Foreclosure Challenging Foreclosure and Predatory Lending Practices

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  1. This article provides information about how you can successfully challenge the foreclosure process on your home and also lists several governmental assistance programs that may provide aid and help you stave off foreclosure. You may be surprised by the number of remedies that currently may be available to you.

    Foreclosure Facts

    According to a leading web site report (Realty Trac), during 2008 more the one million homes in the United States have gone through the foreclosure process and returned to the mortgage lenders. In recent months, legislation has been passed by the government to try to solve the mortgage crises. The Hope for Homeowners project is a program legislation that became effective in July 2008 and will remain in effect until September 2010. The Hope for Homeowners project is only estimated to be able to help around 400,000 home owners. However, an estimated two million more homeowners will face foreclosure in the next two years. Another report from Credit Suisse states that about 6.5 million homeowners will fall into foreclosure over the next 5 years.

    Many of those homeowners who are facing imminent foreclosure on their homes may not understand or be aware that they have ways to challenge the foreclosure of their home and do not have depend on the Hope for Homeowners project. If you have been the victim of predatory lending practices, you may have legal recourse to challenge the foreclosure in court. The judicial system is becoming much more sympathetic to the homeowner in challenges to foreclosure actions. Many attorneys are finding a lot of different ways to challenge foreclosure. You always have the right to seek legal counsel and get up to the minute advice on what new laws are being passed to help homeowners remain in their homes.

    Mortgage Loan Default

    If you are in default on your home mortgage, the lender will begin the foreclosure process, usually after you have been in default for at least 3 months. Once the foreclosure process is completed, the title to the property goes to the lender and the homeowner must vacate the property. Most home owners do not challenge the foreclosure and simply walk away from the property not knowing they have the ability to challenge it.

    Challenge of Promissory Note

    The first thing you can do is force the lender to produce the original promissory note in court to prove they actually have the right to foreclose on the property. This is done in federal court, which is the only court that the homeowner can challenge foreclosure. Many times the promissory note has been bought and sold many times by many different banks. This makes it very hard for the lender to produce the original promissory note.

    Challenge of “Equity Branch of the Law”

    Lawyers can challenge the foreclosure for you by using the “equity branch of law” if it is applicable in your situation. Usually this means that the attorney can argue that the foreclosure is unfair and unconscionable, making you the victim of one of the many predatory lending practices. For instance, if the borrower was elderly and really didn’t understand the terms of a loan that they quite obviously could not ever repay it. If there is an outrageous term attached, such as a huge balloon payment, the “unconscionable” defense can be used based on the “equity branch of law.” The court may find the term so offensive to public policy that it could not be enforced.

    Challenge of Mortgage Service mistakes

    If the mortgage service company has made mistakes on your mortgage, you can challenge foreclosure for that reason. Such mistakes can include the following:
    • Not applying your mortgage payment to your account and mistakenly crediting another account for the payment
    • Charging an excessive fee the lender did not authorize
    • Exaggerating how much you owe to bring your mortgage payment default up to date, thereby denying you the option to reinstate your mortgage

    Challenge of Unfair or Predatory Lending Practice

    Lenders who violate federal or state lending laws can be challenged when they try to foreclose on the property. The Truth in Lending Act (TILA) and the amendments attached to it plus the Home Ownership and Equity Protection Act (HOEPA) both prohibit unfair lending practices in an effort to protect the borrow. These acts regulate and guard against very high interest rates and high up front processing fees. All lenders are required to disclose what the annual percentage rate is, what the finance charge is and the total amount to be financed. They must also include the total number of payments that are required to pay back the loan in full. They also must disclose the payment schedule and other basic information as well.

    Challenge of the Right to Rescind the Loan

    If the TILA or HOEPA was substantially violated, the borrower can rescind or cancel the loan. Furthermore, this cancellation can be retroactive in these situations. However, this can only be done if it is a second or third mortgage that was used to buy things other than buying or building your home.

    Challenge of Violation of State Limits on “High Cost” Mortgages

    Some states have made special provision for homeowner protection by placing limits on the costs of mortgages. If your state has violated these limits, you can challenge the foreclosure on that basis.

    Challenge of Military Service

    According to the Civil Relief Act, service members have special protection from foreclosure on there property. Active duty member have an automatic nine month postponement of foreclosure. A request for the postponement must be made in writing to the court. All foreclosure on service member property must also take place in court, no matter what state you reside.

    In summary, there are a number of remedies that may be available if you are currently in danger of experiencing a foreclosure. It is important to contact an experienced real estate attorney who may best be able to assist you immediately as time is of the essence.
    Bankruptcy & Debt:

    Michael Wechsler

    Michael Wechsler
    Michael M. Wechsler is an experienced attorney, founder of, A. Research Scholar at Columbia Business School and of-counsel to Kaplan, Williams & Graffeo, LLC. He was also an SVP and chief Internet strategist at and legal consultant at Kroll Ontrack, a leading service e-discovery and computer forensics service provider.


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