If you have been served with a foreclosure action and wish to defend against it, we highly recommend that you consult with an experienced consumer protection attorney. If the homeowner fails to file an Answer to the Foreclosure Complaint before the deadline on the Summons, the lender will move for a default judgment from the clerk's office. Almost all mortgages provide that a borrower's failure to pay any payment on the date it is due constitutes a default which entitles the lender to accelerate (i.e., demand) the entire balance of the mortgage. Although lenders rarely forget to accelerate prior to instituting foreclosure actions, if the lender failed to accelerate, the borrower can cure the mortgage by paying the reinstatement amount. If your lender attempts to introduce a susbstitute for the original note by including a count to "Establish A Lost Note" (or similar caption), please call us to set up an appointment. We are very concerned that, for many lenders, the note is not "lost" and a fraud is being perpetuated on the courts, the borrowers, and investors. Among the most outrageous of these practices are lenders or service agents that impose late fees prior to the date the payment is due. Such illegal demands for late payments may spiral into a default, acceleration and foreclosure. Consumers who believe that they have substantial evidence that their lender is defrauding them through improper charges should contact our office for an appointment. FEDERAL PROGRAMS WHICH REQUIRE LENDERS TO WORK SOME LOANS Homeowners who have mortgages insured or guaranteed by the Federal Housing Administration ("FHA"), Housing and Urban Development ("HUD"), Veterans' Administration ("VA"), or United States Department of Agriculture - Rural Development Administration ("USDA-RDA") formerly known as the Farmers' Home Administration ("FmHA"), are often protected by program regulations which require the lender to work out loans insured by these programs under certain conditions. FEDERAL HOUSING ADMINISTRATION ("FHA") and HOUSING AND URBAN DEVELOPMENT ("HUD") VETERANS' ADMINISTRATION Homeowners who have mortgages insured by the Veterans' Administration ("VA") also have greater rights than homeowners who have conventional mortgages. But, the protections for the homeowners in the VA program are not as extensive as those available to FHA/HUD borrowers. The courts disagree about whether the lenders' failure to follow these VA rules provide the borrowers with a legal or equitable defense to the foreclosure. The USDA/RDA also offers payment moratoriums, Delinquency Workout Agreements ("DWA's"), and protective advances to assist program beneficiaries. MORTGAGES ARISING FROM A HOME IMPROVEMENT SCAM WARNINGS FOR THE GULLIBLE Sometimes, potential clients who are beneficiaries of these federal programs have fallen behind in their payments due to temporary health problems or unemployment and, with the assistance of the federal work out guidelines, are able to bring their payments current within the allowed time periods. Unfortunately, most borrowers are not covered by these federal programs and/or the borrowers experience more substantial problems than the guidelines, if applicable, allow them to cure without filing for protection in bankruptcy. Many of these so-called experts charge substantial fees and routinely conceal from their "clients" that their efforts, if they made any effort at all, were unsuccessful and, therefore, the client needs to retain a bankruptcy attorney if he or she wishes to prevent the foreclosure sale. Of course, the "expert" has typically charged a substantial fee which often exceeds a Bankruptcy attorney's fee for a typical Chapter 13 case! To state the obvious, many of these agencies are scams that receive substantial fees but provide little, if any, benefit to their "clients". Homeowners should also beware of lenders that continue to negotiate a forbearance while they also proceed with their foreclosure action. Many homeowners fail to defend against their lender's foreclosure actions based on false representations and false hopes that their lenders will work with them. Often homeowners do not discover their lender's deception until after they have already lost many of their valuable rights.
FLORIDA FORECLOSURE DEFENSE & LOAN WORKOUTS
IF YOU ARE FACING FORECLOSURE
The procedure for foreclosure proceedings are wholly determined by state law along with much of the substantive law. If you are not a resident of Florida, the information contained in this site will probably not help you and may even be very misleading. Some of the defenses and counterclaims that homeowners have arise under federal laws.
