Section 44 Generally

• Library: Consumer Law and Practice 2010

When a homebuyer finances the purchase of a home or refinances, the lender receives a security interest in the home. The security interest ensures that the lender has rights in the property in the event of default. In Missouri, typically, a deed of trust evidences the lender's security interest in the home. A note or a mortgage usually accompanies the deed of trust. A note sets out the rights and responsibilities of a borrower and a lender. If a borrower fails to pay the loan according to the borrower's note or mortgage, the borrower is in default. Once a borrower is in default, the lender will send the borrower a notice of default. Upon the default, the lender will accelerate the note, meaning that the total amount borrowed, along with late fees, interest, and other charges, will become due. Missouri law does not require a lender to give the borrower a right to reinstate. But in many instances the lender will do so voluntarily. Once the lender notifies the borrower of a default and acceleration, the lender may allow the borrower to bring the loan current by paying all past due balances, including any late fees and other charges, or the lender may permit the borrower to renegotiate the terms of the loan. Other options for the borrower include:

. selling the property, if time permits, to pay off the loan;

. refinancing the loan with another lender; or

. voluntarily conveying the property back to the lender through a deed in lieu of foreclosure.

If none of those options are feasible, the lender will proceed with the foreclosure.

Filing an injunction to stop the foreclosure may not always defeat the foreclosure, but it may slow the process down, at least giving the homeowner more time to find other accommodations. A good faith argument to enjoin a foreclosure could be based on any number of mistakes made by the lender. Lenders do make mistakes. See,e.g.,Hoyt v. GE Capital Mortgage Servs., Inc., 193 S.W.3d 315 (Mo. App. E.D. 2006) (instead of applying monthly payments to principal and interest, the lender improperly placed them into a suspense account, causing the loan to default and improperly instituting foreclosure proceedings). Because lenders do err, it is important that all notices and documents be checked for errors. Some common mistakes may include:

. failing to credit the borrower's account;

. unnecessarily incurring forced place insurance charges and including them as a part of the borrower's arrearage; or

. as in Hoyt, misapplying payments.

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