Can I File a Predatory Mortgage Lending Lawsuit After Foreclosure?
- Lenders can initiate foreclosure proceedings once you're more than 90 days late with your payments. You can respond in several ways, one of which is to file a countersuit seeking damages for predatory lending practices. The countersuit remains part of the foreclosure proceedings unless the lender persuades the court that the claims it contains are invalid or wrongly filed. Because the foreclosure proceeding stays any action toward seizure of your home, the question of who owns it remains open, and the court can award it to you if your suit is successful.
- Predatory lending practices were endemic during the housing bubble that ended in 2007, and many victims of those practices have since filed suits against their lenders. Among common claims are that the lender sold the borrower a loan knowing that the borrower wouldn't be able to pay it back, and the lender would thus be able to foreclose. Another is that the lender failed to fully disclose the terms of the loan. A class action suit has claimed that Wells Fargo Bank provided loans with deceptively low promotional payments that resulted in higher loan principals and eventual default when the promotional period ended.
- Not all states require lenders to file foreclosure proceedings in court, but whether the foreclosure is a judicial or non-judicial proceeding, you have the right to contest it. At the end of the foreclosure, if the lender is successful, you'll receive an eviction notice, and by that time, the home is usually beyond your reach. If you have a compelling reason to reopen the proceedings -- perhaps by demonstrating a failure on the part of the lender to properly serve you documents -- the court may comply. It's more likely, however, that it will consider your suit a separate action.
- If you were the victim of predatory lending practices, you have the right to have them redressed in court. Waiting until after the fact of a foreclosure doesn't change that fact, but it won't necessarily get your home back. If you're facing foreclosure, and have evidence of predatory lending practices, make your lender aware of it. Foreclosure is expensive for lenders, and they face the possibility of not being able to resell your home, so such evidence can be a powerful bargaining chip. You may be able to persuade the lender not to foreclose and possibly even modify your loan with more affordable terms.