Information About Foreclosure Defense Law

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.