Every three weeks, 250,000 Americans are losing their homes to foreclosure. If you’re one of those facing foreclosure, it is time to think about the foreclosure defense options that are available to you; but first, you must have a basic understanding of the two forms of foreclosure so that you would have an idea what you are standing up to.
There are two types of foreclosure: judicial and non-judicial and depending on the laws of the state in which the property is located, laws may vary; making foreclosure more frightening and often times confusing.
Judicial foreclosures involve the court system. In this type of foreclosure process, the lender files a complaint in court, stating what debt is owed together with an explanation of why the court should allow them to recover the property from the borrower in lieu of debt settlement. The property owner is notified by mail or publication that the lender intends to cure a default. A notice of Lis Pendens, or a notice of pending action, usually accompanies this complaint. Once the court finds probable cause of default in debt settlement, the court then orders that the amount owed is valid along with court costs. After which the property is sold at public auction.
Sometimes referred to as power of sale foreclosure, this procedure does not involve the court. In this type of foreclosure process, the lender sends a notice of default or a right to cure default and files a recording in the county recorders office where local publications are often used along with these proceedings. Most states require a time period for these proceedings, however, there are some states that do not require a notice of default and can proceed right away. Once the proceedings period has lapsed, a public auction is held and the property is sold to the highest bidder. A process called Statutory Redemption allows homeowners to redeem their property. Depending on each state law, the time period varies from 30 days to one year.
Foreclosure Defense Strategies
There are three main categories of foreclosure defense that borrowers can consider; whether they are defending a bank’s lawsuit against them, or initiating their own to stop an auction under a power of sale clause.
1. Loan documents validity
Depending on the laws involved, homeowners may be able to have the entire transaction rescinded if the original mortgage or deed of trust was not drafted or executed legitimately. In other cases, borrowers may question whether the lender suing them actually owns the note. If not, there is no real valid contract between the two parties. Banks often violate state and federal law when creating mortgage, and if there is a defect in the paperwork or illegal clauses, the mortgage may not be valid.
Misconduct by the mortgage lender and predatory lending do not have concrete definitions but a loan may be considered predatory based on numerous characteristics of it. For instance, the borrowers were approved with no income verification or were given an interest rate that the bank knew the owners would not be able to pay, there may be a defense against foreclosure based on misconduct. Also, if the appraisal was inflated and the bank knowingly accepted the unreasonably high value, and gave the owners a loan based on the value of the home instead of what they could actually afford, it may be a case of predatory lending.
3. Lender does not follow the required procedures
Every state have different foreclosure rules that the mortgage lender or the trustee must follow. Oftentimes, the courts take for granted that these requirements are adequately followed by the mortgage lenders. Procedural violations can be raised as a defense against foreclosure by the homeowners.