New Defenses to Foreclosure in Connecticut?

26 Nov New Defenses to Foreclosure in Connecticut?

A Connecticut Superior Court Judge recently decided that mortgage company can be made to answer for the sins of the original lender in a foreclosure action. Consumers now have a new tool in their fight against mortgage lender fraud.

Defenses to foreclosure actions in Connecticut traditionally have been severely limited. You had to allege payment, release of the mortgage, or an invalid lien. If there were any other claims, those defenses could not be presented in the foreclosure action, but instead needed to be litigated in a separate action against the original lender or not at all.

When the sale or assignment of mortgages became commonplace, the opportunity to present any defense to a foreclosure action in Connecticut became nearly non-existent. Not so in other states.

You could not hold anyone responsible for the fraud or misbehavior of the original lender in making the loan. So, if your loan terms were changed at the last minute or the terms of the loan misrepresented to you at the closing or if the lender had not dealt with you in a fair manner, you could not complain.

Exactly these defenses had been inserted into a foreclosure action and when the Plaintiff mortgage company tried to strike them from the case, the Judge decided that an allegation of breach of an implied covenantof good faith and fair dealing, or behavior of plaintiffs assignor in relation to the mortgage transaction.

“In view of recent examples of irresolute behavior in the mortgage market, the court finds that there are significant public policy considerations that militate against allowing assignees of mortgages to foreclose without having to answer for the alleged sins of their assignors.” U.S. Bank National Association as Trustee v. Toni Ascenzia et al, Superior Court at New Haven No. CV-08-5022527 Memorandum Filed July 30, 2009 (ABRAMS, J)

“ConnecticutGene Melchionne is a bankruptcy lawyer covering the entire State of Connecticut. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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