What Is Wrongful Foreclosure In Alabama?
Foreclosures in Alabama are exploding. Approximately 800 per month just in the metro Birmingham, Alabama area. Drive through any neighborhood – expensive or not – and you will see foreclosure signs. Foreclosures are a huge problem for our state.
We assume since you are reading this that you (or a friend or family member) are facing foreclosure and you want more information. We congratulate you on doing research to find out more information.
We’ve discussed this before but it needs to be repeated over and over. The big banks and mortgage companies are banking on the fact that you 1)don’t know your rights and 2)won’t do anything about it even if you know your rights. They think they can cheat, lie, and ultimately steal your home and you won’t know it is wrong or you won’t do anything about it.
Our mission is to prove them wrong on those two insulting assumptions. Show these guys that you do know your rights and then take action.
There are people of all different knowledge levels regarding foreclosures that come to see us. Some don’t know anything about foreclosures. Others are bank executives and veteran real estate agents who have a tremendous knowledge base. We have laid out this long article with headings so you can jump to the parts that will be most helpful to you. At anytime if you decide that the best thing is to talk with us, then call us at 205-879-2447 or fill out the online contact form so that we can set up a meeting with you to help you understand your options in your unique situation.
Remember the goal – understand if your rights have been violated and if they have then fight back against these mortgage companies that are trying to (or perhaps already have) taken your home. We are here to help and will look forward to meeting with you.
I’M NOT SURE I UNDERSTAND ALL OF THE TERMS USED IN FORECLOSURES – CAN YOU DEFINE SOME OF THE WORDS FOR ME?
We find that it is helpful to make sure we are all on the same page with some basic words and definitions but if you already know all of these terms feel free to skip to the next section. We have listed these in the order they normally come up:
Note - this is the document that has the terms of the loan. For example, $200,000 for 30 years at 8% interest rate fixed.
Mortgage - this is what ties the note (loan) to the property. Otherwise the note (loan) would be “unsecured” and there could be no foreclosure.
Servicer - the company that actually handles the payments, taxes, insurance, bankruptcy proceedings and foreclosure proceedings. Normally the servicer does not own the note.
Foreclosure - your home is sold and your ability to pay off the note and have the home free and clear is “foreclosed” so you no longer have this option. We will discuss foreclosure in more detail a little bit later in this letter.
Ejectment - after a foreclosure you will receive a 10 day demand letter. This gives you 10 days to get out of the house or the new owner will have the option to sue you in order to have you “ejected” out of the house. This is where the sheriff gets you out of the house if you lose your ejectment case. (We are seeing some foreclosure lawyers sue in “District Court” under an “Unlawful Detainer” theory which applies to landlord tenant relationships — we think this is bogus and illegal but it is a growing trend — it means you only have 7 days to respond to the lawsuit, not 30 days).
Redemption - under some circumstances, you have one year from the date of the foreclosure sale to buy back or “redeem” the property from the new owner.
WHAT ARE THE CONSEQUENCES OF A FORECLOSURE?
You will lose your house. Your credit reports will normally reflect a foreclosure which is one of the most damaging things that can appear on your credit reports. If you don’t leave the house within the time limit (normally 10 days from the foreclosure sale), you will lose your right of redemption (right to buy back the house within one year). You can also be sued to kick you out of the house and for the deficiency which is the amount owed (plus costs, expenses, and attorney fees) minus the amount the lender receives from selling your house on the courthouse steps.
IS ALABAMA A JUDICIAL OR NON-JUDICIAL FORECLOSURE STATE AND WHAT IS THE DIFFERENCE?
Alabama is a “non-judicial” foreclosure state.
Here is the practical meaning of “non-judicial” foreclosure. In a judicial foreclosure state (such as Florida) the company doing the foreclosing must file a lawsuit against the homeowner and then the judge has to rule in favor of the company in order for the foreclosure to actually occur.
In a non-judicial foreclosure state (such as Alabama) the court is not involved. The mortgage company or servicer simply must follow the law and then the house is foreclosed and sold on the steps of the courthouse. (You need to make sure this was actually done as we have had situations where the bank claims to have done this step but actually our clients were there and know it was not done. That kills the foreclosure process in our judgment.)You might think of it as similar to repossession – the company just declares you are in default, advertises it, and then sells your house at a foreclosure sale.
Technically a mortgage company can file a lawsuit in Alabama but that rarely occurs – instead of taking a year or more to do a judicial foreclosure a mortgage company can conduct a non judicial foreclosure in a matter of weeks.
