Due to the "mortgage frenzy" that occured between roughly between 2003 - 2008, there may be irregularities, defects and even illegality with regards to the solicitation,and underwriting of your mortgage, as well as the mortgage note itself.

It is precisely for this reason that when confronted with the threat of forclosure on your home, you may have significant defenses that either can reduce the amount you owe on your mortgage, provide counterclaims against the lender, and even rescind the mortgage itself.

Over the past 2 years, I personally have seen mortgage servicer and lender conduct that would normally be hard to believe if I had not experienced it myself.

This page is only intended as a very brief overview of only a few defenses that a borrower can assert against a threatened foreclosure by a mortgage servicer, or lender. Please refer to the links on the left side of this page for other options to consider, as well as foreclosure defense.

For more in depth information about all of the potential defenses available to you, depending on your circumstances, please contact me for a no risk assessment of your situation.

Truth In Lending Act (TILA), And Massachusetts Sate Law Counterpart, The (MCCCDA)

TILA does NOT apply to purchase money transactions, that is loans taken out to purchase the principal residence of the borrower. However, any other loan involving the principal residence of a borrower (including a refinance of the original purchase money loan, if not refianced by the original lender) falls under the TILA disclosure requirements,

The creditor MUST disclose; the annual percentage rate (APR), the finance charge, the amount financed, and any security interest taken. Failure to disclose these items as required may give rise to claims for actual damages, statutory damages, and attorney fees.

Closed-End Financing vs. Open-End Financing

Depending on whther a loan is "closed ended "(loan that has a fixed term of years) or "open ended" (no fixed term of years, such as a home equity line of credit), trigger different disclosure responsibilites on the lender.

3 Day Right of Rescission

One of the more powerful defenses created under TILA is the right to rescind the mortgage contract.

Ususally this right is only good for 3 days, however if the lender fails to make the required TILA disclosures, this 3 day period can be extended up to 3 years. TILA requires that the borrower (and spouse) each be given 2 copies of their right to rescind the mortgage contract, and the borrower(s) must have signed one of these notices.

Massachusetts ConsumerCost Dislosure Act (MCCCDA)

Massachusetts has enacted a state law that is virtually identical to TILA, however under the MCCDA, the extended right to rescind a mortgage for violations is four (4) years as opposed to three (3) years under TILA.

The TILA and MCCCDA statute of limitiations described above only apply to "offensive" use of the right of rescission, that is if rescission is sought when NOT under the threat of foreclosure.

In Massachusetts,under the ruling of In Re: Fidler, the Massachusetts Bankruptcy Court highlighted the distinction between offensive use and defensive use of rescission.

The U.S. Supreme Court ruling of Beach v.Ocwen held that the federal three (3) year TILA statute of limitiation was an absolute bar to bring any action after this period of time unless there was a state law recognizing the right of recoupment available to be utilized defensively as a setoff against claims. Massachusetts is only one of a few states that has a recoupment statute that possibly can be used in a rescission situation.

In Re Fidler recognized that in Massachusetts, borrowers under the threat of foreclosure may use rescission as a defense to foreclosure without regards to the TILA or MCCCDA statute of limitations.

Therefore in Massachusetts, if a mortgage loan borrower discovers violations of TILA or the MCCDA, the borrower's right to raise the right of rescission as a "shield" as a defense against foreclosure is UNLIMITED !! This fact is basically unknown to lenders attorneys, and I freqently encounter their ignorance of this FACT.

I am seeing more and more situations where the mortgage lender was so busy it failed to provide ANY 3 day notice to rescind the contract.

A successful challenge under TILA right to rescind, would return to the borrower all fees, and mortgage payments made on the loan. These charges would then be assessed as a "set off" against the principle amount of money lent to the borrower.

The borrower would then have to make an offer of tender of the remaining balance to the lender. The lender then has 20 days to either challenge or accept the tender. It the lender fails to respond, the borrower potentially would be free of the obligation to tender any amount whatsoever to the lender.. Many lenders do not realize or understand how TILA works, therefore the very real possibility exists that the lender wiill not respond.

The very real possibility exsits that the threat of rescission will be an effective leverage agains the servicer/note holder to negotiate better mortgage terms. There have been Massachusetts Bankruptcy Court decsions holding that in a Bankruptcy context, if it is found that the lender committed a violation of TILA/ MCCDA in the procurement of the borrowers mortgage, the amount to be tendered back to the lender becomes "unsecured debt" fully dischargeable in Bankruptcy.

If a TILA / MCCDA violation is found, the security interest is immediately voided, therefore a formal rescission case could be brought in federal court, and a concurrent action for a quiet title action can be made. This effectively forces the lender to deal with the rescission issue, and if the lender cannot rebut the borrowers allegation, the title may revert to the borrower in his/her name only, free of any claim of the lender.

Standing

When a person or entity intiates suit, they must have what is legally known as "standing". Standing is merely the fact that the person suing actually has a "personal interest" in the outcome of the litigation.

Most likely the mortgage you own  has been "securitized". What this means is after your lender had you sign on the dotted line, they immediately sold your loan off to an investment bank, who then created a "special purpose vehicle to hold your loan, packaged with orther home mortgages, to created mortgage backed securities. The special purpose vehicle then sold proportional shares of these "securities" to large institutional investors, who were willing to gamble with these high risk products in the effort to maximize investment returns.returns. Major purchasers of these "securities" were Investment Trusts.

Even though your lender sold off your loan, many times they negotiated for the servicing rights to your loan,  even though they no longer "owned" it. Therefore some people are under the misconception that even though the same lender appears on their statement, the lender is only a servicer now, and not the holder of the mortgage.

Another concept to understand is the fact that a mortgage really involves two things. First it is an obligation to pay (The Mortgage Note), and second it involves the security for that note (your property) which is the mortgage.

Lenders designate mortgage servicing companies as "nominees" and grant them all right to service the mortgage, including foreclosure.However there have been cases where the borrower challenged the servicer on the fact that it was not the actual "holder" of the mortgage note, and therefore it lacked "standing" to bring a foreclosure action against the borrower.

Many times even when a mortgage servicer is challenged to "produce the borrowers mortgage note", it cannot do so due to the fact that the lender itself no longer has the note itself, as it was sold to an investment trust. This presents an opportunity for the borrower in a foreclosure action to force the serviver to locate the note. At worst this can buy the borrower more time to locate a new place to live, and sometimes even provide the homeowner with a home free and clear of any mortgage at all.

Mortgage Servicer and Lender Fraud

While I am not placing blame on every mortgage servicer or lender, there is a great deal of evidence pointing to unethical and/or careless behavior on the part of some of these financial institutions.

Forging of documents, misstating debtor income, inflating (or deflating) home appraisal values, forgery of the debtor and/or spouses signature on legally required documents, and many other unethical behavior is now coming to light with regards to loans made during the hight of the "mortgage frenzy".

In addition to the remedies above (and stated eslewhere on this website) you may have claims against your mortgage servicer and/or lender as well.

 
If you have questions about any of the information above, or would like an assessment of your personal situation, please contact me