| With all of the different parties involved in a real estate | | | | consequence for many homeowners in court may be |
| transaction, it can be surprisingly simple for serious | | | | somewhere in the middle of these two extremes. |
| mistakes to be made in the mortgage or note | | | | Homeowners should also view defects in the |
| documents. Banks can be held responsible for these | | | | paperwork as potential violations of other federal and |
| mistakes, even if they are not discovered until after | | | | state real estate practices. If the terms are stated |
| foreclosure has been initiated. But if a mortgage or | | | | incorrectly in the mortgage or note, the calculations |
| note has serious material deficiencies, homeowners | | | | based on the defective terms may violate the Truth in |
| may be able to have their entire loan declared invalid | | | | Lending Act or other regulations. In such cases, |
| when defending the foreclosure lawsuit. | | | | borrowers may sue for damages under these laws or |
| The mortgage or note may be defective in any | | | | include counter claims in their answer to the lawsuit. |
| number of ways, from minor deficiencies to major | | | | Some common defects that homeowners may run |
| ones that can derail a foreclosure lawsuit entirely. | | | | across are listed below: |
| Homeowners may want to take a look at the original | | | | -Terms in the mortgage and note do not match. |
| mortgage or note that they signed to qualify for their | | | | -Terms in the riders do not match the mortgage or |
| loan and compare it to the version that was recorded | | | | note. |
| and the version that the mortgage company currently | | | | -The terms are impossible to perform. |
| holds. Any differences may be valuable sources of | | | | -Errors create liability under the Truth in Lending Act. |
| information and may lead to the discovery of mistakes. | | | | -Errors in the interest rate trigger HOEPA regulations. |
| In any event, such differences may be questioned by | | | | -Assignments of the mortgage or note are not valid or |
| borrowers. | | | | properly endorsed? |
| For instance, terms may not match between one | | | | -Assignments were not signed at all. |
| version and another, or terms in riders attached in | | | | -The loan is not properly amortized according to the |
| additional sheets may not match the terms found in | | | | terms of the mortgage or note. |
| the mortgage or note itself. Stated terms may also be | | | | -The mortgage or note recorded with the county do |
| impossible to perform, such as if the loan states the | | | | not match the versions included by the bank in the |
| rate will adjust in five years but the adjustment date | | | | complaint. |
| listed is actually only one year from the time the | | | | -A mortgage modification agreement is not signed by |
| contract was put into force. The date the loan closed | | | | all parties to the loan transaction. |
| and what terms are contained in the paperwork will | | | | -The lender that approved the modification is not the |
| hold clues to potential deficiencies. | | | | foreclosing lender and there is no chain of title to |
| Even if a loan is modified once and homeowners fall | | | | indicate the new lender owns the mortgage or not. |
| behind again, there may be mistakes found in the | | | | -The notary stamp is defective or expired. |
| paperwork. If all of the required parties did not sign the | | | | -The mortgage lien was released accidentally. |
| modification agreement, the new note may be | | | | Of course, potentially the best way for homeowners |
| defective. Notary stamps that are expired or incorrect | | | | to determine if their loan has any of these deficiencies |
| also indicate defective paperwork. Homeowners | | | | is to speak with a real estate lawyer. Either by hiring a |
| should read the loan documents carefully to find these | | | | lawyer to help them with their court case or just |
| discrepancies if they wish to include them as defenses | | | | consulting with one to find out the best options going |
| in a foreclosure lawsuit. | | | | forward, good legal advice should be sought out by |
| Invalid terms in a mortgage or note, however, will have | | | | foreclosure victims. Speaking with an attorney is not a |
| different recoveries for borrowers. Minor defects that | | | | guarantee to prevent foreclosure, but it can help |
| caused the owners no harm may just be altered by | | | | homeowners gain some perspective on how to |
| the courts or simply set aside as immaterial. Major, | | | | defend the lawsuit and what to do to recover |
| material defects, on the other hand, could result in the | | | | financially for the long term. |
| entire loan being declared invalid. Of course, a likely | | | | |