Defending Foreclosure: The Basics and How to Use Them
Receiving a court summons for foreclosure is frightening. You find yourself pondering questions you never thought you would encounter. Can you save your home? Will your credit report be affected? Where will your family live?
The bank is telling the court that it has a right under the mortgage to foreclose on you. However, keep in mind that you have rights too, and it is legal, ethical, and smart to assert all of your rights with the help of an attorney when facing foreclosure.
Efficient foreclosure defense can allow you to stay in your home while you litigate your case, and we help many of our clients to save their home. However, if you are looking at other options, we can also help you obtain a deficiency judgment waiver in the situation that you leave your home, such as in a foreclosure sale, short sale, or deed in lieu of foreclosure agreement. We also help many clients to apply for and obtain a loan modification that reduces their principal, interest rate, and monthly payment.
Some of the defenses that experienced foreclosure defense attorneys employ to delay or dismiss foreclosures are:
Failure of Condition Precedent
The terms of the Note, Mortgage, and federal guidelines generally require specific steps the bank has to take before it can begin a foreclosure. If the bank fails to comply with the requirement to serve the homeowner with notice of default or to conduct necessary meetings with the homeowner, the court may dismiss the foreclosure.
Lack of Standing
When foreclosure proceedings begin, a lawsuit must be filed and served against you. You become the defendant, and the bank is the plaintiff. The bank must demonstrate to the courts they are the party legally entitled to foreclose on you. This is the legal concept of “standing”. You can bring the plaintiff’s standing into question as a foreclosure defense, and they must prove that they have the standing to foreclose. As the news has shown over the last several years, ownership of a mortgage can be a complicated thing with most loans being securitized, bought and sold multiple times. The bank’s errors, improper or incomplete documentation, or fraud may cause them to have a hard time proving their standing. If they can’t prove it, the lawsuit may be dismissed.
Unfair Lending Practices
If your bank has been deceptive about your loan, acted unfairly, or failed to disclose required information, you may be able to challenge foreclosure based on these bad acts. The Truth In Lending Act (TILA) requires lenders to disclose a great deal of information, including the annual percentage rate, payment schedule, and other information about the loan. Lenders who do not give borrowers the correct information TILA requires have broken this law.
There are many other defenses that may be raised, such as unconscionable terms, foreclosing on an active service member, and failure to properly invoke the court’s subject matter jurisdiction. But a homeowner can’t use one of these foreclosure defenses if they don’t know the defense exists or how to properly raise it. There are federal and state laws intended to protect homeowners, and those defenses can delay or dismiss foreclosure proceedings.
If you find yourself facing a bank in a foreclosure lawsuit, you know they have their attorneys working to protect the bank. Your best option is to get an attorney on your side to review everything and protect your interests. Contact Doucet & Associates to help ensure that your rights are protected.
Loss Mitigation Options for Families Facing Foreclosure
Federal law requires mortgage companies to offer loss mitigation options to homeowners who are facing foreclosure. Loss mitigation options include:
- Loan Modification – The lender and borrower agree to extend the life of the loan for a reduction in interest.
- Deed in Lieu – The borrower offers collateral in exchange for a release from the mortgage.
- Pre-foreclosure Sale – The borrower sells the property and uses the money to pay off the mortgage.
- Short Sale – The lender accepts a payoff less than the mortgage is worth. This only applies if the mortgage is more than the value of the property.
- Cash for Keys Deal – The lender pays the family to leave in order to avoid the cost of eviction.
- Forbearance – The lender accepts reduced or no payments for a short time in exchange for a later repayment.
- Partial Claim – The lender advances the fees necessary to bring the mortgage current to the borrower under the condition that they are paid back at a later date.
Which options are available depend on the mortgage servicer and the circumstances surrounding the loss mitigation application. The mortgage servicer will be able to present you with information regarding loss mitigation and what is required to file an application. After submitting an application for loss mitigation:
- Your servicer must respond to loss mitigation application in five business days with the application status:
- Either complete or incomplete.
- If incomplete, the servicer must state what is required to complete the application.
- Your servicer must provide you with an evaluation or complete list of options within thirty business days of receiving the application.
- If you are denied, you must be provided with an opportunity to appeal.
Once you submit a loss mitigation application, before responding to your request the mortgage servicer cannot:
- File a foreclosure lawsuit.
- Move forward with the sale of a property.
This is known as dual tracking and it is illegal. Doucet & Associates deals with banks and mortgage servicers on a regular basis. If you are having trouble getting a loan modification processed, or if you would like assistance in filing one calls us at (614)-944-5219.