Foreclosure Defense: Burden of Proof in Non-Judicial States

I have been helping a homeowner in Virginia to stave off a foreclosure based on the bank's lack of authority to foreclose.  Initially, the homeowner proceeded in the case pro se (without an attorney).  After receiving a foreclosure notice, the homeowner filed suit against the bank challenging its right to foreclose.  The bank responded that Virginia is a non-judicial foreclosure state, so that the owner cannot question the bank's right to foreclose and thus arbitrarily convert her foreclosure from non-judicial to judicial.  As expected, the judge sided with the bank and dismissed the homeowner's case without giving her a fair chance to hold the bank to the burden of proving its authority to foreclose.

When the homeowner came to my office, we got a "second bite at the apple" after the homeowner filed for bankruptcy and challenged the bank's status as a creditor in bankruptcy. During the bankruptcy proceeding, the bank made the same argument: that Virginia is a non-judicial state, that their filings with the county records pertaining to appointment of substitute trustees and other foreclosure-related documents established a prima facie case of their right to foreclose, and that it had to be the end of the story.

In response, we explained to the judge that not all challenges to a bank's right to foreclose are equal.  While foreclosure-related filings (even though often blatant and self-serving lies by the bank) may be entitled to some prima facie validity, their validity can successfully be challenged by producing specific evidence contradicting the bank's filings. In other words, although the bank produced a document stating "I, the bank, am the holder of the note and can enforce the debt," we also produced specific documents showing that the bank could not in fact have been the holder of the note (and addressing other deficiencies).  The crucial distinction here was that we did not just "allege" that the bank was wrong. We produced specific documents showing that the bank's statement could not have been true, or at least a substantial question existed as to its veracity.

The judge sided with us and noted in his ruling in open court that (paraphrasing) "while documents such as a deed of appointment and similar filings enjoy some degree of prima facie validity, in this case the homeowner has produced sufficient evidence to at least cast serious doubt upon the validity of such documents."  The judge then admonished the bank's counsel not to proceed with foreclosure unless the bank's defective filings were rectified.

The moral of the story is that, while it may be impossible in a non-judicial state to challenge a foreclosure by merely questioning (through contrary allegations and mere disagreement) the bank's right to foreclose, it is certainly possible to challenge the bank's right to foreclose by adducing specific documentary evidence sufficiently contradicting the bank's prima facie case.  Even if your case is as weak as the bank's, it still may be enough to defeat the initial prima facie validity of the bank's case and have your day in court, as long as you come forth with more than just bare allegations.

If you are interested in specific legal arguments, you can look at this excerpt: http://www.scribd.com/doc/41972339/Burden-of-Proof-in-Non-Judicial-Foreclosure-States