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Foreclosure Defense

What are Foreclosures?

A foreclosure is forced sale of home or property by a financial institution such as a bank or mortgage company. Unless you paid for your property in full (cash) at the time of purchase, most property owners use a 3rd party to provide the additional funds to complete the sale. As a result, the owner is obligated to repay the monies borrowed this is called a mortgage.

When a property owner fails to make payments as part of the loan agreement for their mortgage, the bank or other lien holder may begin foreclosure proceedings to take possession of the property to satisfy the debt owed to them. Many mortgages have an acceleration clause in the mortgage's promissory note.

This feature can often trigger a premature foreclosure action. The acceleration clause permits the bank or mortgage holder to declare the whole loan due if the property owner misses a specified number of mortgage payments. Usually, the property owner must be provided with sufficient notice before the lending institution can invoke the acceleration clause.

The foreclosure process is a lawsuit brought by the bank or lender to force the sale of property to satisfy the outstanding debt. In most instances, the court will order a sale of the property after deciding the actual balance due on the mortgage (this includes accrued interest).

The proceeds of the sale of your property will then apply to the outstanding debt. If the value of your property is less than the outstanding debt, you may still owe the lending institution for the remainder, depending on the terms of the original loan. As the owner, you have the right to pay the bank off before the foreclosure sale in order to keep your property.

If you think you may default on your mortgage and fear that you may lose your property through foreclosure, an experienced lawyer may help you determine what other options available to you, including filing for bankruptcy. An attorney can also represent you in a foreclosure proceeding to make certain your interests and rights are protected.

What Are the Legal Steps of a Foreclosure Process?

The bank will issue notices to the homeowner. These notices let the borrower know they are behind in payment, as well as whether foreclosure processes are being considered or when these processes will be initiated. This gives the homeowner some time to make good on the terms of the loan before the foreclosure occurs.

The property will be sold once the home is foreclosed on. At this point, the home is legal property of the bank until someone buys it from the bank, usually at an auction.

Are There Any Legal Defenses Against Foreclosures?

The very idea that you could lose your house is a very scary and stressful thought. This matter can be made even worse when you do not believe you have any way to defend yourself against a foreclosure action. However, there are some legal defenses that you can use when facing an action for foreclosure.

Although many foreclosure legal defenses will depend on state law and the facts of a specific case, the following are some general foreclosure legal defenses that you might be able to use in such a case:

  • Mistakes: A mortgage agreement is basically a contract, meaning that it is subject to contract laws and standards. Thus, if a mortgage agreement contains a major mistake or error, then it could potentially affect the outcome of a foreclosure action.
  • Fraud or Undue Influence: Mortgage documents cannot be signed or created under conditions of fraud or undue influence. Therefore, if you believe that you were forced to sign a mortgage agreement under the threat of violence or by deceit, then such actions could invalidate the mortgage agreement.
  • Mortgage scams: Various types of mortgage schemes and scams have arisen over the last decade. In particular, predatory lending is one of the most common and is considered a statutory violation in many states.
  • Statutory Violations: Each state has its own laws and legal requirements, which outline the foreclosure process. If a lender has violated these laws, then this could act as a defense against a foreclosure action.
    • For example, most states require that lenders send a notice of default at least 30 days in advance of initiating the foreclosure process. If a lender fails to give a borrower proper notice, then the court may have to delay any existing foreclosure proceedings and order that the lender redo the process properly.
  • Promissory Notice Issues: Only the original owner of a mortgage loan may initiate the foreclosure process. Once this process begins, the owner must be able to provide evidence of the original promissory note. If an entity cannot provide proof that they are in fact the owner of the promissory note, any foreclosure proceedings must be postponed until they can supply proper proof.
  • It is important to note that many of the defenses that are listed above may not entirely erase all foreclosure issues. For instance, some of the above defenses may only serve to delay or restart the process. Regardless, having a court delay an action for foreclosure can still be very useful since this will give you more time to produce funds. In turn, this help can prevent your house from being foreclosed upon in the long run.

