California or federal law as it pertains to consumer lending (i.e. home loans) or the proper execution of the foreclosure, or that it did not comply with the due process requirements of the United States Constitution.
Preparing a Legal Challenge to a Foreclosure
A homeowner should analyze three different aspects of their situation to explore legal challenges against a foreclosure.
- Review the original loan paperwork for consumer lending violations. Federal law is very specific about what documentation and disclosures are required when issuing a home loan. Furthermore, certain illegal practices, such as predatory lending, can sometimes be brought to light by details in the loan paperwork. The loan documentation and the laws that cover these issues are extensive and complicated. Conducting a forensic loan audit helps to unearth any wrong doing by having the loan documents meticulously reviewed for fraud, inaccuracies and/or missing information that is required by law.
- Check for any loan servicing violations. Sometimes loan servicers or lenders misapply mortgage payments which can exacerbate a delicate foreclosure situation putting a homeowner further into a hole. At other times, escrow accounts can be mismanaged, or excessive late fees can be applied to an account. Violations or “errors” of this type by themselves are not enough to mount a legal defense against a foreclosure, but taken into consideration with other factors can help prove fraud, misrepresentation or acting in bad faith.
- Confirm that foreclosure laws have been respected. California’s foreclosure process and schedule requires that lenders or servicers provide notice to the homeowner of a pending foreclosure action. California foreclosure statutes are found in the California Civil Code §§ 2924 to 2924l. Military personnel benefit from additional protections found in the California Military and Veterans Code section §§ 400 to 409.13.
In most cases, violations of any of the preceding laws are enough to at least persuade a lender to provide the homeowner with a loan modification, and in the best case scenario could persuade the court to rescind the mortgage. Homeowners who are interested in saving their homes from a foreclosure should seriously consider engaging a foreclosure attorney to discuss their situations and potential options.
