How to Prove Wrongful Foreclosure and Calculate Damages

With the economic upheavals of the last few years, many homeowners have found themselves in danger of losing their homes.  Loss of jobs meant loss of income for many, and as a result, they fell behind in their mortgage payments and faced foreclosure.  However, there are homeowners who play by the book and do everything right.  Yet they find themselves in foreclosure through no fault of their own, but through negligence or outright wrongdoing on part of the lender.

If you find yourself in this situation, the right legal help is necessary to help you keep your home. Chat with, or fill out a form for a phone consultation, with one of our wrongful foreclosure attorneys. They can go over your case with you, and if needed, explain how to file a wrongful foreclosure suit

What is a Wrongful Foreclosure Action

A wrongful foreclosure is when a lending institution forecloses on a property without any proper legal basis.  This can be through mistakes, negligence or intentional misconduct.  However, it goes, borrowers should always exercise due diligence making sure they don’t fall prey to such practices.  

When Your Rights Are Violated

Lending institutions stand to profit by foreclosing on a property.  It may be done by  mistake or by unfair means for financial gain.  Whether accidental or deliberate, wrongful foreclosures have huge ramifications for homeowners.  Families can lose their homes, and their credit is so badly impacted by the foreclosure that getting a new mortgage is next to impossible, to say nothing of how bad credit can impact other areas of life.  Wrongful foreclosures also cause undue stress on a family, especially if they have to completely rearrange their lives (new neighborhoods / cities / schools / etc.).  Many homeowners may decide to pursue legal action against lenders, in order to reclaim some semblance of their former lives.

Wrongful Foreclosure Cases

There are several high profile cases to illustrate what happens when wrongful foreclosures happen.  One of the most well-known cases involves Wells Fargo.  In 2019, Washington DC’s Eastern U.S. District court ruled that Wells Fargo wrongfully took back hundreds of homes.  It wasn’t deliberate on Wells Fargo’s part, but a textbook example of a technical glitch in software that caused hundreds of borrowers to not get the loan modifications they qualified for.  As part of the judiciary relief, Wells Fargo gave each borrower more than $10,000.  Victims also had further reqcourse under a class action settlement with the bank.

In another case, a lending institution told a couple they couldn’t get a loan modification without getting behind on payments.  They defaulted on their loan and filed for bankruptcy on the advise of the lender.  They lost their home anyway bcause the lender continued with foreclosure proceedings, even with a bankruptcy stay in place.  The couple eventually were awarded more than $45 million in actual and punitive wrongful foreclosure damages and court costs.

In McGinnis v. American Home Mortgage Servicing, the Eleventh Circuit court of appeals affirmed an award of $3 million in punitive damages after a family lost their home after an alleged escrow miscalculation mistake.  The plaintiff had sued for wrongful foreclosure and emotional distress after a mistake increased amounts that had to be paid into escrow.

Causes of Wrongful Foreclosures

Banking and other lending institutions shouldnt’ foreclose until all loss mitigation options have been exhausted.  But nevertheless, it still happens.  So what are some wrongful foreclosure elements?

An incorrect adjustment to interest rates

One of the most common reasons for wrongful foreclosures are incorrect adjustments of interest rates.  Sometimes different divisions will process loan modifications and foreclosures at the same time.  This can cause homeowners working on modiftying their loans, to try to avoid foreclosure, to be foreclosed on anyway.

Incorrect tax accounts

Another common cause of wrongful foreclosures is incorrect tax accounts.  Many mortgage companies require a person to pay into an “impound tax account”, which then in turn pays things like property taxes and insurance aside from the straight mortgage payment you pay.  Some borrowers who put down less than 20% down payment may be required to pay into an impound account.  This account is hands free for homeowners for the most part as the lender manages the impound tax account. But it doesn’t mean that lending companies might inadvertently or deliberately mismanage these accounts, potentially resulting in shortages to pay the needed taxes and insurance.

Breach of contract

Mortgages are legally binding, and terms apply to the lender as well as the borrower.  Breaches of contract can happen in a couple of different ways.  The lender fails to adhere to a loan modification agreement and refinance or restructure accordingly.  A lender can also fail tp provide proper notice of loan term changes, both of which result in breach of contract.

Infliction of emotional distress

The hassle of having to deal with and fight a wrongful foreclosure can create undue stress on a homeowner and their family.  The added expense of having to relocate if evicted, aside from being in default on a mortgage, as well as any legal expenses incurred with potential foreclosure lawsuits against lenders, can be more than many want to deal with.

Unfair business practices

One would think lenders would work for the best interest of borrowers.  But soem lenders will engage in unfair business practices because they ultimately have their bottom line to watch out for.  And this may include questionable business practices aimed at increasing profits for the lender through unfair practices like higher interest rates and unfair loan agreements.

Improper accounting

Sometimes glitches in software or computer system malfunctions can affect the numbers on the books.  Key example is the aforementioned Wells Fargo incident.

Impact of A Wrongful Foreclosure

Wrongful foreclosures, if not resolved or reversed, can have severe years-long impacts on homeowners.  From the immediate issues of relocating and the financial and emotional stress it can create, to further in the future when things like adversely affected credit scores can affect future ability to buy things like homes or even cars.

What to Do if You Are Wrongfully Foreclosed Upon

Foreclosures are complicated matters to fight, especially if you are being wrongly foreclosed upon.  Luckily you can sue for wrongful foreclosure.  New York is a judicial foreclosure state, meaning the lender has to take you to court to foreclose on your home or other property.  Often wrongful foreclosure is brought about as a counter defense.  How do you calculate damages on a wrongful foreclosure?  Each case is different, but there are three main components to wrongful foreclosure damages:  actual damages, court costs and punitive damages for wrongful foreclosure.  

One important thing to keep  in mind, in lawsuits involving wrongful foreclosure, statute of limitations may apply.  In New York, the statute of limitations for wrongful foreclosures is six years.  It may seem like a long time to be able to take legal action, but it’s still important to file suit as soon as possible.  And the first step starts with hiring the right legal team.  Visit Moshe’s Law to chat with our wrongful foreclosure legal team, or to make an appointment for a phone or in-person consultation.

Avoiding Wrongful Foreclosure Actions

It may be impossible to avoid wrongful foreclosure in some cases, but it’s possible to fight it.  And you can take steps to avoid wrongful foreclosure actions:

1. Keep accurate and detailed records of all communications with your lender.
2. Review your records on a regular basis to catch any potential discrepancies.
3. Review each communication with your lender.

Sometimes wrongful foreclosures are unavoidable despite the most diligent record keeping.  One other possible avenue for forestallign a wrongful foreclosure is applying for an injunction to stop a foreclosure sale until the lawsuit is resolved.  

FAQ

Getting Help From Wrongful Foreclosure Attorney 

You don’t have to deal with wrongful foreclosures by yourself.  Our team of wrongful foreclosure attorneys will examine your case in detail and suggest the best course of action when suing for wrongful foreclosure. 

Fill out the form on our website to talk with one of our legal experts, or chat with one of them online today. The sooner you get started with us, the sooner you can start getting your life back.