Few events are as devastating or disruptive to a family as the loss of the family home to foreclosure. Children are often forced to change schools; families are often forced to live a considerable distance from friends, relatives or the workplace. If there is a deficiency judgment arising from the sale, the lender may garnish the debtor's wages. Many homeowners lose substantial amounts of equity; this financial loss often continues to affect the debtor throughout their life.
A homeowner's most effective method of protecting an owner-occupied home from foreclosure is usually a Chapter 13 bankruptcy.
Chapter 13 allows debtors to catch up on their homes over a period ranging between three to five years.
Many debtors have defenses to foreclosure that allow them to delay foreclosure and gain negotiating power with their lenders both within and outside bankruptcy. Often, the lenders can "cure" many of these problems by simply correcting its behavior and beginning the foreclosure anew. Unfortunately, the arrearages and size of the eventual judgment against the borrower will continue to grow as the borrower continues to fail to make monthly payments (often because the lender refuses these payments in order to continue its foreclosure.) Some of the legal defenses described in this web site will postpone foreclosure or reduce the amount owed after foreclosure. Homeowners who need additional time to arrange a workout, refinancing, or a private sale, often benefit from fighting foreclosure.
Some homeowners have valuable causes of action which the lenders cannot correct. Many of these defenses and counterclaims may actually prevent foreclosure and even require the lender to pay the borrower damages. Our firm represents homeowners against lenders in both bankruptcy court and in state court.
Under Florida law, after a foreclosure sale has been conducted, the sale is final and the former homeowner will have lost all rights that he or she had to the home.
In Florida, the lender must file an action in court and have the sheriff or private process server complete service of process.
The Summons will state how long the homeowner is allowed to answer the Foreclosure Complaint. This is typically twenty (20) days. It is extremely important that homeowners comply with this deadline if they intend to defend against the foreclosure.
Some lenders fail to comply with procedural requirements including lack of joinder of necessary parties or insufficiency of service of process.
More commonly, lenders' complaints are pleaded improperly by, for example, failing to attach copies of the promissory note and/or mortgage or by misrepresenting the principal balance.
The homeowner also has an opportunity to raise defenses such as fraud, usury, tender of payments due, invalidity of the mortgage, and the Truth-In-Lending Act violations.
Once the Court has confirmed the default issued by the clerk, it is very unlikely that the court would lift the default.
Few homeowners retain counsel to defend against a foreclosure proceeding; it is very expensive, especially for borrowers who are already in financial distress. Attorneys who represent mortgage lenders are typically responsible for handling a very high volume of cases. As a result, these firms often make mistakes which, although correctable, can create the basis for defenses to the foreclosure or inability to immediately prove the lender's case.
Sometimes, lenders fail to: (1) introduce the original of the promissory note in the foreclosure proceeding; (2) properly perfect their security interest before initiating the foreclosure; and (3) improperly assign the mortgage.
We are also concerned about lenders who attempt to extort additional profits by systematically demanding late fees which are not due or which arise from the lender's policy of deliberately delaying the processing of payments until after they are due.
Many borrowers have conventional mortgages which provide little protection from valid, legal acceleration. Some of these borrowers may have defenses to the foreclosure; most do not. But, borrowers who have mortgages that are insured by federal agencies often have valuable rights that allow them the opportunity to enter into loan workouts which sometimes provide borrowers with sufficient time to bring their payments current without having to enter into a Chapter 13 Bankruptcy for three to five years.
Homeowners who have mortgages insured or guaranteed by the Federal Housing Administration ("FHA") or its successor the Department of Housing or Urban Development ("HUD") have protections from foreclosure that are not commonly available.
