The following is a basic introduction to how disputes are litigated in the the courtroom. Homeowners facing the loss of their home by foreclosure may benefit from knowing the basics of the process before attempting to save their homes on their own or consult with legal counsel. If the borrowers decide to hire an attorney, being aware of how the court case will proceed can provide much-needed peace of mind and help the owners keep on top of the process of preventing a sheriff sale.

The first step is to answer the summons. Once the bank hires its local law firm, the attorneys will get to work creating the foreclosure lawsuit. Then, the paperwork is filed with the county court, with a copy of the suit being served on the homeowners, who are summoned to court to answer the allegations. If they do not file an answer or appear in court, the bank will win the case by default.

The answer to the lawsuit should contain as many of the following elements as are relevant to the borrowers' situation. The most important point is to deny any and all of the allegations that the lender makes in its lawsuit, as well as demanding strict proof of the claims raised by the bank. Then, general defenses should be included. General defenses are claims that the bank should be aware of, including any offsets. Affirmative defenses then follow, which include claims of the homeowners that the bank may not be aware of, such as an expired statute of limitations or unclean hands. Also, the homeowners can then include counterclaims against the bank, which may include violations of the Fair Debt Collection Practices Act or Fair Credit Reporting Act, for instance. Finally, the borrowers may wish to include a request to the court that they are given a period of time to prepare for the next stage, discovery.

Discovery is the process where the plaintiff (the bank) and the defendant (the homeowners) may attempt to get information from each other that will help them in their case. This can include interrogatories, taking depositions, and having the other side produce documents. The first reason for discovery is to examine the case that the bank may present against the homeowners; the second reason is to better define the disputes between the two parties and find out if there are any issues on which each side agrees. When the bank and the borrowers both agree on a fact, their agreement is called a stipulation and may be included in legal filings with the court.

Again, homeowners should examine this brief description here and decide which discovery procedures to use against the bank. Proposing admissions means asking the bank to stipulate a fact. Obviously, if the bank is asking the homeowners to stipulate that they owe a certain amount of money and deserve to lose their home, the owners can refuse to agree. Thus, borrowers may not want to agree to any of the bank's stipulations, while proposing their own to the bank. Interrogatories are questions that are designed to get specific statements of fact from the bank, and it is important to word these carefully and not allow the bank to wiggle away from making important admissions or object to how they are put.

Demanding the production of documents is a procedure used in discovery that can be extremely important for homeowners in produce the note defenses. These requests can be as broad as the homeowners want, as the bank may have pages of relevant documents that can be produced. Even such items as internal emails, notes on a borrower's mortgage account, and bank procedures can be requested.

After serving discovery documents on the bank, the borrowers may need to file any sort of motions with the court. Filing motions is basically a request that the court do something for the homeowners in order to move the case along. The main point to remember here is that the owners should include a copy of an executed motion that the court would use with the homeowner's own motion. This gives the court an easy way to sign off on a pre-made order that the homeowners want done if their motion is granted.

Some of the more common types of motions include the following. A Motion and Order to Compel forces the bank the produce documents that have been requested but have not yet been produced. If the lender ignores the discovery demands, the borrowers can file a Motion and Order to Compel. If the bank continues to ignore the borrowers, a Motion and Order to Preclude can be filed, which would exclude any evidence from trial that could have been revealed in discovery. Obviously, this can destroy the entire case the bank has prepared. Finally, a Motion for Summary Judgment may be used if there are no issues of law or fact that are being disputed. It is used when one side simply requests that the court issue a judgment against another side; this is very common when banks attempt to ignore all of the homeowners' claims and file a Motion for Summary Judgment to circumvent the court process and move straight to the sale of the home.

To conclude this overview, when a bank has its attorneys file a motion, the homeowners may have their own attorneys file an opposition to the bank's claims and state the reason why the motion should not be allowed. All of this may seem to be both a gross oversimplification of the court process, as well as completely over the head of many average homeowners. However, having a basic understanding of how the courts work can help borrowers to defend their homes more effectively than if they did not take the time to learn this important foreclosure information.

Although this blog has long been a proponent of homeowners defending their properties on their own, realizing that many foreclosure victims do not have the extra money to hire an attorney, this is definitely not a one size fits all solution. While a number of books and other resources are available that teach borrowers how to save their homes on their own, there are a number of reasons at least to consult with an attorney when attempting to stop a bank from continuing with foreclosure.

The first reason that borrowers should consider hiring a lawyer to help them stop foreclosure is simply that the banks will have an army of attorneys pursuing the lawsuit or trustee sale. Many times, these bank-hired lawyers will not take calls from the borrowers, but would be willing to communicate with another attorney that is representing the residents. They speak the same language and know that they can make the process very time-consuming and difficult for each other.

