Fraudulent Practices in Foreclosure Proceedings

January 31, 2013 By Elliot S. Schlissel

Newspapers and television news shows have made numerous presentations concerning many financial institutions in the United States being involved in fraudulent practices in originating loans. Lawsuits involving fraudulent practices can be brought against the original lender as well as subsequent lenders who received the notes and mortgage pursuant to assignments.

Fighting Foreclosure Lawsuits

A consumer who seeks to fight a foreclosure proceeding must present evidence he or she was taken advantage of due to predatory lending practices or the loan was issued after the Home Equity Theft Prevention Act (HETPA), as codified in Chapter 308 of the Laws of 2006 in the State of New York. HETPA creates presumptions of predatory lending in certain circumstances.

The case of Immigrant Mortgage vs. Fitzpatrick 95 A.D. 3D 1169, 945 NYS 2D 697 (2 Dept 2012) held a consumer is responsible for the contents of the information he or she provided in the loan application and at the time of the closing of the sale of the house. The court in this case held “[Immigrant Mortgage’s] evidence [presented against Fitzpatrick] established Fitzpatrick was presented with clearly written documents describing the terms of the subject loan and alerting her to the fact the plaintiff would not independently verify her income. Such evidence establishes prima facie entitlement to judgment as a matter of law dismissing an affirmative defense regarding fraudulent practices. In opposition, Fitzpatrick failed to proffer any evidence sufficient to raise triable issue of fact as to whether the plaintiff made any materially misleading statements or committed any misconduct with respect to the subject loan.”

Counterclaims in Foreclosure Proceedings

When a homeowner is sued in foreclosure, they may counter-sue the financial institution even if there is a waiver of defenses or counterclaims in the mortgage documents if the counterclaim is based on fraud.