How to Answer a Foreclosure Lawsuit
Defined A lawsuit is a legal action filed by a party seeking to enforce his or her legal rights. A foreclosure action is one whereby a lender seeks to enforce its legal rights by foreclosing on the mortgage,* taking the property, selling the property, and recouping the money the owed under the mortgage.** When the amount recouped by the sale of the property is less than the amount owed on the mortgage, the lender will likely seek to require the borrower pay the difference. This difference – the amount the borrower must pay after the sale – is called a deficiency judgment. Depending on the sale price of the property, this deficiency judgment can be substantial.
The Answer The answer to a foreclosure lawsuit is exactly what is appears to be – a A borrowers answer to the allegations made in the lawsuit (sometimes called a foreclosure “action” or “claim.”) The lender is the “plaintiff” and the borrower is the “defendant” when the lender files a foreclosure lawsuit against the borrower.
The answer to the foreclosure contains three sections, as described below. ! It is very important all defenses known to the borrower at the time the answer is filed are included within the Answer. Civil Rule 12(b) requires “every defense to a claim…must be asserted in the [Answer]…” Not including the defenses in the Answer can cause the borrower to waive his or her ability to raise the defenses later.
If a rough Answer has already been filed in the lawsuit, the borrower may be able to file an Amended Answer.
See the chapter in 23 Legal Defenses to Foreclosure called “Amended Answers” if this applies in your situation (Also See Appendix E to 23 Legal Defenses to Foreclosure.)
Timing It is critical that an answer be filed within the required time frame under the rules of your state. Most states require the lender say within the lawsuit paperwork (within the Complaint, or on a cover sheet) how long a borrower has to file his or her Answer to the foreclosure. Whether a date is stated or not, the Answer usually must be filed within 20-30 days from the date served. If and Answer is not filed, the lender can move for default judgment, which means the borrower doesn’t disagree with the foreclosure, even though he or she was given an opportunity to do so.
If it is nearing the deadline or the lender hasn’t requested a default judgment yet, it is generally appropriate to file a “Motion for Extension of Time.” (You can find an example here.) Instead of filing an Answer to the foreclosure lawsuit, the borrower may file a “Motion to Dismiss,” which stops the clock running on the need to file an Answer until the Motion to Dismiss is ruled upon by the Court.
If you believe a defense is present that warrants a Motion to Dismiss, this will stop the foreclosure clock until the court decides whether dismissal is warranted. (See Appendix C.)
Things to Consider When Beginning a Foreclosure Defense The most significant item to consider is the impact fighting a foreclosure will have on the amount the borrower might be obligated to pay post-foreclosure via “deficiency judgment” (the difference between the amount the property sells for at auction and the loan amount still owed.) The amount owed at the end of the foreclosure action generally includes the amount of interest and penalties accumulated between the default date and the date of final judgment, as well as (in most states) attorney’s fees.
If the borrower thinks he or she might end up in bankruptcy if the foreclosure defense fails, then these accumulating costs might be less of a concern.
Next, consider if you wish to have a jury trial or a trial in front of a judge. This designation should be made within the Answer, usually by writing “JURY TRIAL DEMANDED” under the title of the document, then add a section after any Counter Claims titled “JURY TRIAL DEMANDED” and write “Defendant hereby demands a trial by jury.”
It is usually a good idea to demand a jury trial, or one judge will be making all of the decisions. (Again, an example of an answer is in Appendix D of this book.)
What an Answer Must Contain The answer to the foreclosure lawsuit has three major parts to it: 1) A statement admitting or denying the allegations made in the Complaint, 2) A list of defenses to the foreclosure lawsuit, and 3) A list of affirmative defenses to the foreclosure lawsuit. Sometimes there is a section called “Counter Claims” which acts like a counter-lawsuit, suing the lender for its own violations of the law. Each will be discussed below.
! Most states are “notice pleading” states, which means an answer only needs to put the other side on notice of your defenses.
An answer generally does not require a laundry list of facts supporting each defense, just enough information to put the other side on notice of how you intend to defend the lawsuit at trial. However, counter claims should contain each of the “elements” that establish that particular counterclaim. (Each of the chapters in this book give you the elements for each claim.)
Admitting or Denying Allegations The first section of the “Answer” admits or denies each allegation of the lender, paragraph by paragraph of the complaint.
For example, paragraph #2 of the complaint may allege you have not made a payment since January 1.
If you actually stopped making your payments on March 1, then you would deny the allegation in paragraph #2.
Your denial would appear like this in the Answer: “Defendant denies the allegation contained in paragraph number 2 of the complaint.”
You should number each paragraph that admits or denies the allegations in the complaint, addressing each allegation made by the lender.
Defenses The defenses section of the Answer is the section where the defendant-borrower states the reasons why the lawsuit should never have been filed because the plaintiff-lender is “flatly wrong.” Each defense only needs to be a short and plain statement of the defense raised, unless fraud is one of the defenses, in which case the specific grounds of the fraud must be stated.
Generally, most of the defenses raised in this book won’t fall under this section, but rather under the Affirmative Defenses section, as described below.
A defense would include a statement to the effect of “you got the wrong guy.” Formally, this would be defense entitled, “Failure to State a Claim.”
Worth Repeating! It is very important all defenses known to the borrower at the time the answer is filed are included within the Answer. Civil Rule 12(b) requires “every defense to a claim…must be asserted in the [Answer]…”
Not including the defenses in the Answer can cause the borrower to waive his or her ability to raise the defenses later.
If a rough Answer has already been filed in the lawsuit, the borrower may be able to file an Amended Answer. See the section called “Filing Amended Answers” if this applies in your situation. If you make a mistake and include a defense as an affirmative defenses, or an affirmative defense as a defense, most courts will still accept the defense. (See Civil Rule 8(c)(2).)
Affirmative Defenses Affirmative defenses are the rough equivalent of “yeah, but…” That is, the lender is not flatly wrong in filing the foreclosure action, but there is some legal reason to avoid judgment in the lender’s favor. For example, the lender might have sued the right person, but failed to mail a required Notice of Acceleration, which most mortgages/deeds of trusts require occur before the lender files foreclosure. This is required under covenant 21 or 22 of most mortgages and creates a “conditions precedent” before foreclosure can begin.
That is, the lender must mail the notice and wait 30 days, or it cannot foreclose. If this is applicable in your situation, you may be able to have the case dismissed, force the lender to mail you the correct notice, and then wait 30 days before refiling. (See Defense #12: Conditions Precedent for more information on this.)
Counter Claims Counter claims are mini-lawsuits filed back at the lender. Instead of filing a separate lawsuit against the lender, you may include a section within the Answer document that alleges claims against the party suing.
If you think a counter claim is applicable, you must file it in the foreclosure action, or be forever barred from bringing it.
! Civil Rule 13(a) requires the Answer you file include as a counterclaim any claim that – at the time of the lawsuit’s service – arises out of the transaction that is the subject matter of the opposing party’s claim.
In a foreclosure lawsuit, this means any claims the homeowner has against the lender due to a defect in the mortgage must be filed with the Answer. This is called a compulsory counterclaim. It means that if you lose the foreclosure lawsuit and later find out the…