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Foreclosure and Affirmative Defenses by Gary A. Newland

Illinois Foreclosure defense Attorneys:Cook County, McHenry County, DuPage County, Kane County & Will County

Different defenses exist in a foreclosure action:

Can those defenses actually get me out of the mortgage debt?

Below is a list of many defenses; (there are still more)

  1. Violation of TILA. TILA is the Truth in Lending Act which is codified at 15U.S.C. Section 1601 etseq. and Regulation Z Section 226 etseq. Defenses under the TILA provisions are :

(a) The amount financed needs to be clearly itemized in a real estate closing and consumer residential closings require banks to follow the Truth in Lending Act when a consumer credit transaction involving a lien or a security interest is placed on a principal dwelling. The homeowner may be entitled to rescind the transaction and elect to do so.

(b) Failing to clearly and accurately disclose the number, amounts and timing of payment scheduled to repay the obligation

(c) Failing to deliver to the defendant 2 copies of notice of the right to rescind and any other pertinent .statutory disclosures

(d) Failing to properly and accurately disclose the amount financed

(e) Failing to clearly and accurately disclose the annual percentage rate

(f) Failing to clearly and accurately disclose finance charges

(g) Failing to clearly and accurately disclose the total of payments

  1. Unclean hands: Foreclosure actions at least in the state of Illinois are filed within the Chancery division of the County within which the property is located. To proceed in chancery court, the parties must have clean hands and otherwise not contributed to the default. For example if a lender refuses to re-instate there would be an argument that the lender has “unclean hands".
  2. Standing: One of the key issues with respect to standing is whether or not an institution is registered to do business in the State of Illinois and therefore are unable to maintain this action and the court does not have jurisdiction. Also there is an issue with respect to whether all indispensable parties have been joined. To determine if all appropriate parties are named in the action it is necessary to ascertain the chain of title demonstrating that the lender is in fact the real party and interest.
  3. RESPA Violations: There are numerous provisions under the RESPA Act; otherwise known as the Real Estate Settlement & Procedures Act that can result in defenses under a mortgage foreclosure. RESPA is codified under 12 U.S.C. Section 2601. The defenses are as follows under this violation:

(a) Charging a fee at the time of the loan closing for the preparation of the truth in lending uniform settlement and escrow account statements;

(b) Failing to provide a special information booklet; a mortgage servicing and disclosure statement and a good faith estimate of settlement and closing costs to the defendants at the time of the loan application or within 3 days thereafter;

(c) The accepting of fees, kickbacks and other things of value in exchange for settlement services and or splitting fees and receiving unearned fees for services not actually performed;

(d) Not providing annual escrow disclosure statements for each year of the mortgage since its inception.

  1. Fraud; Yes it is true that lenders have been known to commit fraud and the homeowner may in fact have been induced to sign the documents because of lender fraud. This can be interpreted and evaluated based upon looking at several different issues.

  2. Was the appraisal over inflated ?

  3. Were any fiduciary obligations violated ?

  4. Violation of Unfair and Deceptive Trade Practices Act: Lenders can be held accountable under Unfair and Deceptive Trade Practices Act and also be forced to pay punitive damages and attorneys fees under the deceptive practices act. Violations of the Unfair and Deceptive Trade Practices Act could involve the following:

(a) Obtaining a yield spread premium (YSP) that was excessive or not properly disclosed

(b) Charging excessive fees and making payments of fees to parties not entitled to receive them

(c) Failing to provide defendants with statements of escrow account

(d) Failing to pay taxes and insurance premiums

(e) Otherwise misleading or deceiving the consumer in a way in which the practice can be construed as unfair or deceptive.

  1. Lack of Jurisdiction: A court lacks jurisdiction of a matter if they cannot

establish the owner of the claim or the Plaintiff is not otherwise the real party in interest and is not shown to be authorized to bring the foreclosure action.

There are many other defenses as well that can be raised in a foreclosure action. The above

stated are some of the more common objections. It is also true that the lender can be

required to produce the original Note which can be a defense as well. Sometimes

defenses are used to actually permanently avoid payment of the date and other times

it is used to seek a compromise in modification or better terms. But for whatever

reason, consumers must know their rights. Call Newland & Newland LLP to speak to

their foreclosure defense attorneys in Cook County, McHenry County, DuPage

County, Kane County & Will County today.

Additional resources provided by the author

Gary Newland is a Trial lawyer experienced in foreclsoure defense and loan modification.

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