Second, if homeowners are attempting to save their home by fighting a lawsuit in court, it can pay to have an attorney look over the legal documents to search for mistakes. Even if the borrowers do not retain the attorney to represent them, they may benefit by having a local lawyer familiar with the court rules examine the paperwork and process to ensure that is being done correctly. More than one homeowner has had their case thrown out of court due to failing to follow the rules of procedure.

Another reason to consider hiring an attorney is simply insurance against a corrupted system, especially a corrupted judge. In cases where debtors represent themselves, the judge and bank's attorneys may ignore the borrowers while continuing the foreclosure process despite any claims that may be raised against it. If a lawyer on the homeowner's side is present to object to this corruption, it may be far less likely to occur.

While it can cost a significant amount of money to hire a good attorney to help in a foreclosure case, it can greatly benefit the homeowners. It may cost a few thousand dollars to get legal representation, but it can also drag out the foreclosure process over several additional months. This can help keep borrowers in their homes and help them save even more money while the lawsuit is being worked out or another solution is negotiated.

Many homeowners that have negotiated a permanent loan modification have also done so by hiring an attorney to help them get through the bank's initial defenses. While it is very possible to negotiate a good modification on one's own, hiring a lawyer just in case can also make a huge difference. Borrowers often end up with a temporary modification when they work on their own, but can get a permanent plan by retaining a lawyer to negotiate with the lender for them.

Unfortunately, for many homeowners, hiring an attorney may just not be a good solution at all, despite the benefits of doing so. The main sticking point is often the cost of hiring legal representation, and many lawyers may not be willing to take on a foreclosure case where it is clear that the residents of the property are behind on their monthly bills. Fighting a bank in a complicated predatory lending case is also often a losing battle. But for those who can afford to hire a lawyer, it can help.

So you have contacted MERS or the mortgage servicing company and found out which lender owns your mortgage. Then, you sent a rescission notice to the bank using the three-year extended period that you had under the Truth in Lending Act to rescind your loan. But now, the hard part begins. What do homeowners do when they are rescinding a loan – how do they make good with the bank, pay off what needs to be paid, and lower the amount needed for the process to go through successfully?

After rescinding a loan, the lender is supposed to void the security instrument – the mortgage or deed of trust on the home. In turn, homeowners are required to give back to the lender the real proceeds of the loan transaction. This consists of the entire principal balance of the mortgage. Interest, closing costs, and finance charges are not included and do not need to be paid to the lender. Any payments already made to the bank are subtracted from the amount the borrowers need to tender to rescind.

In many cases, if the homeowners do not have the cash on hand to pay back the mortgage, they will have to give back the home or may have to fight with the lender in court. Courts have even found that they can make the voiding of the mortgage or deed of trust conditional on the borrowers' ability to tender the amount necessary to pay off the principal balance of the loan. In effect, they postpone rescission until the lender has been paid.

Thus, in a court battle, homeowners should be prepared to assert every claim they and their attorneys feel comfortable with. This is done to minimize the amount that must be paid to the bank in order to rescind the loan by winning claims against the bank that will lower the total owed. Especially important to raise are any claims that statutes or rules allow for damages that must be paid to the homeowners or credited against the loan, such as Fair Debt Collection Practices Act claims.

While courts can condition rescission upon the paying off of the loan, they can also help set up conditions in favor of the homeowners. The banks will be asking for circumstances to work in its favor; homeowners can do the same to make their situation easier. For instance, the tender amount can be made in payments through a court-mandated payment plan. The bank can even be made to modify the existing loan so it is restructured and will be paid off over the remaining life of the original loan.

The homeowners should be aware, however, that courts will look more favorably on debtors who have acted responsibly against predatory lenders. If the borrowers have acted just as irresponsibly as the bank, the court may not be willing to use its authority to modify the loan to make tendering the rescission amount easier. This is why making as strong a case as possible arguing the case of predatory lending and related claims is so important.

However, paying off the total amount of the loan is sometimes not in the best interests of the homeowners. In these cases, it may be wise to consider filing Chapter 13 bankruptcy and establishing a repayment plan through the courts. The borrowers may be able to pay a certain amount every month through the bankruptcy and then make a lump sum payment at the end of the plan to pay off the rest of the loan. This is often done through refinancing at this point.

But bankruptcy can also be used by homeowners to make the home loan unsecured. While discharging the entire loan through a Chapter 7 is unlikely, paying only a percentage of the loan through a Chapter 13 may be more reasonable. The mortgage company receives the same percentage as all of the borrower's other creditors, and at the end of the payment period, the rest of the mortgage is discharged by the courts.

