Foreclosure Sale Injunction: Benefits

In the current real estate market, commercial lenders tend to treat borrowers who have missed one or more loan payments the same. There is seldom an inquiry into why the payments were missed. The lenders tend to be aggressive and want immediate payoffs, late fees, penalties, etc. They usually want to strictly enforce balloon payments, despite the fact that they could be receiving interest rates well above the market rate. In general, the lenders tend to believe that they do not have to give an inch before foreclosure.

Oftentimes, the borrowers just need time to catch up on loan payments, time to refinance, or time to sell the property. Temporary restraining orders (temporary injunctions) and preliminary injunctions can be effective tools against unyielding lenders to stop foreclosure sales. Borrowers can gain valuable time without using up their limited right to bankruptcy. In addition, bankruptcy generally stays on a borrower’s credit for 10 years.

Although it is necessary to file a lawsuit before a motion for an injunction can be brought (if the lender has not already done so), the rewards can be significant. Injunctions force the lender to be flexible. They force the lender to look at the implied covenant of good faith and fair dealing in every contract and the materiality of the breach. Injunctions are particularly powerful when the property is not upside down. The main issue discussed with respect to an injunction is whether or not the borrower will suffer irreparable harm if the injunction is not granted.