You are required to file your Answer as to the party that sues you. Since the Servicer sent the Notice of Intent to Foreclose, you can be pretty much assured that they will be the Plaintiff in the Complaint, and they will rely on MERS or on a Power of Attorney to sue on behalf of the actual Lender to establish standing. So, assuming the Servicer is the Plaintiff, your defenses and counterclaims may be brought directly.
Let's assume for a moment that you are right and the Lender sues instead; you can still file a Third Party Complaint against the Servicer, which, in fact, is an excellent and under-utilized strategy. Conversely, if the Servicer sues, you can use Third Party Practice to bring in the Lender.
Awards of attorney's fees and costs are basically a myth. Judges will almost never award them. It would surprise me to learn that there are any attorneys out there who have taken a foreclosure case in hopes of getting paid through attorney's fees.
As an attorney, I hear people tell me every day that they cannot afford counsel. Lawyers do not work for free; in fact, we are quite expensive. But, it sounds like you fail to appreciate that there is little to no chance of successfully defending a legal case this complicated without a lawyer.
You have to weigh the pain of paying full price for competent legal counsel with the pain of losing your home in a sheriff's sale and facing all the collateral consequences that flow from that. You will likely experience one of these two pains. You decide which is worse.
At the very least, you would be wise to hire an attorney to tell you what your options are to try to negotiate a modification, deed in lieu of foreclosure, or a short sale. Even with a lawyer, a foreclosure defense does not solve your ultimate problem and give you back full ownership; so, such a defense is usually a bargaining chip to accomplish one of these other goals, to give you time, or as part of a larger legal/financial plan.
I highly advise against representing yourself. But, you are on the right track in one respect. The Answer is critical and will buy you a lot more time than simply failing to respond. Make sure you file a "Contesting Answer". You should visit the LSNJ site which has two resources you want to pay attention to: (1) Overview of the Foreclosure Process; and (2) Sample Answer and Sample Document Request. If you represent yourself, I'd strongly suggest filing a discovery document request with your Answer. Even before being served with the Complaint (i.e., now), you may want to send in a Qualified Written Request to the Servicer, a form of which is also included in the package. As Bankruptcy may become important, you may also want to look up resources provided by Max Gardner.
I wish you luck. If you do not heed my advice and try to represent yourself, be ready for the Judge to be unimpressed by your decision and opposing counsel to take advantage of your inexperience. Although I think it would be a foolish proposition and would cost you 10x to 20x more in time to have any hope of doing it properly, if you decide that is what you are going to do, I've included a guide on Civil Procedure in New Jersey, and I would recommend boning up on the New Jersey Court Rules and perhaps buying a copy.
I agree with my colleague here - you need counsel and proceeding without it is very risky. It's also very unlikely that you're going to find an attorney to take your case on contingency because there's just not a good likelihood that you'll win. It's possible but an attorney can't roll the dice on a case like yours so you're looking for a way to retain counsel for a fee. Check with the local non-profit legal organizations to see what's available, check with friends to see if there's a way to raise a little money, etc. but if you intend to proceed on your case, don't do it without counsel.
Evan A. Nielsen
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Evan A. Nielsen is licensed to practice law in California. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.