Foreclosure Rights – Recovery Defense in a Foreclosure Case

If you are a practicing lawyer: Are you using Recovery Defense under 15 USC 1640(e) Do you have a strong affirmative defense for your clients?

If you are a consumer: Have you had your loan (from the date of application to the present) audited by a forensic consumer debt analyst?

I get my fair share of “conspiracy theory” calls or emails from people who would swear that the CIA was covertly involved in the loan they signed and that all fraudulent measures occurred against them by everyone involved. and… you get the point. My first question to this person is always, “Great, so are you prepared for the $15,000+ advance that a good attorney will want to spend their time investigating, quantifying, defending, and trying a case like that? Well, you know the answer …

Others have read (or heard) that a loan audit and TILA violations can only help you if it’s a primary residence refinance loan within the last three (3) years. To have the EXTENDED RIGHT TO RESCIND, these conditions must be met, but rescission is not the only thing that can help someone in (or in danger of) foreclosure.

When it comes to defending against a foreclosure, the first order of business is to establish clear and genuine issues of material fact in the case. In a Florida foreclosure defense strategy, the client wants to quantify these genuine issues of material fact in the foreclosure case because no judge should grant a motion for summary judgment. Why?

In the state of Florida, there is broadly established law that prevents summary judgment from being granted when there are outstanding issues of material fact. Johnson v. Boca Raton Community Hosp., Inc.., 985 So.2d 141, Murphy v. Lake Wales Young Men’s Christian Association, Inc., 974 So.2d 565. A “material fact”, for the purposes of summary judgment, is a fact that is essential for the resolution of the legal issues raised in the case, Continental Concrete, Inc. c. Lakes in La Paz III Ltda. camaraderie758 So.2d 1214.

Successfully defeating summary judgment scores heavily in the consumer’s favor and can greatly improve the chances of obtaining a viable and fair settlement and thus ultimately avoiding foreclosure.

Therefore, one practice area that Lane Houk and his team assist consumer attorneys with is completing a forensic loan audit on the client’s loan documents from the day they applied for that loan to the present day. Why would a foreclosure client want this done? Let’s think about it…

  1. Many times, the client did not receive the proper “pre-closing disclosures” under the Truth in Lending Acts (TILA) and the Real Estate Settlement Procedures Act (RESPA);
  2. Especially when there was a mortgage broker or interim lender involved
  3. The actual “lender” in the transaction was under the same time obligations to make customer-specific disclosures from the day the request was received
  4. The many abuses of service that could have occurred from the day of the closure to today
  5. Insufficient number of certain disclosure violations
  6. Abuses of mismanagement of security deposits (I’ve seen people almost lose their home because of a good faith mistake by the bank, but they didn’t budge until a good lawyer got involved.)
  7. The list goes on…

Under the civil liability section of TILA [15 U.S.C. 1640(e)] violations says that any action under that section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date the violation occurred. However, that subsection does not preclude a person from asserting a violation of this subchapter in an action to collect debt that is brought more than one year from the date the violation occurred as a matter of recovery defense.

A consumer can only bring an action for damages within one year from the closing date. However, the consumer is not precluded from bringing a claim as a “recovery defense issue” in a foreclosure action because a foreclosure action is an action to collect debt. (i.e., almost all foreclosure lawsuits are served with some level of disclosure that “this is an action to collect a debt”), however NOT disclosing that does not necessarily preclude that such action is NOT an attempt to collect Debt).

Any quantified claim of a TILA (Truth in Lending Act) violation from an expert audit report must be presented as an affirmative defense by the attorney. This is a rock solid matter of material fact. No summary judgment. The lender will have to take the action all the way to trial. This should give you much more leverage to get a workout. At the very least, this will give you or your client a lot more time in the house and time to try to find something that works for both parties; something that is sorely needed these days because I still see a lot of admin abuse/misrepresentation every day.

I hope this little bit of information gives you some ideas on how you can help yourself in a foreclosure case. If you would like more information on forensic loan auditing, please call me at (800) 985-4685 ext. 2 or by email at [email protected]

© Lane A. Houk – 2009 – All rights reserved

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