The bottom line to you is that the speed of the foreclosure can be shocking, especially if you read about or talk to people in judicial foreclosure states such as Florida or New York. You need to act quickly if you are facing a non judicial foreclosure in Alabama.
HOW DOES A NON-JUDICIAL FORECLOSURE HAPPEN IN ALABAMA?
The basic procedure is that the mortgage company will declare you to be in default of the note, and therefore the note is “accelerated” which means it is all due now. Then the company will advertise in your local paper for three weeks and then the house will be sold at the advertised time (between 11 am and 4 pm) at the courthouse steps (main entrance). Whoever buys the property at the foreclosure sale – and normally this is the company that allegedly owned the note before the foreclosure – will then record the foreclosure deed in the probate court of the county where your property is located. The new “owner” can then sue to have you kicked out of your home.
WHAT IS A MORTGAGE SERVICER?
This is the company that handles the day to day activities of processing or “servicing” a mortgage loan. This includes sending out statements, receiving payments, handling payoffs, charging and collecting late fees and expenses, etc. Most of the time the company that owns your loan is a Trust – an investment vehicle – that has no employees so a servicer is hired that will actually do the work.
SO A “TRUST” NORMALLY OWNS MY LOAN?
Yes – in the majority of recent loans (since the early 2000s) a Trust is generally the owner of your note. These Trusts are designed to own a huge number of loans and then investors can make investments into the Trust in order to gain a certain level of return and risk. Normally the investment options will range from very safe and low returns to high returns with high risks – all on the same home loans. Being “securitized” gives investors this option which supposedly makes more investment money available to make more mortgage loans. We are seeing that the way this was done this over the last ten years has damaged our economy in a very serious way.
WHAT IS SECURITIZATION AND WHAT DOES IT MEAN FOR ME FACING FORECLOSURE?
As mentioned above, this means investors can invest money into a trust which owns your note. Think of thousands of loans bundled together and then little parts of it are separated out for investors. Maybe someone wants to have a short term investment – that is possible even if every loan is a fixed rate 30 year loan. Someone else wants a high return investment – this is possible. The possibilities are almost endless.
So what does this mean to you? Often the companies doing the foreclosure don’t know who really owns your note. The note has been sold and chopped to pieces so often that no one may be able to figure out what happened to it. Or it may have been allegedly sold to a Trust but the paperwork was never completed so it truly did not go into the Trust in a timely manner which is a requirement of every Trust that we have seen. (The document creating the Trust and putting the loans in there is called a Pooling and Servicing Agreement or “PSA” and it will contain a deadline or cutoff date to put loans into the Trust).
The bottom line is securitization can be confusing for everyone but when a company forecloses on your home, it must have “its ducks in a row” and not just guess at who the true owner is.
I HAVE HEARD OF THE “SHOW ME THE NOTE” OR “LOST NOTE” APPROACH – WHAT IS THAT AND CAN IT HELP ME?
This particular defense is prominent in judicial foreclosure states such as Florida. Remember a judicial foreclosure state requires the owner (or servicer) to file suit against the homeowner. One of the requirements is that the note must be in the possession of the foreclosing party but generally no one knows where the note is. So most lawsuits in Florida, for example, contain a provision called “Lost Or Misplaced Note” where the plaintiff – the one suing – says “We can’t find the note but we do have a copy of it.”
Think of the note as a check that you would write to someone. The check itself has special significance. If I write a check out to my neighbor and then he gives you the check, can you deposit it in your account? No. It is not made out to you.
But if my neighbor endorses it over to you then you can. But what if you went to my bank and said you wanted to cash the check. And you didn’t have the check. Would they let you cash it? I hope not! They would say to you “Show me the check” and if you then pulled out a photocopy from your back pocket this would probably not do the trick. Why? Because the check itself has meaning and significance. If you have lost the original, you would likely not be able to use a copy.
As a practical matter this is what happens with the note. Mortgage companies say the original is no better than a copy and we are just being too technical. I wonder if you sent in a photocopy of my check to my neighbor endorsed to you if they would take that as your mortgage payment? Too technical? I think you get the point.
This does have some meaning in Alabama if you sue to stop the foreclosure. But if you do nothing then it won’t help you as we must remember Alabama is a non judicial state so no judge will ever see that the mortgage company does not have the original note….
WHAT IS “MERS” AND DOES THIS GIVE ME ANY HELP IN FIGHTING BACK AGAINST A FORECLOSURE?
