Many people today are facing, or know someone who is facing foreclosure of their home mortgage loan. Sometimes we as lawyers are contacted by the property owner who is having their mortgage foreclosed. We are also contacted by individuals or banks or mortgage companies who have made a loan which is not being paid, and which needs to be foreclosed. Both lenders and borrowers need to be aware of the requirements for modification and loss mitigation in foreclosure actions. Knowing and following the loss mitigation rules is very important for a successful outcome in a foreclosure action.
In addition to loss mitigation, there may be defenses that a property owner can raise, which a knowledgeable attorney can assist you in identifying. This is important for both lenders and borrowers, as a lender may be more inclined to engage in modification if a feasible defense exists to their foreclosure action. These defenses can rest upon many different areas of the law, as foreclosure is a litigation case much in the same way a lawsuit regarding a car wreck, or contract enforcement action.
Foreclosure is what is known as an “equitable” remedy because it transfers ownership of a piece of property from an owner to a lender. This is as opposed to a “legal” remedy in which one party pays money to another. It is possible that a foreclosure action may include a legal remedy, which is a deficiency judgment. A deficiency judgment is a money judgment over and above the sales price of the property sold in a foreclosure action. Some lenders are pursuing these deficiency judgments where property has lost significant value since the loan was made. Because foreclosure is both legal and equitable, both legal and equitable defenses are applicable in a foreclosure action. These defenses may include the defense of “unclean hands” which is an equitable defense, or legal defenses such as set-off when a lender owes money back to a borrower for charging costs and fees which they were not entitled to charge. One example of this would be charging a higher than agreed upon interest rate on the debt. A great example of an unclean hands defense would be if someone other than a South Carolina licensed attorney closed your mortgage transaction. Our South Carolina Supreme Court is charged with regulating the practice of law. They have determined that closing real estate loan transactions is the practice of law. They have also determined that loans closed by someone other than a South Carolina licensed attorney after August 8, 2011 are unenforceable.
Knowing your legal rights in a foreclosure action is the best way to secure the most beneficial outcome of your case for both property owners and banks and other financial institutions.
Subject: York County SC Real Estate Law. Foreclosures.
Disclaimer: This article is for informational purposes, and it should not be relied upon as legal advice.