I have received many asset protection inquiries in the past year from people concerned about a mortgage foreclosure on one or more of their properties. Most people who contact me are interested in asset protection from deficiency judgments because Oklahoma is a deficiency state. One of the issues?I discuss with my clients facing a foreclosure and a potential deficiency claim?is whether the homeowner should defend the foreclosure even though the homeowner is? unable, or unwilling, to continue making mortgage?payments. There are advantages and disadvantages to foreclosure defense, and the decision to defend or default depends on the individual debtor’s situation and his assets.
In order to stay up on developments in the law of foreclosure defense, I recently attended a legal seminar called ?Defending Foreclosures in Oklahoma? which was jointly sponsored by the?Oklahoma Bar Association and?Legal Aid Services of Oklahoma. The featured speaker was Florida legal aid attorney?April Charney. ?Attorneys that practice in the real estate area know that April is at the forefront of the battle against foreclosures. ?She is a nationally recognized expert that helps Florida homeowners in particular, and like-minded attorneys in general. ?As a condition of attending the seminar, I agreed to donate at least twenty hours of related legal work to Legal Aid Services of Oklahoma.
I left April’s seminar better equipped to advise and help Eastern Oklahoma area homeowners present legal defenses to foreclosure actions even where the loan is in default. ?Points to consider:
While you are litigating the foreclosure case,?you are?not?required to make your normal monthly mortgage payments.? The legal process will afford you time to reinstate the mortgage, sell your home, file a bankruptcy or move out.? You may be able to force the lender to completely?rewrite the terms of your note and mortgage, enabling you to keep your home.
This may sound too good to be true, but you may actually have valuable defenses and counterclaims against your mortgage company that could actually?prevent foreclosure?and even require your lender to?pay you damages.? Across the country, judges are punishing mortgage companies for incomplete record keeping and for violations of the Truth In Lending Act.? You may be able to allege valid defenses including fraud and Truth In Lending Act violations.
Are you aware that your mortgage company is probably not the same company that actually loaned you the money to buy or refinance your home?? How do you know if the mortgage company suing you has been properly assigned your note and mortgage?? Your mortgage company may have failed to properly assign the note and mortgage before initiating the foreclosure.? Does your foreclosure complaint even have copies of the note, mortgage and purported assignment attached?
Most likely, these documents are not attached, especially the assignments, and?may not even be in the possession of your mortgage company.? Your mortgage company may be attempting to substitute your original note and/or mortgage with a purported copy.? This is called a “Count to Establish Lost Documents.”? There are?strict legal requirements?to establish a lost note or mortgage, and your mortgage company may be unable to meet the requirements if challenged.
If your current mortgage company is not your original lender, it probably has never read your mortgage.? Your mortgage may require that the plaintiff accelerate (i.e. demand) the entire balance of the note.??Your mortgage company may have failed to do that, which may entitle you the opportunity to cure the mortgage by paying the reinstatement amount.? It is also common for mortgage companies to inflate the balance due on the mortgage by charging homeowners junk fees, such as Broker Price Opinions (BPO), property inspections and other “property preservation expenses.”
So, essentially, your mortgage company may have filed an improper foreclosure lawsuit, but your time is limited.? You have or will be served a copy of the foreclosure complaint by a process server.? You typically have?only 20 days?to respond to the mortgage company’s complaint, so you need to see an attorney immediately if you wish to defend?against the foreclosure.??If you are beyond the twenty days, there are still defenses that can be raised. ?It may even be possible to vacate a foreclosure judgment and?sheriff’s?sale.
If you are wondering why you have not heard more about foreclosure defense, consider April Charney’s words: ?Lawyers don?t go to law school to fight foreclosures. It?s a special skill set. Even most judges aren?t familiar enough with this because so few homeowners go into court.?
Beware of so-called foreclosure ?rescue? businesses that charge homeowners a large up-front ?consulting? fee to negotiate a loan modification with the lender, but after collecting the money, the companies do little or nothing to save the home.