There is a recent trend, fueled by the unscrupulous practices of lenders, in which homeowners are contesting their foreclosures. How and why is this done?

In many cases the party who wrote your loan is no longer the party who is now alleging ownership. This fact provides the first method for contesting a loan in foreclosure. Simply put, homeowners are forcing the lender to provide proof that they actually own the loan. Since many loans are sold in mortgage "pools" "there is a tendency of many lenders to sell these pools without following formal legal requirements required for the sale of a mortgage and note. Basically, there must be executed by the lender selling the loan an "assignment" which indicates that ownership is being transferred. When they sell pools of hundreds or even larger pools of mortgages in the normal course of business, many sales forgo this necessary legal step. In doing so, lenders who acquire the loans really don't have what's known as "legal standing" to bring the action for foreclosure in the first instance. As such, many courts are dismissing foreclosure actions after homeowners have hired sharp attorneys who are making the argument that without providing the court with a signed assignment the party suing has no standing. In the case of lenders who are selling these mortgage pools and then going defunct, it makes it virtually impossible for the party who bought your loan to acquire the necessary signed assignment after the fact. That means that there is no party who can actually foreclosure on your home. This has resulted in a windfall for many homeowners, whose debt is essentially reduced to nothing. Many Judges are in fact dismissing foreclosure actions when there is no valid assignment.

The second method of contesting a foreclosure is by alleging that the initial contract (the loan documents themselves) were legally invalid. They are in essence making allegations of fraud, overreaching, bad loan practices, and loan origination practices which violate the law. In essence they are asking courts to "undo" their loan. Many lenders have violated State and Federal law. Some were charging excessive fees and interest rates, while others misused the legally accepted loan practices including disclosure requirements, fair lending requirements, and predatory lending practices. Predatory Lending covers improper marketing, underwriting, and pricing. In short, homeowners can make allegations within their foreclosure action that the lending practices of their lender in some way exploited them. Some borrowers are actually initiating the first shot and suing their lenders before a foreclosure action is even begun.

These types of strategies may be available to you when facing foreclosure. However, there are also many alternatives to spending money on attorneys that you can explore on your own and for free prior to implementing these types of legal tactics. Please keep reading our blog and explore our site for information concerning these other options!