Available Defenses when facing Foreclosure

Foreclosure Defense Options in Schaumburg

The State of Illinois continues to experience a foreclosure rate that is over one-and-a-half times greater than the national average. According to the University of Illinois at Urbana-Champaign, the most common circumstances that cause foreclosure are medical problems, job loss, divorce, and death of one of the spousal owners. However, regardless of what caused the foreclosure, there are defenses available for Chicago area owners who want to fight a foreclosure action.

Illinois Mortgage Foreclosure Law and Foreclosure Defense

Illinois Mortgage Foreclosure Law (IMFL) governs the rules for foreclosures in Illinois. However, state and federal law can come into play when determining how to fight a foreclosure action.  There are types of defenses and counterclaims that can be raised in a foreclosure action. The choice of which avenue or avenues to pursue are very fact specific and depend upon the type of mortgage being foreclosed upon, the interest rate of that mortgage, and whether the lender made required disclosures when the loan was originated. The choice of defenses also depends on whether the homeowner’s goal is to keep the property or dispose of it prior to the foreclosure.

If The Homeowner Wants To Keep the Property

If a homeowner wants to keep his or her property that has fallen into foreclosure, there are several defense options to consider, depending on the particular facts. Possible defenses include:

Violation of the Truth In Lending Act - The Truth In Lending Act (TILA) was enacted to ensure that consumers received full and accurate information when they enter into credit transactions such as a mortgage. Under TILA, certain things must be disclosed to a borrower, including the annual percentage rate (APR) of the loan, the finance charge associated with the loan, the amount financed, and the total amount the borrower will have paid after making all scheduled mortgage payments. TILA also requires that the lender clearly disclose the number of payments required under the loan, the amount of each loan payment, and when payments are due. A borrower also must receive a copy of the right to rescind.

If the lender failed to provide any of the required information connected to the loan, the borrower can seek monetary damages and/or loan rescission.

Violation of the Real Estate Settlement & Procedures Act - The Real Estate and Procedures Act (RESPA) is a law that ensures that borrowers are informed about loan closing costs and settlement procedures. RESPA requires that homeowners receive certain disclosures at various times in the loan transaction, including a standardized Good Faith Estimate (GFE) and a HUD-1 outlining actual closing costs. It also prohibits kickbacks that increase the cost of settlement services.

Damages for a RESPA violation may include monetary damages, as well as attorneys’ fees and costs.

Home Ownership And Equity Protection Act - The Home Ownership and Equity Protection Act (HOEPA) is an amendment to TILA. It was enacted to address abusive practices in the area of refinancing and closed-end home equity loans with high interest rates or fees. HOEPA applies to mortgage transactions where the loan application was received on or after January 10, 2014. The law prohibits balloon payments, negative amortization, default interest rates higher than pre-default rates, unfavorable rebates of interest on default, most unfavorable repayment schedules and prepayment penalties, and many due-on-demand clauses.

Penalties for HOEPA violations include statutory and actual damages, attorneys’ fees and costs, and loan rescission for up to three years.

Illinois Interest Act - The Illinois Interest Act governs the maximum rate of interest that can be charged on loans made in Illinois. It specifies that contracts with an interest rate greater than 9 percent are void.

Common Law Fraud - Mortgage fraud occurs where a lender intentionally encourages a borrower to enter into a mortgage loan when the borrower would not have done so if he or she had correct information. Common law fraud also looks at whether the loan terms or circumstances surrounding the loan are or were so unconscionable as to “shock the conscience,” including situations where the borrower was pressured to enter into a loan, did not understand the loan terms, was not represented by counsel when entering into the loan, and entered into a loan with outrageous terms.

Unclean Hands - The principle of “unclean hands” is an equitable one. It requires that the party complaining about a matter before the court did not contribute to the situation being complained of. If a lender has contributed to a borrower’s default or has not cooperated with reasonable borrower requests (such as providing pay off information upon request), the lender may be found to have unclean hands and not be allowed to proceed with the foreclosure.

Lack Of Jurisdiction - In order to initiate a foreclosure action, the entity filing the foreclosure action must actually have an interest in the loan being foreclosed upon. With the selling and packaging of loans, it is possible that the entity filing the foreclosure action may not actually own the note any longer. Thus, lack of jurisdiction may be asserted as a defense if the plaintiff in the action cannot establish that it owns the borrower’s mortgage note.

Lack Of Standing - Lack of standing addresses whether the lender is registered to do business in the state and whether the party complaining of a mortgage default is authorized to bring the foreclosure action.

The Law Offices of Gilbert C. Schumm is committed to working with homeowners in the Schaumburg, Arlington Heights, Palatine, Des Plaines, Mt. Prospect, Hoffman Estates, Bartlett, Streamwood, Hanover Park, Elk Grove Village, Rolling Meadows, and Roselle areas who have fallen behind on their mortgage payments and are facing foreclosure. We have extensive experience in real estate disputes and litigation, and we are dedicated to obtaining the best outcome for you. To schedule a free consultation to discuss your home retention options, please call us at (847) 559-9109.