When a person cannot repay a mortgage loan or other type of property debt, foreclosure occurs. In such circumstances, the lender, who is typically a bank or other financial institution, may be permitted to force a sale of the property and collect the revenues to make up for the unpaid debts.
Additionally, they typically have the ability to acquire property ownership rights. Depending on the circumstances, the foreclosure procedure may take either in or out of court.
What Are the Legal Steps in a Foreclosure Process?
The homeowner will receive notices from the bank. These notices inform the borrower of their late payments, whether foreclosure proceedings are under consideration, and when they will begin. This delays the foreclosure and gives the homeowner time to fulfill the loan’s conditions.
When the house is repossessed, the property will be sold. The house is now legally the bank’s property until someone purchases it from the bank, typically at an auction.
What Effective Foreclosure Defenses Exist?
Several foreclosure defense strategies may be accessible to a homeowner even if a foreclosure case is initiated against them. By using a defense, a homeowner may be able to keep their home and even renegotiate the conditions of their mortgage.
Typical foreclosure defenses that a homeowner may have include the following:
- Unfair mortgage contract provisions: Courts may rule in the borrower’s favor and permit a renegotiate of the mortgage terms.
- Fraud: Evidence of mortgage lender fraud, foreclosure fraud, or real estate broker or agent fraud is a defense.
- Failure to comply with state foreclosure regulations: The borrower may not be able to file a lawsuit against the bank or other lending institution if they foreclose without following the correct procedures, such as missing a filing date or failing to give the borrower the appropriate notice.
- A soldier serving on active service: Certain military members who are on active duty at the time of foreclosure may be eligible for specific legal protections and special property rights.
Lastly, there may be several ways to prevent foreclosure altogether through alternatives, even though they are not officially foreclosure defenses. These are a few examples of a mortgage modification, forbearance, or deed-in-lieu of foreclosure. See if these are viable choices for you by negotiating with a lender or real estate firm.
What is the Redemption Right?
A borrower, or mortgagor, may redeem the property before the foreclosure sale by paying the outstanding debt. This is referred to as the right of redemption. If a mortgage has an acceleration provision, the borrower cannot redeem the property until the whole amount of the mortgage is paid.
How Can I Prevent Foreclosure?
Simply ensuring that mortgage payments are completed in full, on schedule, and by the due date is the greatest strategy to prevent foreclosure. However, there are several other methods a homeowner might use to stop foreclosure before it starts, including:
- Trying to engage with the lender;
- Modifying the loan;
- Asking for a forbearance;
- Selling the house; and
- Filing for bankruptcy.
If a person is going to skip a payment or is falling behind on their regular payments, it is crucial to attempt to work with the lender rather than avoid them. Discussing the problems with the lender could result in a solution before foreclosure becomes possible since a lender often wants to avoid foreclosure proceedings at all costs.
Another option would be to modify the loan’s conditions and duration. While the loan’s lifespan may be prolonged, the payments will be reduced, making it simpler to make scheduled payments. Because interest rates sometimes start off low and rise througout a loan, changing them could be problematic.
An individual may ask for forbearance if they are suffering financial difficulties. A forbearance enables someone to suspend payments for a predetermined amount of time. This could enable the person to save money throughout that time and pay a big sum at the end of it.
An individual might think about selling their home before the foreclosure process starts. This gives the borrower control over the sale rather than the lender, and the revenues can be used to pay off the mortgage’s outstanding debt while also giving the borrower a profit.
A homeowner who is deeply in debt may escape foreclosure by filing for bankruptcy, even if it may not be the best course of action. A Chapter 7 bankruptcy will stop foreclosure and discharge mortgage debt.
But in a Chapter 7 bankruptcy, the homeowner would lose their house because the money would be given to other creditors instead. An individual could want to apply for Chapter 13 bankruptcy if they really want to keep their home.
In a Chapter 13 bankruptcy, a person can compel the lender to accept an affordable repayment plan from the borrower and halt the foreclosure process temporarily. The borrower can continue to live in their home using this technique, but they must gradually pay back the amount.
How has the COVID-19 Pandemic Impacted the Foreclosure Process?
The COVID-19 outbreak has significantly impacted the foreclosure procedure. Many people have seen their incomes fall during this time, which could lead to home instability.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act established safeguards for mortgage loan borrowers and was the federal government’s initial response to the potential housing catastrophe linked to COVID-19. If a borrower’s mortgage is federally guaranteed, they are in certain ways protected.
A foreclosure moratorium for federally guaranteed mortgages ended on June 30, 2021. An eviction moratorium is currently in place through September 30, 2021, for foreclosed loans from lenders, including:
- Fannie Mae;
- Freddie Mac;
- The FHA;
- The VA; and
- The USDA.
Contact a local lawyer if you have any questions about how your legal rights and options may have been affected by any recent changes in the laws regarding foreclosures.
What Happens If I Can Prevent a Foreclosure Legally?
Foreclosures are frequently resolved through the legal system. You can then offer your foreclosure defense if this is the situation. Non-judicial foreclosures, on the other hand, are those that take place outside of the legal system.
Legal defenses to foreclosures may not be brought automatically in non-judicial foreclosure cases. You may need to file a specific petition to have your argument used in court.
Last but not least, even if a foreclosure has already taken place, you might still be able to reclaim your home through statutory redemption. State law allows a homeowner in this situation to settle their mortgage obligation with interest and regain the home after a foreclosure.
You should consult a lawyer to know if you can obtain your property back after a foreclosure.
Do I Need Legal Assistance for a Foreclosure Defense?
An in-depth understanding of foreclosure rules is necessary to mount a defense against foreclosure. These can differ from state to state and frequently require more complicated legal ideas.
You might need to hire a local foreclosure attorney in your area if you require aid with a foreclosure defense.
If a foreclosure claim has been made against you, your lawyer can assist you in investigating your state’s laws to determine your choices. Additionally, your attorney can represent you if you have to appear at any meetings or hearings.