Foreclosure Fraud? Where is the Recourse?
As a practicing foreclosure defense attorney in Jacksonville, Florida, I have many clients who ask "if the banks are committing so much mortgage fraud, what is the homeowner's recourse against them? Can I sue the bank?" To be honest, it can be very difficult to sue national banks for mortgage fraud. I am not saying it cannot be done, but it normally takes State Attorney Generals to get involved. Banks receive a lot of protection against "unfair practices" claims and are immune from many causes of action that the homeowner looks to bring. However, when banks are acting in a "servicer" capacity they lose some of that immunity.
As more and more mortgage fraud is being uncovered, the state attorney generals are stepping in and filing actions against the banks. Many claims are being brought as class actions which allow homeowners to become part of the class and receive a pro rata portion of any settlement proceeds. Some attorney generals are suing to for equitable and injunctive relief to prevent banks from doing certain things moving forward when handling mortgage loans and applications. Because national banks do business all over, the matter can be brought in federal court.
Much of the recourse for banks committing mortgage fraud may result in banks having their foreclosure cases booted out of court. If a case is a dismissed with prejudice that party is longer able to bring that type of action against the homeowner. Most cases are dismissed without prejudice unless happens more than once. To get a case dismissed the first time with prejudice is very difficult and punitive in nature. There would have to be an extremely egregious act to warrant a case being dismissed with prejudice. If a case is filed after the statute of limitations has been filed, then the case can be dismissed most likely with prejudice. So, what does that mean to the homeowner? That means the homeowner may get a mortgage free house. Yes, that is correct.
It is possible to receive a house for free if a case is dismissed with prejudice. Again, these are few and far between but it is happening more and more. The homeowner can then file a quiet title action to make sure the county records reflect that the mortgage is longer on the property. Now, if there is a second mortgage or a home equity line encumbering the home, it is still attached to the property. The homeowner will want to keep that debt current. If the first lien is extinguished, the second lienholder has more of an incentive to foreclose because it now becomes the senior lien holder (assuming property taxes are current).
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Greg Gilbert
Keith Maynard
