Foreclosure defense comes into play when you’re behind on mortgage payments and facing foreclosure. As foreclosure is typically a once-in-a-lifetime experience it can be difficult to understand all of your options to defend against the foreclosure action. A foreclosure attorney can be a great ally at a time like this.
Sometimes, lenders make big mistakes and do illegal things. After a consultation with an attorney, it may become clear that your lender made an egregious mistake that should be taken to court in your defense.
More commonly, people fall behind on their mortgage due to an unforeseeable financial hardship. The hardship comes out of nowhere and forces the homeowner to prioritize daily living expenses. Once you’ve fallen behind, it can be hard to get caught up.
If this describes your situation, there may not be an obvious error on the lender’s part and the thought of getting embroiled in a messy lawsuit can feel overwhelming, particularly if there isn’t any guarantee of success in court.
I speak to many people every day who just want to get caught up and have everything return to normal as fast as possible.
If this sounds more like what you’re going through, “foreclosure defense” for you will likely mean:
- Taking advantage of all available government-help programs backed by your mortgage investor
- Figuring out how to use what’s available to you in your state to get more time in the home
- Seeing if there are any state-sponsored dispute resolution processes (like foreclosure mediation!) that you could use to help you negotiate with your bank and stop the foreclosure activity
- Applying for loss mitigation options (like a loan modification, repayment plan, forbearance or short sale) offered by your bank to see if you can resolve the matter and end the foreclosure activity
If you’re unsure what the best next move is, you should probably consider having an attorney consultation to go over your foreclosure defense and mortgage relief options.
An attorney will be able to tell you whether you have a case that should be litigated in the court system or whether it’s better to try and work out an agreement with your bank prior to the foreclosure auction.
Below is some information about foreclosure defense options that will likely be discussed when you speak with an attorney.
Going through your lender’s loss mitigation procedures is your first foreclosure defense
- You can use the loan modification process to help you achieve a mortgage modification so you can resume mortgage payments and keep your home. An approved and accepted loan modification will stop your foreclosure. If you have a Fannie Mae, Freddie Mac, FHA, VA, or USDA loan, there may be government programs to help you achieve a mortgage modification (to keep the home).
- You can request forbearance on your mortgage loan. If approved for forbearance, your mortgage servicer will temporarily stop requiring monthly mortgage payments for an agreed upon time.
- You can complete a reinstatement of the past due amounts in order to bring your loan current and keep the home. A reinstatement is a one-time payment in full of all your missed mortgage payments and any related fees. After you reinstate, you then resume your normal monthly mortgage payment.
- You can work out a new repayment plan with your bank or mortgage servicer to catch up on mortgage payments and keep the home. A repayment plan allows you to resume your regular mortgage payments with an agreed-upon extra amount on top of your regular payment that goes toward the arrears. Once your repayment plan is done, you continue with regular mortgage payments.
- If you want to short sell your home or deed it back to the bank (because you owe more than the home is worth), there are ways to apply and negotiate approval for a Deed in Lieu or a Short Sale Agreement with your lender. These agreements will help you stop foreclosure and get out of your home before the auction date.
Defend against foreclosure by completing an equity sale of your property before the foreclosure sale date
If you want to sell your home and recover your equity, you may want to consider selling the property on the real estate market before your foreclosure auction date.
(If you’re considering this, you may want to partner with a distressed sale manager to handle the foreclosure aspect of the sale as these sales often take place on a tight timeline).
Foreclosure defense includes taking advantage of state-run dispute resolution processes like Foreclosure Mediation under the WA Foreclosure Fairness Act
For homeowners in Washington State, you may be eligible for Foreclosure Mediation under the Foreclosure Fairness Act. This is a government-help program designed to stop foreclosure so you can communicate directly with your bank.
Mediation is intended to bring your lender to the negotiation table to discuss your desire to avoid foreclosure and to see what programs may be available to you to help resolve the situation.
