Alabama Foreclosure: Can a defective default letter make a foreclosure void?
Yes. If the default letter is defective, then the Alabama foreclosure can be declared “void” so that it never happened and/or you can sue for money damages. Let’s see why.
Two Types of Foreclosures In America
In Florida, for example, for the mortgage company to foreclose it must sue you, serve you, and then beat you in court. Then the judge will allow the foreclosure. It is called a “judicial” foreclosure because the court — the judicial system — is involved in it.
This is NOT how Alabama foreclosures work.
Non Judicial Foreclosure
In Alabama, there is no judge involved in your foreclosure. It all takes place privately between you and the mortgage company except that there is a public advertising in the newspaper and then the foreclosure sale takes place outside the courthouse front entrance.
We call this “non judicial” foreclosure because no judge is involved.
This is amazing power given to the mortgage companies so in exchange for this, the courts hold the mortgage companies to strict compliance. This is why the default letter being defective gives you an opportunity to fight back against the foreclosure.
Paragraph 22 Default Letter
Your mortgage will have parargraph 22 which lays out the details of what letters have to be sent in order to ultimately do a foreclosure. (Sometimes the paragraph number is slightly different but most mortgages have the equivalent of this). You can read more about paragraph 22 default letters here.
Here is the typical language of paragraph 22:
Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrowerís breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property.
The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law.
So now we want to check and see if the default letter (breach letter, notice of intent to accelerate letter, etc) matches up with Paragraph 22.
First notice the six requirements of paragraph 22:
- Tell you that you are in default
- How to fix (cure) the default
- When to fix the default (at least 30 days out)
- If you don’t fix the default, then your loan may be accelerated and/or foreclosed
- Even after acceleration, you can reinstate the loan
- You have the right to bring a court action to challenge the default, the acceleration or the foreclosure
Second, keep in mind the big picture of foreclosure in Alabama.
- Default letter
- Acceleration letter
- Advertising the upcoming foreclosure in your county’s newspaper for 3 weeks
- Actual foreclosure which takes place at the front entrance of the courthouse
We are going to focus on the first — the default letter under paragraph 22 of your mortgage.
Remember this — each step is only good if the step before it has been done 100% correctly.
So if no default letter, the acceleration letter is no good. The advertising is no good. The foreclosure is no good. This is why we start with the default letter — if it is bad, then nothing else the mortgage company does means anything.
If the default letter is not valid, then the foreclosure can be void and/or you sue for money damages
So a foreclosure happened but when we look at the default letter, it does not match those six requirements. So what?
This is a big deal because the foreclosure was non judicial. So much power is given to the mortgage company so if they can’t even get the default letter right, then the courts rule the foreclosure is no good or you can sue for money damages (sometimes both).
It is mission critical for you to look at your mortgage and the default letter to compare them.
Examples of defective paragraph 22 default letters
The default is not described to you.
So the letter says, “You are in default and you can figure this out by looking at your mortgage and how you have performed under the mortgage.”
This is no good — the default has to be explained. Lack of payments. Insurance not kept up. Taxes not paid. Property not maintained. You have to be told exactly what is wrong.
You are not give a date certain at least thirty days from the date of the default letter.
So you get a letter dated September 1 that tells you that you must cure the default by September 30. That’s not 30 days. So this fails as a default letter.
You are not advised that you can reinstate the mortgage even after acceleration.
This is a requirement (it is item number five from parargaph 22) and so if it is missing, the letter is no good.
The notice either doesn’t tell you that you can bring a court action or it talks about asserting a defense in the foreclosure proceeding.
Remember item six from paragraph 22? The default letter must tell you about your option to bring a lawsuit. Many times it is instead stated that you can assert a defense in the foreclosure proceeding. But there is no foreclosure proceeding — instead this is a non judical foreclosure. This is not Florida.
So this is a defective letter.
How do you figure out if YOUR default letter is defective?
Look at your letter and compare it with your mortgage.
If you don’t have your mortgage, you should be able to get it from the probate court in your county.
If you don’t have your default letter, consider sending a request for information letter to the mortgage company asking for it. This is under the RESPA rules and you have to be 100% sure you are sending to the right address or it is worthless.
Bottom line is you have to figure out if the letter matches your mortgage. If you are in Alabama, we are happy to look at this for you.
Remember that if there have been multiple default letters, what matters is the last one as that is the one the mortgage company based the acceleration letter on and ultimately the foreclosure.
Can you sue under state or federal law?
Yes you can sue under breach of contract because the mortgage company violated the mortgage by sending a defective default letter.
How about under the FDCPA (Fair Debt Collection Practices Act)? If your mortgage company is a debt collector (most are) and they threatened to foreclose or did foreclose without authority, then that will violate the FDCPA. You can get mental anguish damages and attorney fees along with economic damages (loss of equity, etc). Same is true for false credit reporting by a debt collector — you can sue under the FDCPA normally.
Think about the FCRA (Fair Credit Reporting Act) — this prohibits false credit reporting. So the mortage company reports you are foreclosed but it is a void/invalid foreclosure. You dispute through the credit reporting agencies. The mortgage company verifies the reporting. But they know the foreclosure is no good. This is false credit reporting and you can get compensatory damages (including mental anguish) and (sometimes) punitive damages as well as attorney fees under the FCRA.
Point is you can sue the mortgage company.
And you may be able to get the judge to rule that the foreclosure is invalid — it is void.
What if you want more information? Free training and our money back guarantee consultation.
You may want to know about foreclosures and you can go to our free training (video and workbook) at ForeclosureDVD.com. This is more designed for someone facing a foreclosure but you might be in this position.
If you want a consultation with us, call us at 205-879-2447 or fill out our contact form and we’ll be happy to set that up. We do charge a fee but we make you this promise — if you do not feel you received more value than you paid for, we will refund your money. We have never had anyone tell us our consultation was not worth more than they paid (even when we have “bad news”) but we make that promise to you to give you peace of mind that this will be money well spent.
Whether you reach out to us or not, we hope the information in this article and video is helpful to you and we wish you the best of success!