What Is the “Produce the Note” Defense in Foreclosure?

In general, the “Produce the Note” defense is a type of legal defense that is commonly cited against actions for foreclosure. It concerns the endorsement of the promissory note, which gets signed along with the mortgage document. For instance, when a borrower requests to take out a loan to pay for a house, they will be asked to sign both a promissory note and the mortgage document itself (i.e., the deed of trust).

It should be noted, however, that the promissory note is the actual promise made to repay the mortgage loan, not the mortgage document. As such, the owner of the note is the only party who has the legal right to enforce the promise contained in the note and to collect the debt.

Since a lot of mortgages tend to be sold to other banks, a property owner may use the “Produce the Note” defense and demand that the foreclosing bank provide proof that they have possession of the original promissory note and thus have the legal authority to foreclose on the property in question.

If the bank does not have possession of the promissory note, then the property owner may be able to avoid foreclosure due to the fact that the bank does not have any legal authority to foreclose on their property.

What If the Terms of the Foreclosure Were Unfair?

When the terms of a mortgage agreement are so unfair and lopsided that it would shock the court, then a property owner may be able to defend themselves against an action for foreclosure by filing a claim with the court that challenges the terms of the mortgage agreement. This type of claim essentially says that the terms of the mortgage agreement are unfair or unconscionable. In other words, it is a way to defend against an unfair contract case.

However, this type of defense is extremely difficult to prove because before a property owner or borrower signs a promissory note, they are granted the right to read all of the terms and conditions of their loan. Thus, by reading and then signing the promissory note and agreement, they are essentially saying that they agree to all of the terms and conditions contained in the document.

How Do I Raise a Defense to Foreclosure?

In order to raise a defense against a foreclosure action, a property owner must assert a specific defense before the court. Also, if foreclosure is being sought through a judicial foreclosure sale, which is filed in state court, then the property owner must seek approval of the defense from a judge.

A property owner can do this by either filing a lawsuit or a counterclaim and stating that the foreclosure action is illegal for whatever reason they are alleging. The property owner must also request that the same court issue a stay to put the foreclosure on hold until the issue regarding the illegal foreclosure action is resolved.

What Are Ways to Avoid Foreclosure?

In the event that there are no legal defenses available that are applicable to the circumstances of a particular foreclosure action, then there may be a few other things that a person can do to avoid foreclosure. At the very least, there are certainly some steps that a person can take to minimize the impact of a foreclosure action.

For instance, many lenders want to and will actively try to avoid the foreclosure process by presenting different payment options. They may negotiate with the borrower for a new payment plan to help them satisfy their debts without having to go through with a foreclosure action.

Some other ways that a borrower may be able to avoid a foreclosure action include the following methods:

  • Talking to lenders: A borrower should contact their lending institution or bank and see if they would be willing to work with them by suspending or lowering mortgage payments until the borrower is able to start making regular payments.
  • Requesting a forbearance or partial payments: A borrower should also ask their lending institution or bank whether they would be willing to only accept partial payments for several weeks or months. This negotiation tactic is known as a forbearance. Many lenders are willing to agree to a forbearance, so long as a borrower can prove that they will soon be able to start making regular payments again.
  • Asking the government for help: There are a number of different government agencies that a borrower can contact for help with avoiding a foreclosure action. Such agencies can provide various resources and assistance to homeowners who are facing a foreclosure action.
  • In some instances, a government agency may even be able to help a borrower or homeowner to modify the terms of a loan or get their payments reduced.
  • Filing for bankruptcy: Although filing for bankruptcy should be a borrower's last resort, in some cases it may be necessary to file for bankruptcy with a court in order to remain in possession of one's home.

Bankruptcy Can Prevent Home Foreclosure

A borrower who cannot keep up with his or her mortgage payments faces potential foreclosure which permits the lender to seize the property, evict the homeowner, and sell the home. In some cases, a lender may work with the borrower by refinancing or modifying the loan, or agreeing to a short sale. If the lender is unwilling, however, the homeowner may still be able to stop the foreclosure by filing for bankruptcy. Our experienced attorneys can advise you of all your options.

