Note: This post was originally published Feb. 2016 but it is still important today.
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Why is this important?
It is the idea that the best defense is to be able to be in control and have an aggressive offensive strategy. This applies to whether you are trying to stop a foreclosure, get a loan modification, or believe that you were subject to fraud.
This is why this ruling is such a game changer for you. It allows you to turn the tables on the banks, loan servicers, and even their attorneys.
A loan servicer trying to foreclose on your home is subject to the same laws as that apply to a debt collector. A law firm that represents a loan servicer is also subject to the same laws. In a foreclosure action, both the loan servicer and the law firm are subject to penalties and enforcement under federal laws as debt collectors and can be sued by a homeowner.
In the landmark case [Psaros vs. Gree Tree Servicing ] brought and won this year by Denbeaux and Denbeaux, possible favorable outcomes for foreclosure defense shifted more in favor of the homeowner.
The takeaway for New Jersey homeowners facing foreclosure as explained in the articles “Debt collectors beware: Judge’s Ruling Could Change the Game” by David Porter of the Associated Press, and ‘These Are People’s Lives You’re Playing With’:The Fight to Curb Debt Collector Lies” by Alan Pyke is this: a law firm who represents a bank in a foreclosure case can be held responsible for the mortgage company’s loan servicing errors.
Both the loan servicer and the law firm that represent them can have complaints filed against them and the law firm can be made to testify and provide evidence against their client.
Judge’s Ruling an NJ Foreclosure Game Changer
On the surface, this may not seem like a big deal, but here is why it is important to a homeowner who may be facing or fighting foreclosure.
Here is how it helps the homeowner.
Foreclosures are filed in state court. In New Jersey, the state courts have become more unfavorable to homeowners since 2012, and they often rubber stamp bank requests even where the documents are missing. Courts have made it easier and easier for banks to obtain foreclosure judgments in New Jersey.
Psaros v. Green Tree Servicing is a good example of where the State Court allowed the bank to get a judgment including money not owed by the homeowner and the Federal Court ruled that by seeking to collect money not owed the attorneys involved violated Federal Law. When a bank seeks to collect money it is not owed, a homeowner can sue in Federal Court instead of State Court. Federal Courts apply the law more accurately than the State Courts.
Homeowners that go on the offensive level the playing field. A homeowner that shows the bank they are not afraid to fight when their rights are violated, creates leverage.
The number of ways banks and their collection attorneys violate homeowner rights is never-ending and always evolving. Federal Courts can hear claims where a bank refuses to honor a loan modification, misapplies money paid to the bank, or where the bank breaks into a home. These are the types of violations that happen on a daily basis across the country. These are violations of homeowner rights ignored by the State Courts.
Additionally, banks process foreclosure cases as quickly and inexpensively as possible and don’t look into details unless forced to. Often times they haven’t even looked at the repayment history or loan servicing file before filing a foreclosure. This increases the chance for an error on by the debt collecting lawyers. Finding these errors and turning them into leverage for the homeowner is the foundation to creating a smart and effective legal plan for combating foreclosure.
Denbeaux & Denbeaux doesn’t just think about how to defend a foreclosure, they have developed tools to utilize several Federal Laws that allow homeowners to go on the offensive if their rights have been violated by the loan owner, servicer, attorney or their representatives. The Denbeaux firm uses the Real Estate Settlement Procedures Act to obtain a homeowner’s complete loan servicing file. This includes loan payment history, letters sent by the loan servicer, loan modification applications, phone call records, and other documents that often demonstrate violations of Federal Law that can be acted upon by the homeowner.
Going on the offensive is the best way a homeowner facing foreclosure can improve their situation. The banks, loan servicers, and their attorneys take matters seriously when they get sued with legitimate claims. They pay attention in part because they are under a close watch from the Financial Consumer Protection Bureau (CFPB) which pays attention to how often financial institutions get sued, and the reasons for the lawsuits. The ruling in Psaros v. Green Tree Servicing demonstrates the difference between operating in State Court and Federal Court and shows that homeowners facing foreclosure have many rights, but only if they are willing to directly stand up for themselves.