Lawsuit to Set Aside Foreclosure Sale

This option is somewhat similar in substance to the “Legal Grounds to Prevent a Foreclosure” page.  The causes of action could be the same, but the difference is obviously that you are filing suit post-foreclosure to unwind the foreclosure sale rather than pre-foreclosure to stop the foreclosure sale.

If your lender violated your state’s property code by not conducting the foreclosure sale properly; if the lender engaged in some type of fraud or made a misrepresentation prior to or relating to the foreclosure; or if the lender engaged in some type of unfair lending practice; it may be possible to obtain a rescission of the foreclosure sale.  Additionally, in lieu of getting the house back, it may be possible to obtain money damages for any of the foregoing claims should you be able to prove that you lost equity in the property or had other significant losses as a result of the foreclosure.

In addition to the foregoing, many states may have a cause of action for a “wrongful foreclosure”.  This will of course vary from state to state, but wrongful foreclosure actions tend to relate to issues of whether the sale was conducted in a commercially reasonable manner or whether the property was sold for a grossly inadequate sales price.  

The possibilities for actions taken by a mortgage company that could constitute a wrongful foreclosure are endless.  There have been cases where a mortgage company has foreclosed on borrowers that were not in default on their loans.  This typically occurs due to some internal error in applying payments.  There have been cases where homeowners were not behind on their mortgage payments but called the lender to inquire about a loan modification.  The lender advised the homeowners to become delinquent on their mortgage so that they could be considered for a loan modification.  The bank then took many months to make a loan modification decision, before ultimately declining the homeowners for a modification and foreclosing on the property.  

Whether any of the above causes of action are “winning arguments” and constitute a valid wrongful foreclosure claim is extremely specific to the particular set of facts.  It is also highly dependent on the laws of the state in which the foreclosure occurs.  Therefore, if you believe that your mortgage company committed a wrongful foreclosure by an action they took leading to or in conducting the foreclosure, you need to speak with a licensed attorney in your state to determine if your facts would give rise to some type of a wrongful foreclosure action.

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