Homeowner Foreclosure Defense Guide pt.1

Part 1: Understanding your Bank’s Foreclosure Complaint

This is only a guide and is not to be substituted for an attorney.

Homeowners facing foreclosure often have little accessible information to help defend themselves against the bank. And so, many of our homeowners and readers have asked us to come forth with a useful courtroom foreclosure defense guide. You will be reading Part 1 of the Homeowner Foreclosure Defense Guide. We have produced the first of its kind. The benefits of this guide are as follows:

• Save Money on Attorney Fees. The more information you can offer your attorney to identify a problem or a possible solution, the more money you will save.
• Homeowner Defense Awareness. Familiarize yourself with defenses that have worked for other homeowners nationwide.
• Encourage the lender to offer a loan modification or another loan workout enabling the homeowner to retain his primary residence. Homeowners and attorneys should note that highlighting possible loan violations often will induce a bank to resolve the situation without going to trial.

You just got a foreclosure notice in the mail. Your lender is proceeding with foreclosure on your home. You might be asking yourself, “I don’t understand this complaint?” or “What should I do next?” Don’t panic. Learn the process.

Foreclosure proceedings are initiated or commenced upon the receipt of a copy of the complaint with an order from the court requiring the homeowner to file an answer usually for a period of fourteen days to a month.

The first thing one should do: Become acquainted with the legal procedures. See if there is compliance with the rules which includes the period of time when a particular pleading is supposed to be filed. It is important to read the complaint carefully and reply to it in a timely fashion.

The next matter to examine in detail are the issues and facts raised in the complaint. Do the facts bear out and prove the essential elements of the complaint? The facts claimed in the complaint must be proven by evidence. For instance, the lender will establish that there was breach of a legally binding and valid contract with the homeowner, i.e. the mortgage loan secured by the house. The lender will prove that the homeowner failed to make payments as specified in the contract and therefore, under the law the lender is entitled to foreclose on the property and have it sold at a public auction to satisfy the monetary award of the judgment. By understanding the essential elements which the lender seeks to establish to make a successful foreclosure case, the homeowner will have a good opportunity to thwart their claim.

Recent precedent setting jurisprudence of In re Fourteen Foreclosure cases, where fourteen foreclosure cases were dismissed on account of the failure of the Plaintiffs/lenders to show that they owned the loans, has allowed homeowners to put up a formidable defense.

The first element that lender would seek to establish in a foreclosure case would be the existence of a legal, valid and binding contract between the lender and the homeowner. With the current practice of securitization among lenders, it would be difficult for the lender to prove ownership over the loan. Thus, the homeowner can capitalize and exploit how these loans are sold as the paper trail is difficult to trace.

The second element that the lender would have to prove is that lender performed and complied with the terms and conditions as stipulated in the contract. The homeowner must be familiar with the specific obligations of the lender under the contract so that he can clearly identify which of these obligations were not performed or have been violated by the lender. One standard obligation of the lender is to collect and apply payments in a reasonable and legal manner. Most of the lenders are found to disregard this obligation. It is a common practice for the lenders to misapply the payments, fail to apply payments or completely lose payments. Thus, the homeowners must require the lender before the court to present evidence to prove its compliance in terms of application of payments based on what is specified in the contract. The homeowner may require production of proof of this, a request which a lender may have difficulty in presenting.

Although the lender may prove that the homeowner failed to comply with the contract by showing gaps in its payment records; the homeowner whose payments have been misapplied or not applied may bring this as a defense. The homeowners must show that they did not violate the terms of the contract.

In cases of non payment due to financial hardship, the homeowner may request deferment of trial, to which judges are always agreeable considering that they would rather keep the case from going to trial if there is a possibility for the parties to reach a settlement such as when parties agree to a repayment plan or temporary loan modification, or any other similar arrangements.

Finally, the last element that the lender would have to prove in court are the damages it may have sustained by the violation of the homeowner of the terms of the contract. Usually this ranges from claims of having to use more resources in order to collect the missed payment(s) or the claim that they are not earning interest and therefore it negatively affects their income. All these claims must be proven by evidence presented by the lender. It makes the process speedier if the homeowner fails to appear and oppose these claims because the lender would no longer be required by the judge to prove and substantiate their claims for lack of opposition. By being familiar with the legal process and the elements that lender would seek to prove in court to make a case of foreclosure against them, homeowners are able to interpose a solid defense against these lenders or institutions.

Would you like to read more? Part 2: 11 Courtroom Defenses for the Homeowner available soon!

Written by Kevin levonas