When homeowners attempt to rescind a loan under their Truth in Lending Act (TILA) rights, one problem that may occur is confusion where to send the rescission notice. Few original lenders hold onto their loans anymore, and many notes may have been transferred from one holder to another over the years, as the securitization of mortgages was a common practice during the real estate boom. This can make it difficult for borrowers to fight foreclosure in time.

This is not just a problem with the lenders attempting to prove in court that they own certain mortgages. Homeowners who are able to rescind their loan under the three-year extended period granted by the Truth in Lending Act are required to send a notice of their decision to the holder of the note. But if the holder is hiding under various security agreements or is unable to be found because the transfers were never recorded, what are homeowners supposed to do?

Another problem that homeowners may encounter is that the company they send their payments to is often just a mortgage servicer, which is different than the actual owner of the loan. Also, if transfer of ownership of the loan is administered by the Mortgage Electronic Registration System (MERS), it will be even more difficult to penetrate that company's secrecy in order to find out the true holder of the note to send a rescission notice.

Thankfully, one recent new rule makes it somewhat easier for debtors to keep track of the transferring of their loan. Any loans that are or have been transferred after May 20, 2009, require that notice be sent to the borrowers. The notice must be sent within 30 days of the transfer or sale of the note and must include such information as the new creditor's name, address, phone number, and how to reach a party with authorization to act on behalf of this new owner.

However, this new rule does not apply to loans transferred before May 20, 2009, which may include a large portion of mortgages. Once the housing market started to melt down, the buyers of securitized mortgages stopped purchasing. With fewer purchases, fewer mortgages were transferred from one entity to another. The drying up of mortgage securitization and the subprime debacle showed the world why transferring ownership of mortgages was not such a great idea.

The main factor working against homeowners in other cases, though, is time. If they do fall under TILA's three-year extended right of rescission, every day will count. For instance, borrowers who attempt to find out their loan holder by sending a Qualified Written Request to the mortgage servicing company may have to wait up to 60 days before getting a response. The law allows servicers up to this long to respond to a QWR.

In most instances, homeowners should attempt to find out which company owns their loan. But, due to servicer incompetence and the fact that no holder may be found at all, the law does provide borrowers with another tactic. Under the Truth in Lending Act, debtors can send notice just to the original creditor to rescind the entire mortgage transaction. Homeowners should send the notice of rescission to the creditor listed on the original paperwork, as well as all other companies with a connection to the transaction.

Although it is not widely used, and despite the fact that lenders will vigorously fight against it, rescission of a mortgage under the Truth in Lending Act is one of the most powerful tactics homeowners may use to stop a foreclosure action. It immediately puts the foreclosure process on hold and forces the bank to respond properly to the rescission notice.

In cases of a foreclosure, a loan that is a non-purchase money loan on a principal dwelling can be rescinded. This includes home equity lines of credit, second mortgages, refinanced first mortgages, and home improvement loans. The law covers a wide range of homeowners who may have these types of loans affecting their properties.

Usually, homeowners have a right to rescind their loan that lasts for three days after the closing. However, this time period can be extended up to three years if the bank fails to give the borrowers the proper notice requirements of their right to rescind. Also, if the lender fails to make certain material disclosures, the right to rescind is extended.

One way that banks have attempted to get around this law is by having homeowners sign a waiver of their right to rescind. This involves signing a statement that the three-day period has already expired and the borrowers have decided not to rescind the loan. However, in reality, the three-day period has not passed yet and the waiver is simply a falsehood.

Thankfully, the courts have decided that this type of rescission waiver is not valid and may even automatically trigger the extended right of three years. This may happen at a closing in which the homeowners are asked to sign a waiver on the same document as the notice of the right to rescind. Borrowers may also be asked to post date the signature three days in the future.

Any homeowner closing on a new loan should be aware of their right to rescind, as well as the difficulty in waiving that right before the three-day period has expired. If the bank includes a waiver that is signed after the three-day period actually has expired, that is one issue. But it is not valid to waive the right at the closing or sometime before the actual end of the period.

Other courts, though, have decided cases more in favor of the banks than homeowners, even in cases of an improper notice of right to rescind. Due to amendments in the Truth in Lending Act that were enacted in 1995, some courts have held that the intention of the changes were to make it so that the law was interpreted even more in favor of creditors.

With an improper notice of the right to rescind a mortgage loan, homeowners may have a few events working in their favor. The first is the Federal Reserve's confusing definition of a business day. Homeowners have three business days to rescind their loan, but many may be surprised to find out that the Saturdays count under the Truth in Lending Act as business days.

Second, if the lender disburses funds for the loan before the three-day period has ended, the homeowners may be able to make the argument that even the mortgage company was unclear about the deadline to rescind. Banks usually do not fund a loan after closing until the rescission right has expired, so the funding of a loan before the period has ended shows confusion on the part of the bank.

