Defending Foreclosure - Unjust Enrichment by the Lender or Servicer

The commonly understood meaning of the phrase "unjust enrichment" is that of an individual or company unfairly making large amounts of money at the expense of a client or customer. Based on the last few years at least, few homeowners or debtors have any real doubt that this is the exact type of business that banks and mortgage companies engage in every single day.

However, the phrase also has a specific legal meaning -- one that borrowers may be able to rely on if they face foreclosure or abuse by their mortgage servicing company. It is less well-known by debtors because unjust enrichment is not specifically covered by any of the federal lending laws. This is a type of common law tort defense to foreclosure that homeowners may raise if they are being sued or if the lender is moving ahead with a trustee sale of a property.

Instead of being based on concepts of contract law or regulations in statutes, unjust enrichment is based on the legal ideas of justice and equity. Therefore, the definition of what is unjust enrichment may be more subjective than violations of some other types of laws. A bank found to have been engaged practices to enrich itself at the expense of borrowers, however, must make restitution to the homeowners.

Just as with many other types of defenses to foreclosure, homeowners may wish to speak with an attorney to determine if the conditions of unjust enrichment have been met in their case. There are typically three elements to an unjust enrichment claim, although they may also vary a little based on state laws. These variations in state law make it all the more important for borrowers to consult competent legal counsel if they wish to examine this type of claim.

The cases where this claim may most appropriately be applied is when a lender or mortgage servicer charges homeowners for excessive fees or improper collection of some types of fees. These may include forced place insurance policies, improper late fees, and attorney fees to proceed with the foreclosure process. In any of these cases, borrowers may wish to raise an unjust enrichment defense.

Alternatively, when mortgage companies charge fees to homeowners in default or foreclosure that are not authorized in the original loan documents, an unjust enrichment claim may be raised. Banks may charge each time borrowers request payoff statements, for example, and the courts may see this as an unjust enrichment scheme in some cases. Again, it may be best to research state laws or speak with a lawyer to find out more about a specific charge.

There are a whole list of legal claims that homeowners can make when attempting to defend their home against a wrongful foreclosure. From the time the loan is originated to the time the property is sold at sheriff sale, banks and servicers have to comply with thousands of pages of laws and case history interpreting those laws.

This situation often gives homeowners the distinct advantage, if they can do enough research and get adequate foreclosure help before they run out of time. The unjust enrichment claim is just one more of these defenses that borrowers may wish to look into and speak with an attorney about, but which may help them save their homes, negotiate with the bank, or know that they have done everything possible to fight back.