When a person is facing foreclosure, they may think they’re going to spend a lot of their time working with the bank. After all, it’s the bank that wants mortgage payments made, so it makes sense that the homeowner would primarily deal with them. However, this isn’t always the case. In some cases, a servicer may take over the dealing, and regularly drop off documents to the homeowner. Sometimes, the servicer may even sign several important documents.
So, what is a servicer in a foreclosure proceeding? Is it legal for the bank to use them? What can a servicer legally do, and what can they not do? These questions are important for any homeowner in a foreclosure proceeding, as the role of the servicer could provide a valid foreclosure defense.
What Is a Servicer in Foreclosure?
A servicer is an individual or company the lender has hired to act on their behalf during foreclosure proceedings. They often call homeowners, send them documents, and otherwise communicate with the homeowner during the foreclosure proceeding.
Why Do Banks Use Servicers?
Simply because when it comes to mortgages, banks lend money. They are good at that, and that’s the work they want to focus on. Sometimes they do not have the capacity to keep amortization tables, keep track of interest, apply payments to the current mortgage, review escrow payments, or send out notices. Not having the capacity to do these things doesn’t necessarily mean the bank doesn’t want to. They want to focus on creating more loans, so they can make more money.
In the case that a foreclosure happens, they certainly don’t want to deal with litigation. For this reason, they will often send a servicer on their behalf to foreclosure hearings. This is the area where the role of a servicer is questioned. There is much debate on the role of a servicer in foreclosure hearings, and whether or not it’s legal for them to appear on behalf of the lender.
The Legality of a Servicer in Foreclosure Hearings
The questions surrounding the legality of a servicer in a foreclosure hearing focus on one main point. That is the fact that the lender, or the bank, created an agreement with the borrower, or the homeowner. The servicer is not a part of that agreement and the homeowner doesn’t owe the servicer anything.
Most lenders don’t want one more hassle holding up their foreclosure proceeding. For this reason, they will often foreclose in their own name, which erases some of the questions pertaining to the legality of using a servicer.
It doesn’t end there, though. The servicer will still communicate with the homeowner during the proceeding, and they can even appear in court and testify against the homeowner. Whether or not this is an issue is something that has been contested for years among homeowners, lenders, and even the courts.
The Servicer and Personal Knowledge
No one really disputes whether or not a servicer can communicate with a homeowner heading toward, or already in, foreclosure. After all, payments are still made to the lender and it often doesn’t matter who is communicating with the homeowner to give them important documents or information. This only really becomes an issue when the servicer testifies against the homeowner in court.
In the past, Florida appellate courts have passed judgments stating that the use of a servicer in a foreclosure proceeding is completely legal. However, there is a large caveat attached to this: in order for the servicer to legally testify against the homeowner, the courts have also stated that the servicer must have personal knowledge about the homeowner.
Personal knowledge refers to knowledge regarding a specific homeowner’s loan. This includes the payment history, the length of the loan, the interest rate and the type of interest, and anything else pertaining to the loan. As long as the servicer is privy to this knowledge, they can testify on the behalf of the lender during foreclosure litigation.
The problem with this, at least for lenders, is that too often a servicer does not have this information. They are unsure about how a loan was transferred, how many payments were made and when, and if the payments were properly applied to the loan. They may not even know what the lender’s policies and procedures are, a very important aspect of the knowledge a servicer should have when testifying.
This is because the company or individual acting as the servicer gets hundreds of files pertaining to loans from the lender. This makes it very difficult for the servicer to have the personal knowledge required by the courts on every single file.
The fact that a servicer does not have full knowledge of the loan, yet still testifies, may sound like bad news to borrowers. It’s not, though. In fact, when a servicer testifies without full personal knowledge, it is considered a violation. That, then, can provide the foreclosure defense a homeowner needs in order to keep their home, and give them more time to determine how they’re going to get their loan out of default.
A Florida Foreclosure Defense Attorney Can Help With an Improper Servicer
A Fort Lauderdale foreclosure defense lawyer knows about the role of a servicer in foreclosure proceedings. They know how courts have ruled in the past, and the fact that a servicer must have personal knowledge pertaining to the loan. They will use this knowledge to refute any testimony the servicer provides, and to show that the servicer actually has no personal knowledge of the loan.
If you are facing foreclosure or have started receiving documents from a servicer or your lender, contact the Loan Lawyers at (954) 523-HELP (4357). We know the law regarding foreclosures, including the rights of the homeowner and how any violations of these can provide a viable foreclosure defense. Don’t allow any lender to simply take your home. Get the defense you need that will provide the time you need to get your loan out of default and let you keep your home.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.