MERS is a company that suffers from a split personality. On one hand, it generally claims it is nothing more than an electronic database of mortgages. When a mortgage is transferred a fee is paid to the probate court of your county and the transfer is noted. With MERS, the mortgage is transferred to MERS and then all future transfers are recorded only internally at MERS (and not in the probate court) and the companies can avoid paying the fee to the probate court.
But on the other hand MERS claims it can foreclose on people all over the country including in Alabama.
So sometimes MERS is just a database and sometimes it has the power to foreclose. When it gets sued it will take whatever position helps it in the case.
Here is the significance – MERS has some serious issues facing it. If you are dealing with MERS it gives you more choices and options to explore as often MERS will appear to cross the line in the area of foreclosure law.
WHAT ABOUT FORECLOSURE RESCUE COMPANIES THAT I HAVE RECEIVED LETTERS ON OR I SEE ON SIGNS ON TELEPHONE POLES OR ON THE INTERNET?
No matter whom it is that promises to help you – a lawyer, a bankruptcy lawyer, a non-lawyer, a real estate agent, an internet site, etc. – be careful. Whenever there is a tragedy – and the foreclosure crisis our country and state are facing qualifies as a tragedy – there will be those who are scam artists that will try to exploit victims.
Use your common sense and see how much information the person offering to help will share with you. A common trait of scam artists is to “hide” the information and claim that you have to buy their product or service before the details can be revealed.
Here are a few examples of scams that you may have faced or will face:
- Rent to buy - the promise is to buy your house and then rent it back to you. Often the rescue person does not make the payments and your home is foreclosed.
- Straw men - sell your property to someone who will then rent it back to you or sell it to you for a reasonable price but like the rent to buy you can wind up evicted and your money has been wasted.
- Phantom counseling - usually an upfront fee of thousands of dollars to negotiate with your mortgage company. You are required to cut off all contact with attorneys, mortgage companies, credit counselors, etc. And you have to pay your mortgage payment to the “rescuer” who then often never negotiates and never sends your money on to the mortgage company.
There are numerous other examples but this will give you a sampling. Be careful. Ask lots of questions. Be skeptical of someone who will not answer questions and will not provide helpful information before you pull out your wallet.
OK I UNDERSTAND ALL OF THIS – BUT TALK TO ME ABOUT SOME EXAMPLES OF HOW THE FORECLOSURE PROCESS ITSELF CAN BE FLAWED SO THAT I CAN FIGHT BACK.
Normally the foreclosure sale must be advertised in the appropriate paper in your county for three weeks prior to the sale. And the foreclosure sale occurs in the county where your property is located and then the foreclosure deed is recorded in that county.
Sounds simple enough, right?
Well, sometimes the company doesn’t advertise. This is a big problem as normally this means the law is not being followed so the foreclosure sale is improper.
Or maybe it is advertised but it is advertised in the wrong county or in the wrong paper. We have a case where the sale was advertised in a Walker county paper for a Jefferson county property.
We have seen where the foreclosure sale was to occur in the wrong county and the foreclosure deed was to be recorded in the wrong county.
We have seen where the foreclosure does not actually happen at the right side of the courthouse (main entrance) on the right day (day advertised) and during legal hours (11 am to 4 pm).
These are not the only types of violations of the law on foreclosures but they give you a sense of what we always want to check out. There are not often violations of these types but when there are, you have options.
I’VE HEARD ABOUT ILLEGAL CHARGES THAT CAN GIVE ME OPTIONS IN FIGHTING A WRONGFUL FORECLOSURE – TALK TO ME ABOUT THESE
Servicers are the companies that actually handle your payments and escrow as well as when you are late or in default. They really don’t make much money except for when you are in default. Then the fees can quickly add up and these fees are extraordinarily profitable to servicers.
So what fees are we talking about? Inspection fees (when someone drives by your home to see if you are still living there). Broker price opinions. Attorney fees. There are numerous other fees but these that we have listed will give you the general concept.
What’s the problem with them? For most of these there is not authority in the loan documents for you to be charged these fees. Or if there is, the amount is not set out. Think about it – the loan was supposed to last for 30 years so the loan companies don’t want to put a dollar amount on the fees and expenses. Sometimes we see charges imposed, for example, for inspections when there were no inspections. Or the fee is inflated over the actual charge of the inspection. Lawyer fees where no lawyer looked at your account.
