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William Strauss' Blog

By William Strauss | Mortgage Broker
or Lender in Chicago, IL

3 key defenses to a pending foreclosure

Q: I missed two payments on my mortgage last fall due to the replacement of an HVAC system. I called the bank and asked for some help. They told me that I did not qualify. I made full payments in December and January. My February payment was returned and approximately one week later I received a notice from a law firm advising that my house would be foreclosed upon. Although I have asked, I have never received a bank statement detailing my payment history.

I sent a note to the law firm disputing the debt, and requested a copy of the original loan along with the amount past due. Does the bank have to produce the original document prior to a foreclosure sale? The law firm seemed to feel that this was a non-issue.

A: It seems to me that you have three issues — possible defenses — to the pending foreclosure. First, the bank accepted two of your payments, but returned the third. You could argue that the bank is legally barred — lawyers call it estopped — from now claiming that you are in default.

Second, the bank's attorney may be in violation of the Fair Debt Collection Practices Act. When you first receive a letter from a collection agent (including attorneys) you have the right to dispute the validity of the debt, and the agent is legally obligated to provide you proof of your delinquency.

Third, in many states, if a lender wants to foreclose on residential property, it must be in possession of the actual original note. In the past, many loan documents were securitized — bundled together and sold to investors all over the world — and as a result, many lenders cannot locate the original promissory note that you signed.

Some judges throughout the country have taken the position that if the lender does not produce the original document, the lender cannot take legal action against the homeowner.

I suggest you contact a local attorney to review all these issues. You may have a case against both the lender as well as the law firm.

Q: I have owned a condo town home for more than 30 years that is being used as a rental. Last year after extensive remodeling ($25,000), a leak was noticed in the dining room ceiling. After it was determined it was not due to internal plumbing, the management company was notified, the spot on the ceiling was spray-painted over, and the roof supposedly repaired.

A few months later, the leak re-appeared; a plumber once again determined that it was not an internal leak. Once again, the management company was notified and it sent out a roofer to examine, and he said it could not find any evidence of a leak. I was charged $75, which is now being tacked onto my monthly condominium fees. My real estate agent, who helps manage the property for me, sent letters and e-mails to the management company citing the legal documents, which puts the burden on the association regarding external repairs. We have not received any response.

I have refused to pay and the management company is now charging a late fee of $20 per month for nonpayment of the roofer invoice. The complex has a long history of roof leaks and repairs, including at least one new roof and many repairs. Some of it is due to design flaws, which we successfully sued the builder over who corrected some of the issues but not all. Some of it was due to poor maintenance and upkeep by the various management companies over the years.

Where do I go from here? Because the "leak" has not been identified or repaired, I am now concerned that during the upcoming winter/rainy season the leak will "re-appear" and cause damage internally. This is too small a claim for my insurance policy.

A: I recommend you hire an independent structural engineer to determine where the leak is coming from. If that expert confirms your position that this is not coming from inside your unit, I am afraid that your only remedy is to file suit for declaratory judgment, asking the court to determine that the condo association is responsible.

And perhaps this is a naive question on my part, but what kind of "internal plumbing" is over a dining room ceiling. It seems to me that this is a common-element problem, which is the responsibility of the association to correct

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