Mortgages

What to Do if a Bank Wrongly Forecloses on You

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Earlier this year, Katie Barnett of Athens County, Ohio, hadn’t mowed her lawn in two weeks. This led First National Bank of Wellston, Ohio, to believe they were at the right place. They began to repossess her house, hauling items out to sell or throw away, and even changed the locks. But there were two problems: Barnett was on vacation, and First National Bank meant to repossess the house across the street.

In fact, First National Bank wasn’t even her bank, and after the local police closed the case, the bank president refused to replace her estimated $18,000 in losses.

“He got very firm with me and said, ‘We’re not paying you retail here, that’s just the way it is,’” Barnett said. “I did not tell them to come in my house and make me an offer. They took my stuff and I want it back.”

While Barnett is still in negotiations, a few lessons spring forth in this cautionary tale. First, she’s not alone, and second, it could happen to you. In December 2009, Jason Grodensky paid cash for his new home in Fort Lauderdale, Florida, only to find seven months later that Bank of America foreclosed on the mortgage-less house in error.

Angela Iannelli of Hampton, Pennsylvania suffered a similar fate in 2010 at the hands of Bank of America, with a wrongful foreclosure occurring despite the fact that she had been on time with all but one of her mortgage payments. A contractor padlocked her doors, shut off her utilities, and even confiscated her pet parrot.

These are just three of the many, many horror stories that countless homeowners have faced in the past few years. The Huffington Post examined court records in 2012 and found over fifty lawsuits filed against several different lenders and contractors, all across the country, stemming from unlawful break-ins and repossessions.

If a Bank Wrongly Forecloses on You

What if this happens to you? What can you do to make sure that you’re not falling victim to a wrongful foreclosure? While legal provisions vary from state-to-state, here are a few measures to take that can help you:

1. Document everything

This is perhaps the best precaution you can take to ensure that you legally have the upper hand. “Documentation is key,” said Yelena Gurevich of Consumer Action Law Group in Los Angeles, a firm dedicated to foreclosure defense. “So if someone has been paying their lender and the lender says they’re still going to foreclose on their house, if they can prove that it’s wrong, the lender is essentially the bad guy in that situation.”

Gurevich recommends that homeowners keep a detailed file of names of people at the bank with whom they interact, specific dates, and most importantly, official letters from the lender.

Documentation also helps in assessing property damage, both before and after a wrongful repossession. Keeping an up-to-date record of valuable items in your home can provide support for your monetary claim, and photographs of damage should this unfortunately occur, bolsters your court case.

2. Know your legal rights

While you don’t have to be a lawyer to pursue what’s rightfully yours, you should know that you don’t have to suffer. “[Homeowners should know] they have legal recourse, they have standing to pursue their claim, and if something happens to them that they think is wrong, they may not know exactly what’s wrong, but if they feel it is wrong … they have a right to pursue that,” said Gurevich. “They have a right not to be evicted.”

If a lender simply changes the locks on your house without going through the eviction process, that’s illegal and due process applies to lenders, as well.

“A homeowner can’t just immediately be evicted because the house was foreclosed on,” added Gurevich. “If that happens, they can ask the court for a preliminary injunction to stop further action, money damages, for the house back, or more.”

Knowing that you have legal recourse to fight a lender (and win) is important to taking the first steps in your case.

3. Call the lender

Should an unfortunate scenario happen to you, whether it’s a mix-up while you were on vacation or it’s improper notification, you should “call the lender, and ask what’s going on, what happened here, why is this happening,” said Gurevich.

“It’s really important to understand that a lender is a business. A lot of times departments within a lender do not talk to one another,” she explained. “One department could be working with the borrower, while another is unknowingly proceeding with foreclosure.”

Your first step after wrongful foreclosure is to attempt to seek reparations from the lender itself. It could be a simple mix-up that they can easily rectify.

Though laws differ from state to state, California specifically released the homeowners’ bill of rights, that now “places a certain responsibility on the lender to have interdepartmental communication,” said Gurevich.

4. Contact a lawyer

“If you’re not getting a result in the first few days, call an attorney and have that attorney file a lawsuit and bring the lender into a courtroom,” advised Gurevich.

Of Barnett’s case in Ohio, Gurevich said, “If that client came to us and told us that story, we would immediately file a wrongful foreclosure and damages lawsuit.” When a lender refuses to own up to their wrongdoings, you have legal recourse and should seek counsel.

5. Consider going to the media

In some cases, like those mentioned above, lenders were entirely reluctant to fix their mistakes, even reacting to the consumer claims with disrespect.

Gurevich recommends homeowners do this in certain cases, like ones where they’re not seeing results from the lender. “If you want to call the media,” she recommends, “contact everyone you think will listen. I tell clients that we’re just one part of a spectrum, working with one judge, one attorney,” saying that raising awareness could help in some cases.

There are countless scenarios where innocent homeowners face property damages or losing their house over a simple miscommunication. You can’t always know if you’re at risk, but you should take precautions and know that you have the right to fair treatment. Your house depends on it!

Image: iStockphoto

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