Foreclosure

==Contesting a foreclosure==
Because the right of redemption is an equitable right, foreclosure is an action in equity. To keep the right of redemption, the debtor may be able to petition the court for an injunction. If repossession is imminent, the debtor must seek a temporary restraining order. However, the debtor may have to post a bond in the amount of the debt. This protects the creditor if the attempt to stop foreclosure is simply an attempt to escape the debt.

A debtor may also '''challenge the validity of the debt''' in a claim against the bank to stop the foreclosure and sue for damages. In a foreclosure proceeding, the lender also bears the burden of proving they have standing to foreclose.

Several U.S. states, including California,<ref>''Arnolds Management Corp. v. Eischen'', 158 Cal. App. 3d 575, 205 Cal. Rptr. 15 (1984).</ref> Georgia,<ref>''Berry v. Government Nat. Mortgage Association'', 231 Ga. 503, 202 S.E.2d 450 (1973).</ref> and Texas<ref>''Ginther-Davis Ctr., Ltd. v. Houston Nat'l Bank'', 600 S.W.2d 856, 864 (Tex. Civ. App.-Houston [1st Dist.] 1980, writ ref'd n.r.e).</ref> impose a "tender" condition precedent upon borrowers seeking to challenge a wrongful foreclosure, which is rooted in the [[Maxims of equity|maxim of equity]] principle that "he who seeks equity must first do equity", as well as the common law rule that the party seeking [[Rescission (contract law)|rescission]] of a contract must first return all benefits received under the contract.

In other words, to challenge an allegedly wrongful foreclosure, the borrower must make [[legal tender]] of the ''entire'' remaining balance of the debt prior to the foreclosure sale. California has one of the strictest forms of this rule, in that the funds must be ''received'' by the lender before the sale. One tender attempt was held inadequate when the check arrived via [[FedEx]] on a Monday, three days after the foreclosure sale had already occurred on Friday.<ref>''Nguyen v. Calhoun'', 105 Cal. App. 4th 428, 129 Cal. Rptr. 2d 436 (2003).</ref>

At least one textbook has attacked the paradox inherent in the tender rule—namely, if the borrower actually had enough cash to promptly pay the entire balance, they would have already paid it off and the lender would not be trying to foreclose upon them in the first place<ref>Grant S. Nelson and Dale A. Whitman, ''Real Estate Finance Law'', 5th ed. (St. Paul: West, 2007), § 7.22 at 879.</ref>—but it continues to be the law in the aforementioned states.

Occasionally, borrowers have raised enough cash at the last minute (usually through desperate [[fire sale]]s of other unencumbered assets) to offer good tender and have thereby preserved their rights to challenge the foreclosure process. Courts have been unsympathetic to attempts by such borrowers to recover fire sale losses from foreclosing lenders.<ref>''Price v. Wells Fargo Bank'', [http://online.ceb.com/CalCases/CA3/213CA3d465.htm 213 Cal. App. 3d 465], 476, 261 Cal. Rptr. 735 (1989).</ref>

One noteworthy court case questions the legality of the foreclosure practice is sometimes cited as proof of various claims regarding lending. In the case ''[[First National Bank of Montgomery v. Jerome Daly]]'', Jerome Daly claimed that the bank did not offer a legal form of [[consideration]] because the money loaned to him was created upon signing of the loan contract. The myth reports that Daly won, did not have to repay the loan, and the bank could not repossess his property. In fact, the "ruling" (widely referred to as the "Credit River Decision") was ruled a nullity by the courts.<ref name="mn faq">{{cite web| title =Legal Topics: The Credit River Case| publisher =Minnesota State Law Library| url =http://www.lawlibrary.state.mn.us/creditriver.html| access-date =2010-02-25| url-status =dead| archive-url =https://web.archive.org/web/20100131051943/http://www.lawlibrary.state.mn.us/creditriver.html| archive-date =2010-01-31}}</ref>

In a recent New York case, the Court rejected a lender's attempt to foreclose on summary judgment because the lender failed to submit proper affidavits and papers in support of its foreclosure action and also, the papers and affidavits that were submitted were not prepared in the ordinary course of business.<ref>{{cite web|url=http://www.moulinos.com/legal-update-peter-moulinos-foreclosure-summary-judgment-denied/|title=Lender Denied Summary Judgment in Foreclosure – MOULINOS & ASSOCIATES Real Estate Attorney New York|date=10 February 2011|website=moulinos.com|access-date=8 May 2018|url-status=live|archive-url=https://web.archive.org/web/20130910041849/http://www.moulinos.com/legal-update-peter-moulinos-foreclosure-summary-judgment-denied/|archive-date=10 September 2013}}</ref> Many borrowers' attorneys will establish a lender proof of compliance with the 90-day pre-foreclosure notice requirement in order to delay and prolong forecosure proceedings giving the borrower an extra 3 months to clean their record and pay off debt.<ref>{{Cite web |url=https://rew-online.com/2016/10/opinion-recent-efforts-to-speed-up-foreclosure-proceedings-in-n-y/ |title=OPINION: Recent efforts to speed up foreclosure proceedings in N.Y. &#124; Real Estate Weekly |access-date=2019-08-09 |archive-date=2019-08-09 |archive-url=https://web.archive.org/web/20190809190445/https://rew-online.com/2016/10/opinion-recent-efforts-to-speed-up-foreclosure-proceedings-in-n-y/ |url-status=dead }}</ref><ref>{{Cite web|url=https://www.bhpp.com/new-yorks-new-foreclosure-statute-a-critical-analysis-danger-delay-expense-imprecision/|title=New York's New Foreclosure Statute – A Critical Analysis – Danger, Delay, Expense, Imprecision|date=December 21, 2009}}</ref>