The mortgage or note may be defective in any number of ways, from minor deficiencies to major ones that can derail a foreclosure lawsuit entirely. Homeowners may want to take a look at the original mortgage or note that they signed to obtain their loan and compare it to the version that was recorded and the version that the mortgage company currently holds. Any discrepancies may be valuable sources of information and may lead to the uncovering of mistakes. In any event, such differences may be questioned by borrowers.
For instance, terms may not match between one version and another, or terms in riders attached in additional sheets may not match the terms found in the mortgage or note itself. Stated terms may also be impossible to perform, such as if the loan states the rate will adjust in three years but the adjustment date listed is actually only one year from the time the contract was executed. When the loan closed and what terms are contained in the paperwork will hold clues to potential deficiencies.
Even if a loan is modified once and homeowners fall behind again, there may be a defect found in the paperwork. If all of the required parties did not sign the modification agreement, the new mortgage may be defective. Notary stamps that are expired or incorrect also indicate defective paperwork. Homeowners should read the loan documents carefully to find these discrepancies if they wish to include them as defenses in a foreclosure lawsuit.
Invalid terms in a mortgage or note, however, will have different recoveries for borrowers. Minor defects that caused the owners no harm may just be modified by the courts or simply ignored as immaterial. Major, material defects, on the other hand, could result in the entire loan being declared void. Of course, a likely consequence for many homeowners in court may be somewhere in the middle of these two extremes.
Homeowners should also view defects in the paperwork as potential violations of other federal and state lending laws. If the terms are stated incorrectly in the mortgage or note, the calculations based on the defective terms may violate the Truth in Lending Act or other regulations. In such cases, borrowers may sue for damages under these laws or include counter claims in their answer to the lawsuit.
Some common defects that homeowners may run across are listed below:
Of course, possibly the best way for homeowners to determine if their loan has any of these deficiencies is to consult with a foreclosure attorney. Either by hiring a lawyer to help them with their court case or just consulting with one to find out the best options going forward, good legal advice should be sought out by foreclosure victims. Speaking with an attorney is not a guarantee to stop foreclosure, but it can help homeowners gain some perspective on how to defend the lawsuit and what to do to save their home for the long term.