Although California is a non-judicial state which allows banks to foreclose without court action, for various strategic reasons, banks may still file a lawsuit against the borrower in state court, or the homeowner’s only remaining remedy is to file a lawsuit against all the parties to the loan transaction. At this point, most foreclosure victims are intimidated and simply roll over without objection, allowing the court to issue an order of foreclosure, plus costs, expenses and possibly deficiency judgments. In fact, the bank and lender attorneys count on this when initiating the proceedings, hoping for a default judgment.
However, borrowers who are represented in court by a competent attorney have a significant advantage. In addition to understanding the procedural legal aspects involved in the case, an experienced attorney can assert legal defenses which contest the lender’s right to foreclose, can attack the bank’s claims, and/or illustrate that the lender violated court rules or government predatory lending regulations which not only would completely invalidate the lender’s complaint but may enable the borrower to rescind the loan as if it were never made. For instance, if the loan originator (or assignee of the loan) materially violated the Truth In Lending Act (TILA), the borrower may have the right to rescind. Rescission of the loan is a powerful tool which causes the lender to refund any and all principal and interest payments made by the borrower over the entire course of the loan, including a refund of the down payment and closing costs. If a lender is faced with a borrower’s valid rescission right, because of its financial ramifications, the lender will bend over backwards to create a workable settlement that significantly benefits the borrower.
When an experienced attorney gets involved, the borrower gains leverage against the lender. Aside from potentially invalidating the lender’s claims outright, the lawsuit will take longer, cost much more, and may end up not being worth the lender’s time when some other informal resolution could be obtained. Simply hiring an attorney could pave the way for the settlement of your case.