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5 Common Defenses to Foreclosure

08.10.2022 · Posted in Legal Articles

It was nearly impossible to delay or prevent a foreclosure in the past, but now several foreclosure defenses can be used to save your home. The increase in successful defenses against foreclosure largely attributes to the discovery of errors and noncompliance in the mortgage servicing sector, which have persisted for a long time. The evidence has motivated law enforcement to support homeowners, rather than ruling in favor of foreclosure actions. Even though the system is more sympathetic towards homeowners than earlier, it is important to seek legal assistance in order to stop a foreclosure.

Chicago Foreclosure Defense Lawyer can equip you with the right defense and help you build a strong case that refutes the lender’s claim. Now let us discuss some common foreclosure defense sin detail:

1. The lender did not follow the correct legal procedure

The foreclosure process varies from state to state. You can easily challenge the foreclosure if the loan owner did not fulfill the state procedural requirements. If your assertions are correct, the court will terminate the foreclosure, and the lender will have to start over. A foreclosure can be prevented if the statute of limitations has already conceded. If sufficient time has passes since you stopped making mortgage payments, the lender may have lost their right to initiate a foreclosure.

The more serious the lender’s violation, the greater leverage you obtain from law enforcement. For example, the loan owner may have breached federal laws or violated the terms of the mortgage or deed of trust. Every home owner should receive a prior legal notice, which grants them plentiful time to catch up with due payments or make arrangements to evacuate the property; if the loan owner does not issue a timely warning, their foreclosure cannot be approved. 

2. The mortgage servicer made a huge error

Mortgage servicers can make honest mistakes or commit intentional fraud while managing borrower accounts. For example, your mortgage payments may have been credited to another party, which means you are not guilty of defaulting, or at least not to the extent stated. Similarly, certain fees charged by the servicer can be deemed illegal if they were not mentioned or authorized in the loan contract. You can also challenge the foreclosure if the mortgage servicer demanded excessive payment to reinstate the home loan.

3. The foreclosing party lacks standing

At times, the foreclosure is initiated by someone other than the actual loan owner, which can come as quite a shock. Thankfully, there is nothing to worry about if the party seeking to foreclose lacks “standing” to do so, i.e. it cannot prove that it is the real owner of the loan. On the contrary, banks sometimes struggle to provide foolproof evidence of loan ownership. It appears that the debt was sold multiple times to different investors. These kinds of cases can get increasingly complicated, since it is difficult to determine the rightful owner of the loan.

4. I have a modified or insured loan

Loans that are insured by the FHA, approved by USDA, or are VA-guaranteed are governed by specific federal laws. The foreclosing party has to follow strict regulations related to loss mitigation before initiating the foreclosure process. A foreclosure can also be reckoned invalid if you have signed up for a loan modification plan and you are making payments in accordance to the terms.

5. I am protected by the Civil Relief Act

Active duty military personnel are protected by several states and the Service members Civil Relief Act.  Unless the service member gives the lender a waiver, foreclosure procedures involving any mortgage taken out prior to reporting for duty must take place in court. According to the federal law, a sale cannot be made without a court order and the transaction is unlawful if it occurs within the service period and for up to a year following retirement.

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