Millions of home owners are fighting back and staying in their homes.
A loan modification will delay the foreclosure process while the bank is considering your application. The regulations governing the government modification programs such as HAMP and MHA require the foreclosure process to be put on hold or stopped altogether while a home owner is trying to work out the situation with the lender. Typically, a modification should be completed within 30 to 45 days. However, most banks require a “trial period,” usually 3 to 6 months, in which the home owner makes trial modification payments to demonstrate affordability. During the trial period the home owner receives a lower payment while they wait for the lender to make a final decision about the modification. If the lender modifies the loan then the home owner receives a loan with a payment they can afford. However, the lenders have not been granting many loan modifications, in fact, sometimes they cannot modify the loan but fail to inform the home owner so they continue to make “trial” payments. Even if rejected the home owner can reapply and the foreclosure is delayed again. This process can be drug out for months, however, interest, penalties and escrows continue to accrue which can put the home owner in a worse situation than before.
The other technique home owners are using to stay in the home is to actually sue the lender. In the U.S. there are basically two types of state law with regards to mortgages, lien theory states and trust theory states. Depending on your state, you can either raise counterclaim defenses during a foreclosure proceeding or you must sue the lender to enjoin the foreclosure and bring your claims. In either situation these cases take months to work their way through the legal system. During this time the home owner is not making any payment to the lender, but instead is paying to keep the fight going which is often only a fraction of their old mortgage payments.
How legitimate are these foreclosure defense lawsuits?
There are of course the standard claims which can be brought against the lender by the homeowner: breach of state specific foreclosure laws, breach of contract with regards to loan modification trial periods, breach of the covenant of good faith and fair dealing, negligence and misrepresentation, unfair and deceptive trade practices, and conversion (if you actually lost your house in foreclosure). The home owner may also have the standard federal law mortgage claims under the Truth In Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA) and/or Home Owner Equity Protection Act (HOEPA). While these are good claims to bring, and will stall the foreclosure for a significant period of time (months, maybe years), there are two claims in which some attorneys fail to consider in these situation, validity of the debt and standing. These claims are worthy of consideration in any foreclosure defense because these two claims can permanently prevent a lender from foreclosing.
You are likely aware of the fact that millions of mortgages were bundled up as investments by Wall Street and sold off to investors around the world. These were the famed mortgage backed securities (MBS) and collateralized debt obligations (CDO). For you the homeowner this may not seem so significant until you understand more about securitization law and agency law. Without going into a lengthy, esoteric dissertation regarding the minutia of these laws, it’s sufficed to say that Wall Street may have screwed up their security in the property through their investment schemes. What that means to you is there is a potential that the Mortgage or Deed of Trust is invalid, meaning, the “lender” does not have the right to foreclose.
Additionally, many of the promissory notes have been “sold” multiple times from one investor/lender to another. There are very legitimate question as to who really owns the note and where it is. Only the “true party in interest” is allowed to foreclose and they have to produce the original note or bear the burden of proof to show the transaction did in fact take place and under what terms. However, the majority of the time it’s a “servicer” of the loan who is foreclosing and they don’t have the note. These “servicers” are not considered the “true party in interest” under the law and must prove an agency relationship to the party-in-interest in order to foreclose. Sometimes they are unable to do this. This means they don’t have the authority to act for the party-in-interest, and, without the note, even if the “true party in interest” showed up, they can’t prove there is a debt owed.
Bottom line, the wrong party may be foreclosing on you and often they can’t produce the proper paperwork to substantiate there is a valid note or mortgage to begin with. Even if they could, the Wall Street shenanigans have brought the securitization of the note itself into serious question. If this is true, why then would you pay the bank money for the opportunity to legitimize their claim against your property through a loan modification?
Of course court battles can be long and tedious, much like the foreclosure process itself. If you want to just avoid the fight then try the loan modification route. However, if that fails, or if you are ready to defend your rights against the purported lender and their alleged debt, then it’s time to take action.
If you would like to discuss this topic further and have a professional look into your current situation fill out the form below or call me directly at 919-866-2706. I look forward to speaking with you and helping you in any way possible.