Homeowners may feel helpless when they fall behind on their mortgage and potentially face foreclosure proceedings. But anyone who owns a home with a mortgage should know that they have rights when it comes to the possibility of foreclosure and loan modifications.
Over four million people have foreclosed on their homes since 2007. Homeowners have been fighting back, however, and, with the help of an experienced foreclosure attorney, many can stay in their home.
Foreclosure proceedings are initiated by banks and loan companies when homeowners miss mortgage payments. The number of loan payments that may be missed depends on state law. Sometimes a lender can initiate foreclosure if the late fee on a missed payment is not paid along with the missed mortgage payment.
If the homeowner is unable to pay the amount due along with any late fees, state law dictates how lenders are supposed to proceed. In states that permit non-judicial foreclosure, meaning that banks don’t have to take a borrower to court to foreclose on a property, lenders will provide notice, also called a “power of sale.” Homeowners must then challenge the foreclosure in court asking a judge to stop the foreclosure.
In other states, lenders must initiate a civil lawsuit or judicial foreclosure, which means that the foreclosure proceedings will happen in court. In these states, the homeowner will receive notice of a hearing. At the hearing, homeowners may only raise legal defenses to foreclosure. Unfortunately, medical bills, job losses, and similar circumstances are not enough to stop foreclosure proceedings.
Since the Great Recession in the 2000s, however, homeowners have been successfully bringing defenses to foreclosure and staying in their homes.
Learn about defenses to foreclosure, as well as loan modification procedures, that may help if you’ve fallen behind on mortgage payments by contacting the experienced consumer attorneys at McDonald Worley by filling out one of the forms on this page.
DEFENSES TO FORECLOSURE
Common foreclosure defenses include:
- Demonstrating the lender made mistakes with regard to the mortgage or foreclosure proceedings
- Relief under the Servicemembers Civil Relief Act (SCRA)
- Showing that the lender violated state and/or federal law
- Filing for Chapter 7 or Chapter 13 bankruptcy
- Home loan modification
Homeowners should be aware that lenders often make mistakes when initiating foreclosure proceedings, specifically concerning notice and timing. Foreclosure laws are complicated and the mortgage lending industry adds another layer of complexity, so errors are not uncommon.
Demonstrating lender error when it is serious—meaning that it is more than a spelling mistake—is one of the more successful foreclosure defenses.
Mortgages are often serviced by a different company than the one that actually owns the mortgage. These companies change hands often; however, the change is not always properly communicated or recorded in local property records. In these situations, a homeowner may be paying their mortgage to the wrong company for a number of months and have foreclosure proceedings initiated. Payments may also have been credited in error or the amount due may have been incorrectly calculated.
Homeowners who are also members of the military should also be aware of special protections they are entitled to under the Servicemembers Civil Relief Act, or SCRA. Under this Act, service members may request a stay or halt to the proceedings if they can show they are on active duty. Military members may also be entitled to an attorney under SCRA.
Other state and federal laws protect homeowners, including the federal Truth in Lending Act (TILA) and state mortgage laws. If the lender failed to meet standards under federal and/or state laws, and this failure was serious, a court may halt foreclosure proceedings.
Another option may be to file for bankruptcy. Depending on the type of bankruptcy proceeding appropriate for the situation, the lender may be required to object or compel the lender to provide proof of claim or the title to the home.
Getting a home or mortgage loan modification can be another option to avoid foreclosure proceedings.
Loan modifications can include:
- Reduced monthly payments and/or late fees and penalties
- Reducing the principal owed on the loan
- Altering the interest rate
- Extensions on payment deadlines
- Forbearance (a temporary halt in payments)
Loan modifications can be the simplest way to avoid foreclosure proceedings. A successful home loan modification allows the homeowner and lender to renegotiate the mortgage.
Foreclosure proceedings can be expensive and time-consuming for the lender, so they may be interested in working with homeowners to find a way to make payments more affordable.
In 2009, the Treasury Department started a program to help lenders and homeowners get together to start mortgage modification and avoid foreclosure. Many types of home loans are eligible for the Home Affordable Modification Program (HAMP) and over a million mortgage holders have taken advantage of the program.
Only certain home loans are eligible for a mortgage modification under HAMP, but a government settlement helps homeowners who obtained mortgages from several major banks renegotiate the terms of their loan. These banks, including Bank of America and Wells Fargo, were charged with widespread fraud and agreed to pay $25 billion to settle the claims.
DO I NEED A FORECLOSURE ATTORNEY?
Foreclosure and loan modifications can be complex. An experienced foreclosure lawyer can help navigate the process and give you the best bet to stay in your home.