About Wrongful Foreclosure

In an economic climate of foreclosures and repossession, one of the biggest fears amongst homeowners may just be falling victim to wrongful foreclosure. Several things cause it, and the result can tie up a homeowner's property for years in court. With a little knowledge about wrongful foreclosure, you may be able to protect your home.

Significance

Wrongful foreclosure is a serious act that leads to displaced families and very lengthy court battles. In most cases, the affected homeowner is up-to-date on the mortgage payments. However, lender record errors are often the cause of the wrongful foreclosure. Fortunately, these cases are infrequent; foreclosures are usually the result of delinquent payments.

Features

Wrongful foreclosure cases are usually the result of miscommunication between the lender and the borrower. This includes incorrectly applied payments, errors in interest charges and completely inaccurate information communicated between lender and borrower. The situation is often agitated by the borrower's failure to review monthly statements or promptly read and respond to written communications from the lender. Many borrowers also assume that the lender will automatically fix any inaccuracies. All of these actions can quickly escalate to foreclosure proceedings, which are expensive to fight because of attorney and court costs. It is then the borrower's responsibility to prove that the foreclosure is unwarranted. This is done through a wrongful foreclosure action. The borrower must file this action, which can delay the loss of a home for 45 days or up to two years while the court sorts out the mess.

Effects

The wrongful foreclosure will appear on the borrower's credit report as simply a foreclosure, thereby ruining the person's credit rating. Inaccurate delinquencies may also accompany the foreclosure on the credit report. After the foreclosure is found to be wrongful, the borrower must then petition to get the delinquencies and foreclosure off the credit report. This may take some time to accomplish. Wrongful foreclosure may also lead to the loss of the home and other assets if the borrower fails to act quickly. However, once the wrongful foreclosure action is successful in court, the borrower may be entitled to compensation for court costs, pain and suffering brought by the action. These damages are sought through civil court.

Prevention/Solution

The best way to prevent wrongful foreclosure is to keep accurate records and to promptly review each communication with the lender. Doing so will allow you to catch discrepancies before they turn into inaccuracies that lead to a wrongful foreclosure. Keeping accurate records is also that best way to successfully bring a wrongful foreclosure action.

Misconceptions

The most common misconception is that once a home is lost and resold because of a wrongful foreclosure suit, the borrower can reclaim it. This isn't always the case. Reclaiming a home lost through wrongful foreclosure must be done during certain waiting and holding periods that vary by state. Prompt action in response to a wrongful foreclosure can lead to the courts voiding the sale, but waiting can lead to a borrower permanently losing the home.