The
Basics of Foreclosure Defense
Foreclosure is a legal proceeding that takes place when a
mortgage holder repossesses property from a homeowner that has defaulted on
their mortgage. The mortgage holder (such as a bank or other lender) then sells
the property and puts the proceeds towards paying off the amount owed by the
homeowner. As a general rule, the legal right to foreclosure is part of any
mortgage or other loan secured by a lien.
In the United States, foreclosures must conform to a
number of rules and regulations in order to be lawful. This serves to protect both the homeowner and
mortgage holder. Even though mortgage holders have the right to foreclose on a
defaulted loan, by law homeowners have the right to be treated fairly and
reasonably. Homeowners’ rights allow them to defend themselves in certain cases
of foreclosure, using legal strategies commonly known as foreclosure defense.
What
is Foreclosure Defense?
In essence, foreclosure defense is the use of legal
strategy to prevent foreclosure. Not all foreclosures that take place comply
completely with federal and state laws. Some foreclosures may also involve
mitigating factors that might reduce the homeowner’s liability to their
mortgage. In these cases, a lawyer can potentially stop or slow a foreclosure
by negotiating with the lender or challenging the validity of the foreclosure
in court. Though not all cases of foreclosure qualify for a foreclosure
defense, a good number do qualify – talking to a lawyer is a good idea if you
suspect your foreclosure might be extremely abrupt or otherwise unlawful. The
lawyer will be able to present your case to a judge, negotiate with the
mortgage holder, or file a lawsuit alleging an illegal foreclosure.
Legal
Defenses to Foreclosure
Excessively unfair terms of mortgage.
A mortgage (as can
some other contracts) can be declared “unconscionable” if its terms are
excessively unfair to one party. Unconscionability means that something is so
rash and unreasonable that it shocks the conscience of the judge. When a
mortgage is unconscionable in that it takes advantage of the homeowner, it can
serve as reason to stop or slow a foreclosure from taking place.
Unlawful foreclosure procedures
State laws govern procedures that need to be followed
during the foreclosure process. When these procedures are violated, the
homeowner has the right to challenge the legality of the foreclosire. For the
most part, violations will need to be serious or have a clear impact in order
for a judge to act in favor of the homeowner. Possible violations that may
qualify for a foreclosure defense include failure to provide proper notice or
failure to wait for a response from the homeowner.
Mistake by servicer
A mortgage holder cannot hold a homeowner liable for
their own mistake. Mistakes by mortgage servicers are unfortunately common and
frequently cause wrongful foreclosures. If a homeowner discovers that a
foreclosure has happened because of a servicer’s mistake, they can challenge
the foreclosure in court. Two of the most common mistakes are errors in
processing payments and incorrectly stating fees or mortgage payments.
Violation of Fair Lending laws
Along with state laws, fair lending laws exist to prevent
lenders from unfairly enforcing terms of loan contracts. Fair lending laws
require not only require that lenders use reasonable terms in their contracts,
but also that they follow certain rules throughout the loan process. The Truth
in Lending Act (TILA), for instance, requires that lenders disclose and explain
interest rates and fees associated with the loan before the homeowner agrees to
the contract. In the event that fair lending laws are violated, homeowners can
challenge their mortgage and foreclosure in court.
Other
Alternatives to Foreclosure
There are several alternatives that homeowners facing
foreclosure might want to consider. Some courses of action may propose less
monetary loss or may allow you to keep a hold of your home. The most common
foreclosure alternatives include short sales, bankruptcy, and loan
modification. An attorney can better inform you of how each option applies to
your case.
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