Another related matter is the order of payments. Most loan documents require a payment to be first applied to interest and principal for whatever month the payment is owed. Only after this can fees and expenses be paid. But sometimes the servicers will instead apply the payment to the fees and expenses first (remember this is where they make their money). Then there is not enough left for the monthly payment so guess what – you get another late charge. People have been forced into considering bankruptcy or have faced foreclosure over this seemingly small detail but it can become catastrophic. When this happens you may have a lawsuit or a defense to the foreclosure.
WHAT ARE SOME EXAMPLES OF FRAUD THAT YOU HAVE SUED COMPANIES FOR?
Oftentimes the fraud is related to your efforts to save your home from foreclosure. Most people who are facing foreclosure have made numerous efforts to find some solution that will allow them to keep their home. Lies from the mortgage companies are not unusual at this stage.
In one case, our client had been told if she would make a several thousand dollar payment then the foreclosure would be stopped and she would not need to leave her home. So she did this. The mortgage company accepted the money. Then she received a letter telling her the foreclosure had occurred and she needed to leave her house. She called and the mortgage company told her all was fine and to ignore the letter. She then got sued for ejectment and the mortgage company claimed she had lost her right to redeem. So we counterclaimed against the mortgage company for the fraud.
Another example is our client was told the loan would be in forbearance until the house sold. Despite telling our client this repeatedly, foreclosure proceedings were begun against the client. But the advertisement was in the wrong county. The foreclosure sale was to occur in the wrong county. And the foreclosure deed was going to be filed in the wrong county. We sued the mortgage company for fraud and a number of other claims.
Numerous cases exist where Alabama residents were told they had a loan modification or that there would be no foreclosure during the application for a loan modification but then the foreclosure happened anyway. For example, one of our clients went through a loan modification and was told that modification had been approved and the client could start making payments but then suddenly the property was foreclosed. In our opinion a jury will agree that our client was the victim of fraud.
Fraud in Alabama is made up of several elements or requirements. We’ll give you the quick overview here so you can compare your situation to the law when we meet.
First, there must be a misstatement or a lie.
Second, the lie must be about a “material fact” – that is a fact that is important.
Third, you must appropriately rely on the lie. You can’t close your eyes to the truth.
Fourth, you must be damaged.
When you meet with us or another attorney you can explain what statements were made to you and we can help you determine if there was any fraud.
WHEN CAN I RESCIND A LOAN FOR VIOLATIONS OF FEDERAL LAW?
For some loans there is a right of rescission. This means that you can “undo” the loan and everyone goes back to where they started before the loan occurred. Under some circumstances the time for this can be extended from three days to three years. This right may not be available to you but when it is this proves to be very effective and is a powerful tool that you can use.
IF I WANT TO HIRE YOU WHAT TYPE OF FEE WILL I BE PAYING?
We have several options available. One option is a straight hourly rate of $400 per hour plus expenses. Most people, however, choose to hire us on an affordable monthly payment plan along with a contingency (percentage) of any recovery that we make. We will be glad to discuss these options with you to help you find out if we are the right firm for you.
SO WHAT DO I NEED TO DO IN ORDER TO MEET WITH YOU?
First, call us at 205-879-2447 or email me through this website. This way we can set up an appointment with you.
Second, gather all the documents you have related to your loan. Every loan document. Every payment you made. All correspondence. Bring copies of all voicemails. All notes you made on any conversation. Every email. All letters from lawyers. All of your credit reports. The idea is simple – bring us every bit of information you can get your hands on so we can better help you understand your options.
YOU NOW HAVE KNOWLEDGE – MAKE SURE YOU TAKE ACTION!
The mortgage companies are banking on the fact that you do not know what your rights are and therefore can’t hold the companies accountable if they are breaking the law.
While this article is only designed to give you a general overview of some of the laws (without getting into all of the specifics and exceptions), you do have knowledge. The question is what will you do with it?
You can do nothing. You can try and work it out with your mortgage company. You can call a “foreclosure rescue” place. You can call a bankruptcy attorney. You can call a consumer attorney. Or you can call us.
We obviously would like to have the chance to meet in person with you to go over your options but no matter which choice you make do make sure you take action. If you take no action then we have failed in this article as we want you to do something. It may be you can’t or should not stop the foreclosure. Sometimes life is that way, but do take the next step by contacting someone that can help you. Our phone number is 205-879-2447 or you can simply fill out this contact form and we will email or call you to set up an appointment. Remember time is precious in foreclosure cases so call us (or someone) sooner rather than later. We look forward to hearing from you.