There was a time when successful foreclosure defenses were very rare. Now we’ve seen many more foreclosures and many more creative defenses are being raised. Successful defenses aren’t so rare, but courts generally give the lenders opportunities to replead or cure deficiencies in their cases. Foreclosure lawsuits are now being approached by homeowners in a number of different ways. Here are some of the more common defenses that have arisen in the last few years. Two of the alternatives lie in bankruptcy.
Standing to sue
The lender bringing the foreclosure action must be able to show that it is the proper party for bringing the lawsuit. In many cases banks designate Mortgage Electronic Registration Systems (MERS) to bring the action. Often the paper trail going to MERS and record keeping by MERS is insufficient. If MERS doesn’t have a continuous paper trail showing its standing to sue, the foreclosure suit can be dismissed.
The authenticity of the bank’s documents has frequently been called into question. Documents and motions are often supported by affidavits and certifications of individuals purporting to have personal knowledge of the documents or facts. In fact, they may have started working for the lender in 2008, and the document was executed in 1998. It’s impossible for that individual to have personal knowledge of what they’re certifying or attesting to. They were still in high school.
Date of MERS trust
Mortgages are often assigned to a MERS in a very large trust. That’s called a securitization pool. That trust was created on a certain date though. There are times when the assignment of the mortgage doesn’t fit into the time that the trust was formed. The assignment of the mortgage could precede the actual creation of the trust. If the trust had not been created, then the mortgage could not possibly have been assigned to it.
Chapter 13 bankruptcy
This is known as a reorganization bankruptcy, and you’ll be required to bring the payments on your home current within three to five years. It brings any foreclosure actions to a halt though. In that interim, you’ll be making two payments. The first payment will be to your lender, and the second payment will be made to your bankruptcy trustee. A Chapter 7 bankruptcy won’t permit you to do this. With a Chapter 13, you might be able to remove any second mortgages or home equity lines of credit too. That trustee represents neither you nor your creditors. They represent the bankruptcy estate. The trustee is ultimately supervised by the U.S. Department of Justice, and is required to follow certain guidelines. The money paid by you to the trustee is used to pay your delinquent mortgage payments and debts of other creditors. When you file a Chapter 13 bankruptcy, the lender is not permitted to refuse your payments. So long as you make your mortgage payments and your payment to the trustee, the law permits you to keep your home.
Chapter 7 bankruptcy
Some people can’t afford the terms of a Chapter 13 bankruptcy, so they proceed in the alternative with a Chapter 7 bankruptcy which also stops the foreclosure proceedings. They’re able to extinguish significant debt with the Chapter 7, and when they’re discharged from the Chapter 7 proceeding, they’re in a far better position to seek a loan modification with their lender. You’ll obviously be a better candidate for modification, and you’re in a better position to pay a modified loan too.
Other than bankruptcy, most foreclosure defenses don’t ultimately stop the foreclosure lawyers in their tracks. Courts have generally been very forgiving to lenders, and permit them time to produce documents they lack, amend their lawsuits or otherwise cure evidentiary defects. Because the bankruptcy stay stops foreclosure proceedings, it’s the most effective means of stopping a foreclosure. It opens several different avenues of relief that might not otherwise be available. If you want to keep your home, our firm may help you keep it. By using remedies available through the bankruptcy courts like reduction of the principal mortgage amount, interest rate and loan terms, our firm has successfully helped victims of our current economy keep their homes. If you believe you’re going into foreclosure shortly, or if you’re in foreclosure now and want to continue living in your home, call us now. We may be able to keep you there.