Wrongful Foreclosure Claims: When Lenders Violate the Law

Lenders and mortgage servicers are required to follow specific laws and procedures when foreclosing. When they don't — whether through carelessness, systemic corner-cutting, or outright misconduct — the foreclosure may be wrongful. And a wrongful foreclosure gives you claims for damages, injunctive relief, and in some cases, the ability to set aside the foreclosure sale entirely.

The most common type of wrongful foreclosure involves standing defects: the party that foreclosed didn't have the legal right to do so. This often arises from breaks in the chain of mortgage assignments. When your loan was securitized (sold into a mortgage-backed securities trust), the promissory note and mortgage had to be properly transferred through a chain of endorsements and assignments. If those transfers weren't properly executed — if assignments were missing, backdated, executed after the trust's closing date, or signed by robo-signers without authority — the foreclosing party may lack standing.

Dual tracking violations are another common basis for wrongful foreclosure claims. Under CFPB regulations effective in 2014, if you submit a complete loss mitigation application more than 37 days before a scheduled foreclosure sale, the servicer generally cannot proceed with the sale until the application has been evaluated and any appeal has been resolved. If the servicer forecloses while a complete application is pending, that's a dual tracking violation and a defense to the foreclosure.

Notice violations are surprisingly frequent. Every state has specific requirements for how foreclosure notices must be delivered — the content of the notice, the method of service, the timing, and the publication requirements. A notice sent to the wrong address, a notice that omits required information, a notice mailed outside the required timeframe, or a notice that wasn't properly published can invalidate the foreclosure proceeding. These are strict compliance requirements, not optional guidelines.

Robo-signing — the practice of signing foreclosure documents in bulk without proper review or personal knowledge — was the subject of national attention following the 2010 foreclosure crisis. While many servicers entered into consent orders and reformed their practices, robo-signing continues to occur. Documents signed without personal knowledge are legally invalid, and foreclosures based on robo-signed documents can be challenged as wrongful.

Other common violations include: foreclosing in violation of a bankruptcy stay (a serious violation that can result in sanctions), foreclosing while the borrower is on active military duty in violation of the Servicemembers Civil Relief Act, foreclosing on a loan that was already paid off or modified, foreclosing for the wrong amount (inflated by improper fees or incorrect interest calculations), and foreclosing in violation of state-specific requirements like mandatory mediation or pre-foreclosure notices.

The remedies for wrongful foreclosure are significant. You can seek: a temporary restraining order and preliminary injunction to stop an impending sale, damages for violations of federal statutes (TILA provides up to $4,000 in statutory damages per violation, RESPA provides actual damages plus up to $2,000 in statutory damages for pattern-or-practice violations), damages for state-law claims including emotional distress in some states, the ability to set aside a completed foreclosure sale if the violations are serious enough, and attorney's fees under many of the applicable statutes.

At Professional Law Assist, we review every aspect of your foreclosure for potential wrongful foreclosure claims. We examine the chain of assignments, the notice procedures, the timeline, the amounts claimed, and the conduct of the servicer. If we identify violations, we prepare the documents needed to assert them — whether as defenses in a pending judicial foreclosure, as claims in a separate lawsuit to enjoin a non-judicial sale, or as post-sale claims to set aside a completed foreclosure and recover damages.