It's in the mail: a letter from your bank or mortgage lender with a notice of default warning of foreclosure if you don't pay your past-due mortgage payments. You may think there's no way to save your house. However, taking no action practically guarantees it.
You may have legal defenses to slow down or even stop the foreclosure process.
Defenses: Ways to Fight for Your Home
By raising a defense, you're basically saying the bank or lender doesn't have the legal right to foreclose on your home, or it did something wrong in the foreclosure process that cheated you out of a legal right.
Several defenses may help you in the fight. These are only general descriptions, and they're often more complicated than it may appear here. You may have other defenses, too.
To make sure things are done right and you get the full protection of the law, it's a good idea to talk to an attorney with experience in foreclosure law about these and other legal options you may have.
Where's the Note?
When you got your mortgage and loan, you signed a promissory note - an agreement to repay the money the bank loaned you. The 2010 mortgage scandal shows how millions of mortgages were sliced, diced and packaged and sold as securities or investments. Today it's hard to know who exactly owns your mortgage.
Why is this important? Only the owner of your mortgage loan has the legal right to start the foreclosure process. Once the foreclosure process starts - or even if you're in default and the process hasn't started - send a letter to your bank or lender asking to come up with the original note you signed.
If it can't, and if it files a lawsuit to foreclose, it's very likely the court will throw out the lawsuit. You've stopped the foreclosure - at least until the true owner of the note is found and starts the process again.
Predatory lending is when a bank or lender uses unfair tactics and loan terms to fleece borrowers. Loans with super-high interest rates, high prepayment penalties, using inflated appraisal values to increase loan amounts, and granting loans the bank knew or should have known the borrower couldn't afford to repay are good examples.
Many states have predatory lending laws. A lender using predatory lending practices faces a court order stopping the foreclosure. A court may even order the bank to refund the mortgage payments you made.
Follow the Rules
The laws in each state have detailed rules on the foreclosure process banks and lenders must follow. Your mortgage document may also explain the process, too. Know what these rules are. For example, in most states, a bank must send you a notice of default several days (usually 30) before it begins the foreclosure process.
If the bank doesn't follow these rules, the court may stop the foreclosure and force the lender to start the process over again.
There's a Mistake
Yes, banks and mortgage servicers - companies hired to manage mortgage payments and other details for the banks - make mistakes. For instance, maybe your monthly payments weren't recorded properly and you were never actually in default.
Or, maybe you didn't exercise your reinstatement rights because the bank or servicer told you the wrong amount you needed to pay to reinstate. Reinstatement means you pay the past due payments and late fees and make your mortgage current.
By being able to point to a serious mistake by the bank or servicer, you may convince a court to stop the foreclosure. The bank will have to fix the mistake before it can continue with the foreclosure, if at all. The bank may also have to pay you money damages.
Raising Your Defense
How and when you raise a legal defense to the foreclosure depends on the laws in your state, the special rules of procedure for the courts in your state, and perhaps your mortgage document.
In general, there are two kinds of foreclosures:
Judicial foreclosure requires the bank to file a lawsuit against you for a court order allowing the bank to sell your home. If you have a defense, you need to raise it when you file an answer to the lawsuit. This is where you explain to the court why the bank shouldn't win the case. The court rules vary from state to state, but you generally have to file the answer within 30 days.
This type of foreclosure is available in all states.
Nonjudicial foreclosure doesn't require a lawsuit. Instead, your mortgage document contains the specific steps your bank has to take in order to foreclose. The laws in your state also set rules on the process.
About half of the states allow for nonjudicial foreclosure. In one of these states, you need to file a lawsuit against the bank in order raise your defense and stop the foreclosure.
Don't give up. Your home is important to you and your family, not to mention a huge financial investment. A legal defense may be the key. Don't hesitate to act.
Questions for Your Attorney
- How much will you charge to help me defend against a foreclosure?
- Does our state allow nonjudicial foreclosures?
- What happens if I don't file an answer in a judicial foreclosure?