A lender under the FHA/HUD programs cannot begin a foreclosure proceeding until at least three full monthly payments are due. In these programs, the lender cannot foreclose if the only default is the borrower's failure to pay an escrow shortage in a lump-sum payment. Furthermore, lenders must provide notice of the default no later than the end of the second month after delinquency. The lender must also make reasonable efforts to set-up or hold a face-to-face interview with the homeowner before three monthly installments are due and paid. Under certain circumstances, the lender must accept partial payments. The courts disagree about whether the lender's failure to comply with these requirements provides the borrower with legal or equitable defenses to the foreclosure action; most courts have held that it does.
Lenders may not begin foreclosure proceedings against VA borrowers until the borrower fails to make three full monthly payments.
Lenders are permitted to allow the borrower to reinstate prior to the foreclosure sale by tendering the amount that the borrower is delinquent (including late charges and reasonable, actual foreclosure attorney's fees and costs.)
Lenders must also provide thirty days notice to the VA of their intention to foreclose. The lender must offer or consider all reasonable forbearance and workout plans including a temporary suspension of payments by modifying the loan by reamortizing or extending the term of the loan. Many lenders will offer VA borrowers to enter into a written payment plan to cure the delinquencies.
RURAL HOUSING SERVICE MORTGAGES
If your mortgage is insured by the United States Rural Housing Service (formerly the "Farmers' Home Administration" or "FmHA"), you may be entitled to enter into an agreement to avoid foreclosure. The U.S. Rural Housing Service can be contacted at (800) 793-8861. Your mortgage is probably insured by the USDA/RDA if your mortgage papers or other closing documents refer to the USRDA, FmHA or "section 502 Single-Family Housing Program"
TRUTH IN LENDING ACT: AVAILABLE TO BORROWERS FOR HOME REFINANCINGS
Borrowers often have important rescission rights under the Truth In Lending Act ("TILA"). By rescinding the contract, the borrower usually does not owe the lender any money for the mortgage.
First, TILA provides homeowners who refinance their home mortgage an absolute right to rescind their mortgage by providing the lender written notice of rescission within 3 days of the closing. Congress recognized that many home refinancings are often inadvisable. But, Congress provided homeowners the right to rescind without having to show any reason.
Second, TILA allows homeowners to rescind at any time within three years if they did not receive two copies of a written notice informing the borrowers that they have the right to rescind.
Third, TILA allows borrowers to rescind if the lender underestimates the interest rate contained on the Truth In Lending disclosure form. This right expires one year after the closing. Therefore, if you have refinanced your home within the past 365 days and believe that your lender may have defrauded you, you should see an attorney who brings cases arising under the Truth In Lending Act well before your statute of limitations expires.
Lenders who are selected by home improvement providers (e.g., aluminum siding, roofing, etc.) are usually subject to any of the defenses that you could have raised against the company that provided the home improvements. For example, if a contractor abandoned the project without completing it, you would be able to defend a collection action brought by the contractor. Similarly, the law allows homeowners to raise the same claims and defenses against the lenders chosen by the contractor as homeowner could against the borrower. But, if the borrower's damages do not exceed the entire balance of the loan, the borrower will have to pay the difference.
We highly recommend that potential clients bring all of the documents concerning their mortgages and refinancings with them to their initial consultation.
Usually, lenders will not work with borrowers unless their mortgages are insured by the agencies listed above and, even then, the lender will do so only if the borrower is not behind by more than the agency's guidelines require them to workout the loan (usually four months or less, depending upon the agency involved). If a lender is willing to agree to non-foreclosure forbearance programs, the borrower can usually negotiate this without outside help.
If your loan is a "conventional" loan or your lender has already filed a foreclosure action, loan "work out" negotiations are unlikely to be productive. If, however, your loan is one of the loan programs discussed above and you believe that you qualify for a deferment, you should seriously consider negotiating a work out plan as an alternative to bankruptcy.
If your lender has prematurely filed a foreclosure action without following the applicable program guidelines, you should consult with experienced counsel to evaluate whether you may benefit from defending the foreclosure action.
We have observed many consumers who lose their homes because they have relied on "paralegals", "loan workout consultants", "real estate entrepreneurs" and other agents to protect their home.