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Pleading Foreclosure Defenses

If you are sued in a foreclosure proceeding the first step to protect yourself is properly pleading your foreclosure defenses and counterclaims. Foreclosure defenses and counterclaims need to be plead in your Answer in a manner which sets forth the facts to reasonably inform the financial institution with regard to the basis of the defenses or counterclaims.

Types of Defenses

I. Failure to Comply with Notice Provisions
In the State of New York, a financial institution must provide a homeowner with notice 90 days before a foreclosure lawsuit is initiated that they are accelerating the mortgage and calling the debt due and payable. The failure to give the homeowner this notice means the financial institution has not met its requisite notice requirements under New York State law. This provides the basis of a defense to the entire foreclosure lawsuit and can be utilized to have the lawsuit dismissed.

II. Lack of Consideration
For a mortgage to be enforceable there must have been consideration. In theory the homeowner should have received money, which would be the consideration, for him or her signing the note and mortgage. A failure to have been given consideration may entitle the mortgagor to rescind the note and mortgage and set aside his or her financial obligations.

III. Fraud
When a mortgage is obtained by fraud, a properly pleaded defense can be utilized to set the mortgage aside. Fraud must be specifically plead. The homeowner must show the deceit that was specifically involved in the fraudulent procurement of the mortgage.

IV. Failure to Produce the Note
In the State of New York, the financial institution bringing the foreclosure lawsuit must have the original copy of the note in their hands. The failure of the financial institution to have the note in its hands on the date the foreclosure lawsuit is initiated is a defense to the lawsuit. This defense can be utilized to have the case dismissed.

V. Statute of Limitations
All contracts in the State of New York are subject to the statute of limitations defense. Statute of Limitations with regard to the enforcement of a mortgage is six years. If a homeowner makes any payment on a mortgage, the statute of limitations starts to run from that last payment. If a foreclosure lawsuit is not initiated within the statute of limitations time period, it can be a properly pled defense of statute of limitations can be utilized to have the case dismissed.

VI. Unclean Hands
The unclean hands defense is an equitable defense. The basis of this defense involves the homeowner who pleads the defense to show the court the financial institution was involved in illegal or fraudulent conduct which was the basis of the transaction.

VII. Bad Assignments
The financial institution which sues you may not have been the bank you originally borrowed the money from. If this is the case, the subsequent financial institution must have received a valid assignment from the original bank which made the loan. This assignment has to be filed in the County Clerk’s office of the county in which the property is located. The assignment and the appropriate documents related to the assignment must be filed prior to the lawsuit being initiated by the financial institution.

If there are multiple financial institutions that have been involved in the transaction, a problem in the assignment or transfer of the paperwork and/or properly filing it in the County Clerk’s office, can be a defense against the financial institution who ends up bringing the lawsuit. A good analogy of this would be a chain. A chain is as strong as its weakest link. If there is any link in the chain involving any of the financial institutions or services involved in your mortgage which weren’t properly done, that would give you the basis for an affirmative defense of a bad assignment. If there is a bad assignment, you can make a motion to have the case dismissed.

VIII. Counterclaims
If the financial institution has acted improperly a counterclaim can be alleged with regard to the damages suffered by the homeowner. Counterclaims must be plead showing what the bank did wrong and how it has damaged the homeowner. A properly drafted counterclaim can result in not only the case being dismissed, but the homeowner receiving monetary damages from the financial institution.

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