All is not necessarily lost: defenses to foreclosure

By Roberta Gubbins

Legal News

"Once the mortgagor has received the notice of foreclosure, has participated in the 90 day pre-foreclosure process, and received the notice of the forthcoming Sheriff's sale, there are still some defenses available to the mortgagee," said Kellie Maki, a supervising attorney with Legal Services of South Central Michigan, speaking recently in Lansing.

"The notice of the sheriff's sale must be published for four successive weeks at least once in a newspaper published in the county where the property is located and a copy of the notice must be posted in a conspicuous place upon any part of the premises," Maki said.

While there are some procedural defenses to the foreclosure, challenging the posting of the notice is the weakest, particularly if that is the only defense available.

"I think you would be hard pressed to prove the notice wasn't posted," she said.

Other procedural defenses include:

* Incorrect amount claimed to be owing

* Incorrect legal description

* The mortgage was not properly recorded.

Substantive defenses are:

* Common law defenses include fraud or misrepresentation.

* The Truth in Lending Act

* Mortgage Brokers, Lenders and Servicers Licensing Act--she warned the audience to be careful using this defense since it doesn't cover international banks only local 'mom and pop' banks.

"Who has standing to foreclose on a property? A party has standing to foreclose a mortgage by advertisment if the foreclosing party is the record holder of the mortgage," Maki said "and is either the owner of the indebtedness or the owner of an interest in the indebtedness secured by the mortgage or the servicer.

"If the chain of title says the MERS (Mortgage Electronic Registration System) is the holder, they can not go forward with the foreclosure.

"When we are filing an affirmative court action or seeking a temporary restraining order to prevent the foreclosure by advertisement," she said, "we do it on the basis of the procedural or substantive defenses.

"We also ask for waiver of the bond due to the poverty of our clients. My experience has been that judges are willing to waive the posting of bond.

"Another possibility prior to the sheriff's sale is filing for bankruptcy, which puts an automatic stay on the Sheriff's sale," she said.

"If a client comes to you and the sheriff's sale has already occurred but they are still in the six month redemption period and there are some of the procedural or substantive defenses, the action to do is for Quiet Title for wrongful foreclosure.

"You are asking the court to set aside the foreclosure sale for all the reasons stated.

"Finally, even if some people get to your office at the very end, the six months have run and the lender is filing to evict, you can bring all the defenses you would have had at the very beginning.

"The action is an 'answer and counter complaint to set aside the foreclosure sale.' (Manufacturers Hanover Mortgage Corp v Snell, 142 Mich App 548)"

"If an affirmative case is filed," she said, "a Notice of Lis Pendens should be filed with the Register of Deeds to notify potential buyers that there is pending litigation that may affect their title to the property and that the purchaser takes subject to the judgment."

Published: Thu, Mar 17, 2011