Foreclosure happens when a homeowner defaults on their mortgage loan, resulting in the lender taking possession of their home. According to ATTOM’s Midyear 2023 U.S. Foreclosure Market Report, there were 185,580 U.S. properties with foreclosure filings in the first half of 2023. This marks a 13% increase compared to 2022 and a substantial 185% rise from the previous two years, during the pandemic.
While homeowners who fail to make their mortgage payments each month face the risk of foreclosure, there are also a number of defenses that can be employed to avoid such an eventuality. If successful, these homeowners may delay the foreclosure process or stop it altogether, potentially preventing the repossession of their home.
For further information on the foreclosure process it is advisable to seek expert help from a foreclosure defense lawyer who can assess your specific situation and guide you through your options. This article will examine some key defense strategies that can be used to help individuals facing foreclosure, potentially helping them to keep their homes.
Foreclosure Defense Strategies
- Short sale: This is a type of transaction where the lender allows the borrower to sell their house for less than the amount owed to them under the loan. In a short sale, the lender agrees to accept the lower sale price, forgiving the remainder of the mortgage debt and the homeowner avoids foreclosure. Short sales generally take place when the value of the property has declined leaving the homeowner in negative equity.
- Loan modification: A loan modification allows homeowners to change the terms of their existing mortgage loan. This is something that a borrower will request from their lender and if accepted may result in a reduction in the principal owed, a waiver of penalties or fees, a change in interest rate from fixed to floating or an extension of the term of the loan.
- Lender error or violation: Errors or violations made in the foreclosure process may be used as a defense strategy to challenge a foreclosure claim. This can include matters such as the mortgage lender or foreclosing party failing to follow proper protocols when proceeding with their claim or failing to provide the correct documents to prove their ownership of the mortgage.
- Mortgage reinstatement: To avoid foreclosure, a borrower who has defaulted on their loan may be given the opportunity to cover arrears by catching up on any late payments and outstanding fees, and effectively reinstate the mortgage to its original status.
- Predatory lending claims: Foreclosure may be stopped if it can be shown that the lender used unfair lending practices during the mortgage origination process, including aggressive, deceptive, or fraudulent tactics. If successful, the loan may be deemed legally void and foreclosure proceedings dismissed.
- Deed in lieu of foreclosure: This is a legal arrangement where a homeowner who is facing financial hardship voluntarily agrees to transfer ownership of their property to the mortgage lender in lieu of foreclosure. In doing so, the borrower will be released from the obligation to repay any arrears on their mortgage loan.
These strategies can act as potential defenses for homeowners at risk of foreclosure.