When a borrower files for bankruptcy, either Chapter 7 or Chapter 13, the court issues an automatic stay which stops all collection activities and bars the lender from foreclosing on the property.

Chapter 7

While an automatic stay may provide a borrower with time to catch up on mortgage payments, Chapter 7 bankruptcy does not provide for a formal procedure to do so. If you fail to make the overdue payments, the lender can file a motion to lift the stay, and the foreclosure will proceed. Moreover, if there is sufficient equity in the home, the trustee may also move to sell the home to pay off debts that would have been discharged.  In other words, it is likely that you still will lose your home.

Chapter 13

Chapter 13 is referred to as a reorganization bankruptcy because it allows you to pay off your debts over time -- including a mortgage, though a court-approved program. The late mortgage payments, or arrearage, are consolidated into the repayment plan and paid off within 3 to 5 years. 

In the event that the value of the home is less than the amount owed, a Chapter 13 bankruptcy can strip second and third mortgages of their secured status and incorporate them into the repayment plan. In addition, if the amount of the first mortgage is greater than the value of the home, the amount exceeding that value can also be separated from the mortgage and included in the repayment plan.

In order for the repayment plan to be approved, you must have sufficient income to pay the arrearages as well the existing monthly payment.  If you fail to continue making the current payments, the lender can move to lift the stay and proceed with the foreclosure.

While filing for bankruptcy may allow you to stay in your home, both a foreclosure and a bankruptcy can have long lasting consequences on your creditworthiness. You should consult with one of our experienced attorneys to determine whether filing for bankruptcy is right for you.

Why Working With a Foreclosure Attorney is a Good Choice

If you're struggling to make payments on your mortgage and you're facing foreclosure, you're not alone. At EZ Short Sales, we have experienced foreclosure attorneys that can help you avoid the foreclosure process by short selling your home instead. Keep reading to learn why working with a foreclosure attorney is your best choice when facing foreclosure, and contact us to get started today.

They Know the Law

When it comes to foreclosures and the laws that surround the foreclosure process, no one knows better than an experienced foreclosure attorney. We can help you navigate your options and even help you avoid foreclosure altogether. If you're struggling to figure out what to do when facing foreclosure, reach out to our team at EZ Short Sale right away.

They Are Experienced Negotiators

Foreclosure attorneys are experienced in talking to lenders about short sales and foreclosure cases and negotiating on behalf of their clients. When you work with a foreclosure attorney, you can be comforted by the fact that you have someone with the knowledge and experience to fight in your corner when it comes to reaching an agreement with your mortgage lender.

They Can Help With Loan Modifications

Sometimes the best way to get back on top of your mortgage payments and avoid foreclosure is by refinancing your home loan. A qualified foreclosure attorney can help you get a loan modification that works better for you while ensuring that your lender doesn't proceed with the foreclosure process anyways.

The Foreclosure Process Can Be Complicated

The laws and processes surrounding foreclosure are constantly evolving and can be difficult to fully understand without the help of a foreclosure attorney. Foreclosure is a complicated process, and the more help you can have on your side while avoiding foreclosure, the better.

When it comes to avoiding or preventing foreclosure on your home in Florida, Pennsylvania, or New York, there's no better team of foreclosure attorneys to trust than ours at EZ Short Sales. Get in touch with us today to get the help you deserve.

Do I Need a Lawyer for Help with a Foreclosure Defense?

Raising a defense against foreclosure requires an in-depth knowledge of foreclosure laws. These can often involve some complex legal concepts and can also vary from state to state. You may need to hire a foreclosure lawyer in your area if you need any assistance with a foreclosure defense. Your attorney can help research the laws of your state to determine what types of options you have in the event that a foreclosure claim has been filed against you. Also, your lawyer can represent you in court if you need to attend any meetings or hearings.