What Are Some Other Potential Defenses to Foreclosure?

There are a lot of different defenses to foreclosure, and which one would be best depends on which stage you are raising them. You can raise almost anything before the sale by filing what’s called a motion to stay or dismiss the foreclosure, which has to be filed at a certain time.

Some of the defenses that we’ve used involve calculation errors. We might argue that the borrower is not behind at all, that their payments haven’t been credited, that the calculations are wrong, or maybe that they are behind but not as far behind as the lender says. In other cases, we might allege that the lender didn’t follow the lengthy process and missed some notice somewhere. Maybe they didn’t serve the borrower or someone associated with the property correctly.

We could allege that the borrower was in loss mitigation at the time that the foreclosure sale was scheduled. Typically, if the borrower is in the loss mitigation process and they have what’s called a complete package in with the lender at least 37 or more days before the sale, then the lender is not supposed to schedule or continue with the foreclosure sale.

Maybe there are issues with the deed of trust or the note. Sometimes, we use the defensive tender to basically say that the borrower paid the amount due and that the property shouldn’t have been sold. The borrower has until one business day before the sale to cure the total amount due, and if they do that, then the foreclosure sale can’t happen legally.

These are just some of the defenses that we’ve been able to raise. There are also things like mortgage fraud that can be alleged either before or after the sale, though we’ve had mixed success with filing that kind of thing on exceptions. We’ve had at least a couple of cases that have been rescinded. Typically, you want to get these defenses in before the sale, if possible. You are much less limited that way.

What Are Some Alternatives to Foreclosure That Can Help Someone in Danger of Losing Their Home?

We typically tell our clients that the worst possible thing they can do is let the house go to foreclosure. The reason foreclosure is a bad option comes down to equity in the home. If your house is worth more than what you owe and you let someone else sell it for you at an auction, you are probably not going to get as much money for it as you would if you put it on the market with a competent realtor. Similarly, if it goes to auction and you are upside down (meaning you owe more money on it than what it is worth), then you may end up owing more that way because, again, they are getting less for these properties at auction. It’s not that way across the board, but you are really taking the risk of losing your investment or digging yourself an even bigger hole.

When clients come to us, we go through that assessment and also tell them that having a foreclosure on your record is really bad for your credit score. If you plan on ever buying another property in the future, it’s going to prevent you from doing so for a longer period of time than your other options. You simply won’t be able to secure a mortgage for a number of years after a foreclosure. For these reasons, we advise clients not to do nothing, so to speak; don’t allow a foreclosure to occur.

Instead, what you want to do is to go through the options with a competent attorney who understands all of these things and will look to bankruptcy as a possible way of dealing with it. There are options that we can outline for people whether they want to keep the property or not. For those who are unemployed and have no realistic way to manage their debt, we can help them honestly look at the situation. We have strategies to keep them there for a period of time until they can get enough funds to move somewhere else. (Remember, it’s not easy to find a place to relocate to when you have bad credit, and you are probably going to have bad credit if you are in foreclosure already.)

Other than the alternatives of Chapter 13 and Chapter 7 Bankruptcy, there is also loss mitigation as a type of foreclosure defense through loan modification. That would be a way of possibly saving a home, having new terms, resetting your payments so that you are current, putting what you didn’t pay on the back of the loan, and adjusting the interest rates and the payment amounts. Overall, loan modification aims to make your payments more affordable for you. Those are some of the things that we can try to do with your lender.

If you are not keeping the property and don’t want to file a bankruptcy, there is also a short sale option. In a short sale, we can negotiate with your lender to allow you to sell the property to someone for less than what you owe. A short sale is not ideal when you have equity in the property. One advantage of the short sale, however, is that we can get the lender to take the property and waive the deficiency balance that you have in a lot of cases. If we sell it to a third party and you end up owing tens of thousands or hundreds of thousands of dollars on that transaction, the lender will often agree to forgive that amount. You could avoid filing bankruptcy this way if the house is the only issue you have. If you have other issues with credit cards and medical bills and taxes, bankruptcy will probably make more sense, but the short sale can be a very powerful tool to employ.

There is also something called a deed in lieu of foreclosure, and that’s another way to try to manage that deficiency balance. In some cases, the lender will simply take the property back from you, skipping over the whole foreclosure process. Basically, you would sign the title over to them, and in exchange, they often agree to waive that deficiency balance, similarly to the short sale.

With the number of tools we have available, it makes sense to look at these options as alternatives to foreclosure, which almost never makes sense. The earlier that you go to someone, the more of these options you’ll have still available. So, if you get to the last minute, you’ll find that a lot of these options disappear, and then you could only stop the sale by filing bankruptcy. It’s very important that you contact competent counsel well in advance of the sale, probably as soon as you know you are not going to be able to pay the mortgage.

Finally, if you are trying to save your property but have allowed your payments to get out of control, then they are going to snowball. The lender and their attorney will add all kinds of fees and charges to your bill, which could make it something that is not affordable by the time you contact someone. Again, it’s always best to contact someone very early on; the worst they could tell you is not to do anything at that time but to come back to them later.

For more information on Potential Defenses to Foreclosure in MD, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (443) 492-9003 today.