Missouri foreclosures typically occur outside of Court because property is conveyed through a deed of trust, rather than a mortgage. Although “mortgage” and “deed of trust” are often used interchangeably, there is a distinction. Specifically, under a deed of trust, a trustee holds legal title to the property while the borrowers hold equitable title to the property. Once the underlying debt is satisfied, then a deed of release will be filed, thereby giving the borrower full legal and equitable title to the property.
Foreclosure of a deed of trust usually occurs after default in performance of the deed of trust and/or promissory, and acceleration of the entire debt. To foreclose, there generally must be a (1) default, (2) compliance with the notice requirements of the deed of trust, and (3) legal authority by the trustee to foreclose.
Wrongful foreclosure occurs when these requirements are not met. Wrongful foreclosure is a term evoked to set aside a property transfer. It can also refer to a traditional tort suit for damages.
To prevail on a tort action for damages for wrongful foreclosure, the mortgagor must prove that the mortgagee had no right to foreclose at the time foreclosure proceedings were commenced. If there is a right to foreclose, there can be no claim for wrongful foreclosure. In seeking damages for a wrongful foreclosure claim, it is necessary to plead and prove that when the foreclosure proceedings began the mortgagor(s) was/were not in default.
On the other hand, when a foreclosure is wrongful because there is no right to sell, the mortgagor can either let the sale go and sue for damages or it can equitably move to have the sale set aside. Setting aside the sale means that the Court voids the conveyance as if it had never occurred.