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If your lender is threatening to file a foreclosure lawsuit or if a foreclosure lawsuit has already been filed, you have options that could save your home.

Number One--Legal Defenses:

In many cases there are legal defenses that can defeat or forestall a foreclosure action:

  • Ownership Issues

Is the Plaintiff that filed the foreclosure action against you the true owner of your mortgage loan?  It is common for mortgage loans to be bought and sold many times.  The entity that files a foreclosure action must have certain kinds of paperwork to prove it properly acquired the ownership of your loan.  If the paperwork is missing or fraudulent, the foreclosure will be dismissed.

It is surprising how often ownership paperwork was never prepared or is simply lost.  This kind of sloppy paperwork led to the recent “robo-signing” scandal in the foreclosure industry:  When mortgage holders realized they did not have the necessary paperwork to prove ownership of a mortgage loan, they simply created false documents to try to establish ownership of a loan.

  • Legal Hoops for the Lender.

Loan Acceleration.  A lender must give you notice that the loan is in default and that it has demanded that you pay the entire loan balance.  This process is called a loan “acceleration.”  A lender usually cannot file a foreclosure action until your loan has been declared to be in default and “accelerated.”

FHA & VA Loans: For FHA & VA loans it is unlawful to file a foreclosure action without first complying with various federal regulations.  These regulations create detailed requirements a lender must follow before it can file a foreclosure lawsuit. For example, before a lender can foreclose on a VA or FHA loan, it must first offer to meet face-to-face with the borrower to try to resolve the loan deficiency.

  • Incompetent Testimony. 

Often a lender tries to win a foreclosure lawsuit by offering the testimony of a bank employee to prove the lender has met all the legal requirements to obtain a Foreclosure Order. But when cross-examined, sometimes these employees do not really have the proof the lender needs to obtain a Foreclosure Order.


Number Two--Pre-Foreclosure Resolutions: Often we prevent the foreclosure by engaging in efforts to re-work or re-negotiate the terms of your loan:

  • Loan Modification. You may qualify for a modification of your mortgage loan.  This is a process in which the parties negotiate new and affordable terms to repay the loan and thereby save the home from being foreclosed upon and sold. A lender may agree to modify the terms of a mortgage loan if the lender is convinced that, with new payment terms, you will be able to stay current with your modified mortgage payment.
  • Forbearance.  Forbearance is an agreement whereby a lender agrees to temporarily forgo the right to collect monthly mortgage payments.  This device is very useful where a borrower has suffered a temporary period of financial hardship.  The forbearance agreement allows the borrower to forgo making monthly payments until the borrower can once again afford his or her mortgage payment.
  • Forbearance Agreements of FHA Loans.  FHA are governed by federal regulations issued by the Department of Housing and Urban Development  To qualify for an FHA forbearance, the borrowers must live in the home and it must be their primary residence. For all FHA special forbearance programs, the borrower cannot be more than one year (12 months) behind on her mortgage payments. These forbearance plans also require borrowers to be at least three months behind on their mortgage payments before they can apply for a special forbearance.
  • HAMP Loan Modification.  The Home Affordable Loan Modification Program (HAMP) is a program by established by the federal government to encourage lenders and loan servicers to work with borrowers to modify the terms of a mortgage loan so as to make it more affordable.  Not all loans are eligible under HAMP.  To qualify for a loan modification under the HAMP program the borrower must:
  1. Own a 1 to 4 unit home which serves as the borrower’s primary residence.
  2. Have a mortgage that was executed before January 1, 2009.
  3. Have a total mortgage payment (including taxes, insurance, and homeowner’s association dues) that exceeds 31% of the borrower’s gross monthly income.
  4. Not owe more than $729,750 on the mortgage (for single family homes).
  5. Be able to demonstrate financial hardship (insufficient liquid assets to make the monthly mortgage payment).
  6. Own a home that is not vacant or condemned.
  • Mediation.  Many courts encourage the partied to engage in mediation.  Mediation is a way to reach an agreement with the aid of a neutral mediator.  In Cuyahoga County, for example, a foreclosure Magistrate can refer a foreclosure case to mediation in order to give the parties an opportunity to reach a settlement of the foreclosure action.  A mediation may or may not result in saving the borrower’s home but could permit the borrower to negotiate away fees, stay in his or her home longer or any number of helpful outcomes.


Number Three-Counter Lawsuits. 

 A counter lawsuit is a claim against the lender, usually for violating a federal or state consumer law or breaching the terms of the mortgage.  A valid counterclaim can give the borrower leverage in negotiating the terms of a settlement or it may also result in an award of money in favor of the borrower.   




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