Florida is a judicial foreclosure state, which means that the bank must go to court and receive court approval before foreclosing on a home. While the foreclosure is proceeding through the court system, the homeowner will have a right to raise legal defenses to the bank's foreclosure. Some of the common defenses used to fight foreclosure are described below.
Standing means that the party seeking foreclosure has a right to bring the lawsuit. In the context of foreclosure, standing is used to argue the bank is not the proper plaintiff in the foreclosure case. If a bank cannot establish standing they will not be able to prevail in the foreclosure action. A bank seeking to foreclose a home in Florida must provide evidence that it owns or holds the promissory note and mortgage to prove standing. Proving standing can sometimes be difficult for a bank because in most foreclosure cases the bank seeking foreclosure is not the bank that originated the mortgage loan. Mortgages are frequently sold and transferred to other financial institutions. Moreover, banks will often lose the original promissory note or mortgage, which can make it even more difficult to prove standing. If the homeowner can successfully raise doubts as to the bank's standing they may prevail in the foreclosure case.
Most mortgages include a condition that the bank notify the homeowner that the loan is in default prior to initiating a foreclosure lawsuit. This condition is commonly found in the 22nd paragraph of the mortgage. The notice to the homeowner must indicate the action required to cure the default and provide at least 30 days to cure the default before the bank can initiate foreclosure. Once the borrower raises this issue as an affirmative defense to the foreclosure the bank will have the burden of proving the notice was sent to the homeowner pursuant to the mortgage.
Foreclosure cases in Florida are heard in courts of equity. Courts of equity are authorized to apply principles of equity (fairness), as opposed to just law. Unclean hands is an equitable defense that may be used to prevent a bank from foreclosure. In order to establish unclean hands, the homeowner must show either a fraudulent or illegal transaction or any unrighteous, unconscious, or oppressive conduct by the party seeking foreclosure. If the homeowner can show a detriment to them caused by such an action of the lender, the unclean hands doctrine may prevent the foreclosure.
Under Florida Statute §559.715, banks are required to provide written notice to the homeowner each time the mortgage is transferred. The notice required under this statute must be sent to the homeowner within 30 days of the assignment. If the homeowner affirmatively denies the existence of such notice, the court may rule in favor of the homeowner in the foreclosure case.
Mortgage loan servicers are required to apply payments and charges to a mortgage loan in compliance with federal law 12 U.S.C. §2605. If the loan servicer failed to properly credit payments and/ or charge costs in compliance with this statute the lender may have a problem prevailing in the foreclosure action. Homeowners may be able to successfully argue the bank is estopped from claiming a default on the mortgage if the homeowner can prove a violation of the rules governing mortgage loan servicing.
Under the National Housing Act (12 U.S.C. §1701), lenders are required to advise homeowners of loan counseling options offered by the U.S. Department of Housing and Urban Development (HUD). This is an affirmative duty imposed on mortgage lenders, the homeowner does not have to request this information in order for it to be a requirement imposed on lenders. If a homeowner raises this issue in the foreclosure case, the burden of proving this condition was satisfied may be placed on the lender. If the lender is unable to satisfy this burden, the court may refuse to grant the foreclosure sought by the bank for failing to fulfil a condition precedent to foreclosure.
The defenses described herein may not be applicable to every home foreclosure case, you should seek the advice of a licensed attorney in your area for more information about your specific case. Further, the list of defenses described above is not exhaustive, there may be many other legal defenses available.