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Respond to a Foreclosure Summons and Complaint with Affirmative Defenses Based on Standing and Notice
Homeowners answering a foreclosure summons should consider substantial and powerful affirmative defenses to foreclosure that have evolved during course of America's prolonged foreclosure crisis. During the past five years, state legislatures, courts, and government agencies have acted to protect homeowners from the consequences of abusive lending and mortgage practices. In increasing numbers, homeowners have filed answers to foreclosure complaints, thus delaying, and in some instances, stopping judgments from being entered. Notably, financial institutions have also been proactive and creative in crafting legal arguments to overcome such affirmative defenses.
Today, many foreclosures are commenced not by original lenders, but instead by entities who were allegedly assigned the mortgage, typically after multiple, prior transfers. Millions of such transfers were marred by sloppy record keeping and inattention to legal requirements on the part of banks and corporate lawyers. A number of financial institutions, and the law firms that represented them, have been the subjected to civil penalties for their fraud against homeowners. Some of the law firms that handled the largest volume of foreclosures several years ago have been forced out of business.
Affirmative Defenses to Foreclosure Based on Missing Notes and/or Lack of Standing:
The lenders' and mortgage servicers' sloppy record keeping and abusive practices can be of benefit to homeowners trying to defend against foreclosure. In a substantial number of cases, foreclosing plaintiffs (who are typically assignees, rather than the original lenders) are unable to produce the alleged assignment documents pursuant to which they purportedly acquired an interest in the loan. In such situations, the banks may not be able to establish that they have standing to foreclose. During the past several years, courts throughout the country have dismissed foreclosure cases where the foreclosing plaintiff has not been able to establish – by submitting competent and admissible evidence – that it actually owns the note that it is attempting to foreclose. The longstanding legal axiom underlying these decisions is quite clear: a transfer of the mortgage without the debt is a nullity, and no interest is assigned unless the underlying note has been assigned.
Similarly, in some instances, there have been so many assignments (and the assignments were handled so carelessly) that the original notes are missing. When a foreclosing plaintiff is unable to produce the original note (and the homeowner has effectively preserved their legal rights with an answer and affirmative defense), a situation arises that is known, in common parlance, as the "show me the note" foreclosure defense.
The "show me the note" and "lack of standing" defenses are usually available only to property owners who both: (a) answer the foreclosure summons and complaint, and (b) assert the defenses in their responses as affirmative defenses. Given the ready availability of foreclosure answer forms on the internet, it should be relatively simple for any homeowner to download foreclosure defense forms and thereby preserve their legal rights.
Notably, the "show me the note" and "lack of standing" defenses, while still effective, have been watered down some state court decisions. For example, some courts in Florida, New York, New Jersey, California and Illinois have permitted foreclosing plaintiffs to foreclose, even without the original note, by providing competent evidence of the assignments, payment history, default, and statements pertaining to the circumstances surrounding the note's current unavailability. Similarly, in Florida, a court recently ruled that an assignee had standing even though the mortgage itself had not been transferred prior to the commencement of the foreclosure lawsuit where it produced the original note that was endorsed in blank.
Affirmative Defenses to Foreclosure Based on Noncompliance with Notice Requirements:
Defenses based on missing mortgage documents and/or assignments are far from the only defense tactics available to foreclosure defendants. Many state legislatures have enacted mandatory notice requirements that lenders are required to follow prior to commencing a mortgage foreclosure proceeding. For example, in New York, RPAPL § 1304 requires that a lender give at least 90-days notice prior to commencing an action against a borrower when the underlying loan constitutes a "home loan" as defined in the statute. Other states have similar notice requirements. A homeowner should consider asserting, as an affirmative defense to foreclosure, that the foreclosing plaintiff has not complied with its statutory notice obligations.
A homeowner may also allege, as an affirmative defense to foreclosure, that any alleged assignment of the mortgage was cone without compliance with the mandatory notice provisions imposed upon lenders under federal law to effectuate an assignment of a residential mortgage. Under 12 CFR § 226.3, a buyer or assignee must notify the borrower within 30 days from the date a mortgage loan is sold or assigned to a new owner. Here, plaintiff failed to provide such notice. Consequently, defendant argues that the action must be dismissed.
The bottom line is that a homeowner who is served with a foreclosure summons should file an answer with the court in a timely manner.
Empire State Legal Forms
April 18, 2013
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