The 2015 Foreclosure Report generated by the Chief New York Court Administrator, indicated that those in the state that are facing foreclosure are continuing to increasingly retain legal counsel in defense of these actions. In 2011, the percentage of those with legal representation was merely 33%; however, this figure has nearly doubled at 61% last year. The New York State Court System recognizes several defenses that can be raised in the foreclosure process. This requires answering the summons and complaint and effectively supporting the defense. Defenses and potential counterclaims are made in writing with the facts that outline their basis for consideration.
Failure in HAMP Compliance
In response to the U.S. “housing crisis,” a federal program was introduced in 2009 known as the Home Affordable Modification Program (HAMP). This requires compliance with federal regulatory guidelines for lenders to make a reasonable effort to create a modification option for homeowners subject to foreclosure. Homeowners may cite a failure in HAMP adherence as a defense against non-compliant mortgage holders, which potentially could lead to suit dismissal.
Improper Service or Notice
Another defense may stem from the plaintiff's failure to properly serve the summons and/or compliant. Some of these include:
- When a foreclosing party fails to mail a Notice of Default to the homeowner in ample time before the action of foreclosure.
- A required 90-day pre-foreclosure notice must be executed containing five local agencies that a homeowner may seek counsel regarding the matter.
- Plaintiff did not serve the complaint in an approved manner.
- The homeowner(s) was not served the Help for Homeowners in Foreclosure Notice or its necessary attachments.
Fraud or Misrepresentation
Cases occur where there was a fundamental violation of laws associated with contracts. Here, a mortgage loan can potentially be deemed as illegal if unfairness was demonstrated in the sales process, loan terms, or closing process. If these violations are fraudulent or involve misrepresentation, it may lead to rendering the agreement as invalid. One example is the “unclean hands” defense that requires homeowners to prove the transaction involved illegal acts. In such cases, homeowner's may make counterclaims for damages.
Statute of Limitations
Generally, all contracts have a potential defense regarding the statute of limitations. This period applies in the case of a mortgage for six years. For example, if a homeowner made a mortgage payment of any kind, the limitation period begins at that time. Foreclosure lawsuits must be brought within this six-year time frame, or they may be dismissed.
Lack of Standing
It is possible to prove that a foreclosing party lacks proper standing; the foreclosing party must be the holder (owner) of the loan at the time of filing the lawsuit. This defense places a burden on the plaintiff to prove loan ownership. In the mortgage industry, it is common that the original lender with whom the homeowner entered the contract has since sold the mortgage to another party. Here, the current holder must provide evidence of legally obtaining the contract from the original owner.