Wrongful Foreclosures (in a nutshell) — How to sue the bank in California
Updated: Oct 28, 2019
Attention Non-CA Readers:
Our foreclosure defense services are based on CA law and we are only licensed in CA.
If you need foreclosure defense, continue searching for a local attorney.
What is a Foreclosure Lawsuit
A foreclosure lawsuit is when a lender sues a delinquent borrower in order to recoup their principal on the loan in the county where the home/building is located.
California has seen a substantial improvement in foreclosures.
Close to 40,000 homes were sold at foreclosure in 2016.
People still need help!
How to Prove Wrongful Foreclosure
Just because borrowers are behind on their mortgage does not mean the bank can do whatever it wants.
At Fry Law Corporation, we consider ourselves well versed in virtually all legal theories of wrongful foreclosure.
The Homeowner Bill of Rights
The first and likely strongest legal theory for those facing foreclosure is the Homeowner Bill of Rights (“HBOR”).
The HBOR’s strongest law is the law prohibiting “dual-tracking.”
What is dual-tracking?
Dual-tracking occurs when a borrower is in the middle of a loan modification review and the bank continues to proceed with the foreclosure while simultaneously reviewing the loan modification.
It has been referred to as a “scary game of chicken” to see if the loan modification can be reviewed before the sale.
Legislature included a great section on the purpose of the law:
“The purpose of the act that added this section is to ensure that…borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options…such as loan modifications or other alternatives to foreclosure.” (Section 2923.4)
It’s shocking that it took until 2013 for something like this to be enacted!
The dual-tracking provision (section 2923.6) is very complicated.
In order to prove dual-tracking, you have to prove that a completed application was submitted along with all required documents.
You also have to prove that the bank was actually reviewing you.
Faxing a loan modification application to the bank simply won’t cut it.
The law has particular carve-outs for this sort of thing.
A few other key factors in determining whether a viable dual-tracking claim can be made are:
Whether the dual-tracking is material (i.e. there is an actual chance that the modification can be approved.)
Whether a borrower was previously approved for a loan modification.
Whether the borrower previously filed bankruptcy.
These cases are tough to prove but if a claim exists, not only can you stop the sale until the law is complied with (i.e. you get a fair review) but you get your attorney’s fees paid by the bank.
The HBOR also requires certain notices before sale and appointment of a single point of contact (or at least a group of people who know your situation when you call.)
Negligent Denial of a Loan Modification
The next common legal theory against the bank is negligence.
California Courts are starting to impose a duty of care on banks to handle loan modification properly.
It’s sad that it’s taken this long... but we’re glad it’s here.
The duty imposed on banks can be breached by them if they improperly deny a loan modification.
For example, if your income is $100,000.00 and the bank used $60,000.00, you can sue for damages if we can verify that you would have been approved- had they used the correct amounts.
In some instances, the Court will stop a foreclosure until they review the modification application using the correct information!
These are just a couple examples of what the attorneys at Fry Law Corporation look for when dealing with potential foreclosure cases.
If you or someone you know is facing foreclosure and you want to have us take a look, call us for a free consultation!