Mitigation of Damages

Posted by kevin on January 19, 2012 under Foreclosure Blog | Comments are off for this article

This post is geared more for the lawyers; however, we invite all interested readers to follow.

From Contracts I, we learn that a wronged party to a contract is obligated to mitigate damages.  This is black letter law.  How can it apply to foreclosure defense?  Well, I have some ideas which, at least in New Jersey, are untested.  However, when the spigot opens and the lenders start their new wave of foreclosures, I will be testing the theory.

We have all heard about servicer abuses in the HAMP program.  Documents get lost.  People make their 3 trial payments but do not get permanent modifications, and then are required to make additional payments.   We all see fatally deficient complaints where MERS is named the plaintiff or the originator is named as plaintiff when the loan was sold to Fannie or Freddie.  Happens all the time, right?  Guess what also happens?  Interest accrues throughout the snafus.  The lender screws up and the borrower gets charged for it.  The only place this situation can exist is in the bizzaro land of foreclosures where the mantra of the lender and, in many cases, the court is that “you took the money, you did not pay it back, you are liable”.

Defenses tend to fall into two catagories- procedural and substantive.  Procedural defenses include lack of standing.  They can get a complaint tossed without prejudice.  Substantive defenses include predatory lending, UDAP violations, TIL violations and the like.  They reduce the amount due.  Add to the substantive violations failure to mitigate damages.  Why should interest run for the better part of a year after the wrong plaintiff files.  The servicer certainly knows who holds the note.  So should the plaintiff’s attorneys.  So why are their fees routinely added on to the amount due even after the case is tossed.

Make sure that you add mitigation of damages as an affirmative defense.  The follow up with it in requests for documents.  Then follow up with it with discovery motions after the plaintiff refuses to properly respond to your legitimate discovery requests.  Keep pushing the ball up the court.  You will break down the plaintiff and get a better result for your client.