The current economic situation is result of years of reckless and predatory lending, leaving hundreds of thousands of individuals in danger of losing their homes. Even hard-working people can encounter situations which may affect their ability to pay their mortgage in a timely manner.
Many issues can be contributing factors such as job loss, medical illness or injury, marital difficulties, unforeseen repairs, tenant problems, or even a death in the family. Just one of these situations can have a direct impact on making home mortgage payments.
There is more and more evidence that the real estate industry has been rife with fraudulent and predatory lending practices. Because of this evidence, courts that once rubber-stamped foreclosure actions are now beginning to shift their sympathies towards homeowners. Homeowners and their attorneys are taking advantage of this change in judicial attitude, and challenging foreclosure actions in many different ways.
In order to raise a defense to the foreclosure action, you must bring the issue before a judge. In Washington, foreclosures typically take place outside of court (these are called non-judicial foreclosures) and you have no automatic means to mount a legal challenge.
To have your defenses ruled on by a judge, you have to file a lawsuit, alleging that the foreclosure is illegal for some reason, and asking the court to put the foreclosure on hold while it reviews the case.
Homeowners may have several different types of defenses available. Those include challenges to the bank’s legal authority to hold the foreclosure, violations of the federal Truth In Lending Act, violations of statutory foreclosure requirements, unconscionability, predatory lending and fraud.
Individuals may also use a Chapter 13 bankruptcy proceeding to save their home from foreclosure. Chapter 13, Adjustment of Debts of an Individual With Regular Income, also known as the Wage Earner Plan, is designed for an individual debtor who has a regular source of income, that enables the debtor to keep a valuable asset, such as a house, and allows the debtor to propose a “plan” to repay creditors over time – usually three to five years.
The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition. The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the chapter 13 filing.
Whether you are a homeowner who has experienced a loss of income, injury or illness, have a mortgage you can no longer afford or you are an investor who can no longer sell for what is owed on the mortgage, a foreclosure can have severe personal and financial repercussions.
Many people lose everything in a foreclosure only to later learn that they could have saved their home if they had only pursued the rights available to them under the law.