Just because you defaulted on your mortgage payment does not always give the bank an immediate right to foreclosure. The regulated home-loan industry has more requirements than the typical arms-length business transaction. If your loan was federally insured, such as an FHA-loan, there are even more requirements a bank must conform to prior to initiating foreclosure. The following are some legal defenses you may have against the bank.
By filing Chapter 13 bankruptcy, individuals are given an opportunity to become current on his or her mortgage loan. In the majority of case, individuals fall behind in his or her monthly payments on their homes which provides the bank to begin foreclosure proceedings against you. Chapter 13 bankruptcy will stop any and all foreclosure proceedings and allow you to pay back any arrearages on the mortgage loan.
Essentially, this when the bank or lenders fails to follow something that was in the home-loan contract itself, and every contract for an FHA loan has this certain legal language. This includes a requirement that the bank provide the homeowner with debt management and relief, which must be made available to borrowers facing temporary financial problems. Such relief options must include temporary forgiveness of monthly payments, mortgage modification and other foreclosure prevention loan servicing requirements.
The problem many families face is that Banks often skip this step in a rush to get the house so they can re-sell it, and then get bailed out by the federal government (remember, their loan was insured by the federal government). Because of the FHA program, Banks can profit off of your loss.
Remember, there is a reason the Federal Government goes to the length to insure certain home loans: because the bank has a duty to manage the mortgage using special foreclosure prevention workout programs. These programs are suppose to avoid foreclosure in the first place, to the greatest extent possible. The FHA's special foreclosure prevention workout programs can include and allow for
(1) the restructuring of the loan which allows the borrower to pay out delinquent installments or advances to bring the mortgage current.
(2) special forbearance in the form of a written agreement that reduces or suspends the monthly mortgage payments for a specific period to allow time to recover from a financial hardship. Such a plan can involve changing one or more terms of the subject mortgage in order to help the Defendant bring the claimed default current thereby preventing foreclosure.
The bank's failure to comply with the FHA repayment plan or special forbearance workout programs often deny homeowners access to explore alternatives to avoid foreclosure, which under Federal law are required to be available to them.
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Across the country, judges are punishing mortgage companies for incomplete record keeping and for violations of the Truth In Lending Act (TILA). You may be able to allege valid defenses including fraud and TILA violations.
Are you aware that the mortgage company foreclosing on your home is probably not the same company that actually loaned you the money in the first place?
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.
So essentially, the mortgage company may have improperly filed the lawsuit against you. It wouldn't be the first time this has happened. It's happening with astonishing frequency in the wake of the national economic crisis.