What Happens When a Mortgage Company Wrongfully Forecloses?

Mortgage companies often make mistakes. It is not unusual for mortgage companies to lose payments or fail to properly apply payments, or for some other reason falsely accuse the borrower of defaulting on the mortgage. Mortgage companies also sometimes fail to give the required notice to the borrower prior to the foreclosure. Also, because of the confusion that often exists regarding the ownership of a mortgage, a foreclosure can be performed by the wrong company.

Conducting a foreclosure sale without complying the legal requirements is considered under Alabama law to be a “wrongful foreclosure.” Alabama law allows a borrower to bring suit for wrongful foreclosure. The consumer may recover damages and may be able to set aside the foreclosure sale. Conducting a wrongful foreclosure sale may also constituted a violation of federal law.

In Alabama the foreclosure process begins when the foreclosure notice is first published in the newspaper. Beginning this procedure when there is no right to foreclose can also be “wrongful foreclosure.” This means that consumers may have a claim for wrongful foreclosure, or other claims, even when the foreclosure sale has not occurred or was ultimately canceled.

Challenging a Foreclosure

The law also allows a consumer to go into court, before a foreclosure sale, and ask the court to "enjoin" (i.e. stop) the foreclosure sale. The borrower will have to present evidence that the foreclosure is illegal. Although success of this challenge will depend on the particulars of the case and the judge's discretion, where successful, this can be a valuable alternative to filing bankruptcy. The key is to act quickly so that your lawyer will have a time to pursue option. This point is so important, it bears repeating - see below.

Act Quickly! If you believe that foreclosure proceedings have been brought against you wrongfully, you need to immediately seek legal advice with a consumer rights attorney. Do not wait. If you think that you are victim of a wrongful foreclosure, even if the sale has not taken place yet, act now. The sooner you get legal help, the more options you will have.