All loss mitigation workout options including loan modifications, repayment plans, forbearance agreements, reinstatement plans, short sales and deed in lieu agreements can be negotiated and discussed during an open Mediation.
Mediation is a cost effective way to be able to stop your lender from foreclosing and force them to negotiate in good faith with you.
Either a housing counselor or a foreclosure attorney will be required to help you apply for mediation.
Bankruptcy is a proven foreclosure defense
Sometimes, you may need to stop your foreclosure process fast (or you have found that nothing else is working to defend against foreclosure). If you’ve run out of time to work with your lender or servicer, you may need to consider bankruptcy to stop foreclosure.
A Chapter 7 or a Chapter 13 bankruptcy stops foreclosure actions. Once you file bankruptcy, an ”automatic stay” goes into place which stops the foreclosure. Your mortgage lender can ask the bankruptcy court to lift the stay (by filing a motion) but even if this happens, you will likely still be able to delay foreclosure for 1-2 months using the bankruptcy process.
A Chapter 13 bankruptcy may also help you keep your home long-term by establishing a payment plan that allows you to pay back the missed mortgage payments over a certain amount of time.
A Chapter 7 bankruptcy doesn’t allow you an opportunity to catch up on mortgage payments or keep the home long-term, so this type of bankruptcy is mostly beneficial in delaying the foreclosure sale and getting rid of other unsecured debt, not in figuring out a long-term solution.
If you’re considering filing bankruptcy, the first step is always to have a consultation with a bankruptcy attorney about your particular situation so you get the best advice.
Defend against foreclosure by showing that your lender has made an error
If you’re facing a judicial foreclosure, you will have an opportunity in court to present your defenses to foreclosure. If you are facing a non-judicial foreclosure (a foreclosure that occurs outside the court system) and you want to litigate the errors you believe your lender has made, you will likely have to file a wrongful foreclosure lawsuit against your lender.
Common mistakes that may allow you to sue your lender would be:
- The lender can’t prove that they own your loan: If your loan has been sold multiple times, it may be difficult for the bank to produce the correct documentation showing that they are the rightful owners of the loan. This is often referred to as a “chain of title issue.” Mortgages are allowed to be sold between different lenders but the ownership needs to be clear at all times. If there is a confusing period of time where the ownership of the loan is in question, you may be able to defend against foreclosure using this argument.
- The lender messed up when issuing or recording the documents needed to foreclose on the property: States require certain language and certain types of foreclosure documents be issued when foreclosing on a home. If your lender skipped a step, did not include the required language or made some other mistake regarding the documents – this could cause them to have to start the foreclosure process over again to correct their mistake. Consulting with a foreclosure attorney in your state will help you understand if there are valid issues at play that could help you.
- The lender made a mistake in the accounting of payments owed: If your lender accepted payments from you but then failed to apply them correctly, the total amount owed to bring the loan current could be significantly off and could provide grounds for a solid defense against the foreclosure action.
- Federal Law Violations: There may also be ways to use civil litigation to sue your bank under federal regulations like RESPA, TILA, the FDCPA, and the CFPB. Consulting with an attorney about these federal laws is a good first step to determine whether you have a case.
Use the Servicemembers Civil Relief Act (SCRA) as a Foreclosure Defense
If you are an active duty service member and took out a mortgage prior to the start of your active service, a court order is required in order for the lender to foreclose on your property.
In states where lenders are allowed to foreclose non-judicially (outside the court system), they have to make an exception for active duty service members and foreclose only through the court system (a judicial foreclosure). Because judicial foreclosures generally have a longer timeframe for foreclose than non-judicial foreclosures, homeowners in this situation usually have more time to figure out how to resolve the issue before the court order is given.
Facing foreclosure can be an overwhelming and scary process to face on your own. If you are a Washington State homeowner and would like a better idea of what your options are to defend against foreclosure, feel free to give me a call at (425) 654-1674.
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