Miss this critical step in foreclosure and defenses vanish – even if you raised them before
A federal appeals court just handed mortgage lenders a win that makes foreclosure defenses harder to revive once borrowers let them slide.
The Third Circuit ruled February 18 that staying quiet during summary judgment means you've lost your chance to argue, even if you raised those same defenses earlier in the case. For lenders, it's a green light. For borrowers who miss deadlines, it's game over.
The case involved a St. Croix foreclosure that took years to resolve, mostly because the defendants kept disappearing when it mattered most.
Carlton Stevens borrowed $392,000 from Banco Popular de Puerto Rico in 1997, putting up several land plots as collateral. He stopped paying. He died in 2011. Banco Popular eventually sold the loan to DLJ Mortgage Capital, which sued to foreclose in 2018.
The defendants were Stevens's heirs. They didn't show up at first, so the court entered defaults. Then, six months later, they filed an answer crammed with 33 defenses. Statute of limitations. Unclean hands. Failure to prove holder status. The works.
DLJ moved for summary judgment. The heirs said nothing. Crickets.
The district court granted the motion and also reformed the mortgage to include a plot that had been accidentally left off the original paperwork. The heirs appealed, suddenly ready to talk about all those defenses they'd ignored months earlier.
The Third Circuit, in an opinion by Judge Bibas, said no. If you don't raise your defenses when the other side asks for summary judgment, you've forfeited them. Listing them in an earlier filing doesn't count.
The court surveyed how other circuits handle this and found universal agreement. The Federal Circuit, Fifth Circuit, First Circuit, Ninth Circuit, Eighth Circuit, and Tenth Circuit all say the same thing. You can't skip your chance to oppose summary judgment and then resurrect your arguments on appeal.
The distinction the court made between forfeiture and waiver matters, though mostly in theory. Waiver means you intentionally gave up a right. Forfeiture means you just didn't assert it in time. Courts can sometimes revive forfeited arguments in extraordinary circumstances, but those cases are rare. This wasn't one of them.
The heirs also challenged the mortgage reformation. DLJ's evidence that the missing plot should have been included was fairly thin. The lender relied mainly on a 1972 government map showing the plots were supposed to be joined permanently, along with some tax records and title search results.
Not exactly airtight. But the heirs offered nothing to counter it. Not a single document. Not a witness. Nothing.
That silence proved fatal. When you're appealing a factual finding, the standard is clear error. The appeals court can only reverse if the trial judge got it completely wrong. With no evidence from the heirs pushing back, the Third Circuit said it couldn't second guess the district court, even though the evidence was weak.
For mortgage professionals, the lesson is simple. When you file for summary judgment in a foreclosure, pay attention to what the borrower does or doesn't say in response. If they go quiet on defenses they raised earlier, those defenses are likely dead on arrival if they appeal.
But don't assume weak evidence will always hold up. The reformation issue in this case squeaked through only because nobody challenged it. In a contested fight, that 1972 map and some tax records might not have been enough.
The case also shows why timing matters in foreclosure litigation. The heirs had multiple chances to engage and didn't take them. By the time they wanted to fight, it was too late.
