Are There Any Legal Defenses Against Foreclosures?
Facing the prospect of foreclosure can definitely be stressful. However, you may have a number of legal defenses available depending on your circumstances. These may vary depending on the state and also according to the individual claim involved.
Some foreclosure defenses include:
- Mistake: Mortgage agreements are basically subject to contract rules and principles. Thus, if there has been a major mistake or error in the agreement, it may affect the outcome of a foreclosure claim.
- Fraud or Undue Influence: Mortgage documents cannot be signed or created under conditions of fraud or undue influence. If you believe that you were forced to sign a mortgage agreement under the threat of violence or force, it could nullify the agreement.
- Predatory Lending: Many different mortgage schemes and scams have arisen in the past decade. In particular, predatory lending is illegal and a statutory violation, below.
- Statutory Violation: Every state has laws and statutes that outline the foreclosure process. If your lender has violated these laws, it could be a defense against a foreclosure claim. For instance, most states require that lenders send a notice of default at least 30 days before initiating the foreclosure process. If they fail to give you proper notice, the court may have to stop any existing foreclosure hearings and begin again
- Issues with the Promissory Notice: Only the original owner of your mortgage loan can begin the foreclosure process. Once the process starts, they should be able to provide evidence of your original promissory note which addresses payments. If they cannot provide the promissory note, the foreclosure hearings must be postponed until the proof can be furnished.
Note that many of these defenses may not actually completely do away with the foreclosure issues. Some of these serve to delay or restart the process. However, this can be helpful, as it may grant you more time to come up with payments, which can prevent foreclosure in the long run.
What Is the "Produce the Note" Defense in Foreclosure?
The Produce the Note defense regards the endorsement of the promissory note that is signed with the mortgage. When a mortgage loan is taken out, a mortgage (deed of trust) and a promissory note is signed by the borrower. Homebuyers typically believe that the mortgage is the actual contract for the bank to enforce the mortgage. However, the promissory note is the actual promise made to repay the loan.
The owner of the note is the only party that has the legal right to enforce the note and collect the debt. Since many mortgages are sold to other banks, a homeowner may use the "produce the note" defense and demand that the foreclosing bank show proof that they have the original promissory note and have the legal right to foreclosure on the property.
What If the Terms of the Foreclosure Was Unfair?
One of the ways a foreclosure action may be defended is by filing a claim in court challenging the terms of the foreclosure as being unfair or unconscionable. This means that the terms of the mortgage were so unfair and one-side that it should shock the judge. This defense is very hard to prove since before a borrower signs the promissory note they have the right to read all the terms and conditions of the loan and by signing the promissory note they agree to all the terms and conditions.
How Do I Raise a Defense to Foreclosure?
In order to raise a defense to a foreclosure action, the property owner must raise the defense before a judge. If the action is a judicial foreclosure being filed in state court, then the property owner must have the defense ruled by a judge by filing a lawsuit or counterclaim that the foreclosure action is illegal for some reason and request the court to put the foreclosure on hold until the issue is resolved.
What Are Ways to Avoid Foreclosure?
If there are no legal defenses that are applicable in your situation and you still want to avoid the foreclosure action, there are several steps you may take to avoid foreclosure or at least minimize the impact. Many lenders also want to avoid a foreclosure process and may work with the borrower to negotiate different options. Some ways to avoid foreclosure may be:
Negotiate with lender: Contact your lender and negotiate whether you can lower your payments or suspend payments until you are able to begin repayment.
Partial Payment: Ask if your lender will take partial payments for a few months. This is called a forbearance and many lenders will agree if you can prove that you will soon be able to make payments.
Get Government Help: Many government agencies work in various ways to help homeowners who are facing foreclosure. Some allow homeowners to be able to modify their loan terms and have payments reduced
File for Bankruptcy: This should be your last option, but if necessary you may file for bankruptcy in order to keep your home.
How can a Lawyer Help with Foreclosure Proceedings?
If you believe you are wrongly facing foreclosure, you may wish to speak with a real estate lawyer immediately. An attorney can help you defend against the foreclosure proceedings according to the laws of your state. Every state has different foreclosure laws, so be sure to ask your attorney if you have questions about your situation.