Thus, if there is a Saturday or a holiday during the three-day rescission period, or the bank funds the loan before the period has expired, an improper notice may not be ignored by the courts that have decided cases in favor of the banks. In these cases, it can more easily be shown the confusion of the rescission period due to the odd calculation of business day and the bank's premature funding.

If you live in Florida and are facing the possibility of having your home foreclosed, you are probably trying to find out as much about it as you can. Foreclosures are carried out through local court proceedings. The entire process begins when you fall at least thirty days behind on your mortgage payments, though you can usually go at least ninety days or longer without the courts becoming involved.

The lender of your mortgage initially files a notice with the courts. If you are under the impression your lender may have done so, you will know for sure when you receive a notification in the mail or delivered by a local sheriff's deputy. Do not ignore this important warning as if it were junk mail or simply a threat against your home that you can not respond to. You must respond to it within the period of time indicated on the notice.

If you fail to respond to your foreclosure notice in the given time allotment, the court will rule against you and award the lender a default judgment. This means the court can assign a sale of your home to satisfy the judgment, which includes the total amount still owed to the mortgage holder in principal, interest, fees, and court costs. Under Florida foreclosure law, you can still save your home at this point all the way up to the scheduled date for the sale of the home by acquiring enough funds to repay the lender everything you owe.

To give you an idea of how much time you have to get the necessary funds to pay your lender back, the scheduled date for the sale of a foreclosed home is usually between 20 and 35 days following the court’s decision. The originally set date is always subject to change based on the court’s calendar, locality and conflicting schedule times of the auction itself. Homeowners and banks can also work together to postpone a sheriff sale if there is a possibility of another solution solving the problem.

Notices are kept up-to-date weekly for at least two weeks and the official date and time is announced five days preceding the auction. This way, even though times and dates may change throughout the proceedings, you have a clear knowledge of the exact date five days in advance. This is an especially important deadline to keep in mind when negotiating with a lender for a loan modification, short sale, or other alternative to foreclosure.

If this is the point you are at right now with your Florida foreclosure, it is not too late! You can still get your home back by making your account current once again. Remember, this will probably include the payment of late fees and other charges your account may have built up in the time you were delinquent in your payments. You may be able to pay up the account by borrowing money from friends and family, cashing in assets, refinancing, or even just selling the house.

No matter where you are in the legal process of losing your property, you probably still have options. As long as ownership of the home has not been transferred, there may be solutions available. You can learn exactly how to go about stopping foreclosure even in these late stages by meeting with a financial and foreclosure expert. Be sure to choose a reputable source.

If you have defaulted on your home loan, meaning you have become unable to make timely payments for whatever reason, you may be facing the possibility of foreclosure and eviction. This is when your lender whom you took out your loan with seizes your property in an effort to recover principal on the investment they made when giving you the loan to purchase or refinance your property.

This takes place if you have fallen behind three or four months on your mortgage payments. Sometimes a homeowner may have unbearable expenses one month but see that they will recover in the coming month. Other times a devastating financial blow means extended inability to make loan payments on your home. In most cases, lenders will wait at least a few months before threatening to begin the foreclosure process.

Seeing what you can do now to stop a foreclosure on your California home is better than waiting to see if your financial situation improves. If you cannot recover from your monetary hardships and your home is foreclosed, you must vacate the premises once the house has been either sold at auction or repossessed by the lender, according to the California foreclosure laws.

This can be a devastating situation for anyone, but is made even worse for families still suffering from a hardship. However, California also has some of the most Progressive laws in the country regarding mortgage help and how the process is followed. As a homeowner facing possible foreclosure in California, there is important information you need to know about concerning the new laws in the state.

Fortunately, if you are facing the possibility of foreclosure, this new law may actually assist you in preventing foreclosure on your home. In June 2009, Ellen Corbett, a Democratic senator from San Leandro, rewrote the code regarding California foreclosure law, mandating that lenders in the state must give notice to their borrowers a minimum of 30 days prior to the start of the whole process.

Also, if the lender has done nothing to work with the borrower in making affordable changes in agreement terms before sending the notification, a 90-day cessation on payments must occur during the foreclosure process. However, it is important to be aware of the fact that lenders often put forth the least possible effort to help clients, so homeowners should still actively work on negotiations with the bank.

The latter portion of this new law has some people arguing that it is not constructive to allow non-mortgage payers to remain in their homes for 3 months without making a payment. Others say it is a perfect addendum to the initial portion of the law, giving homeowners some time to work out a plan to survive the enforced sale. The only thing that we can bet on, though, is that the cost of obtaining a mortgage in California will go up as a result of this new risk the banks will be taking on.

As always, homeowners should take advantage of every opportunity to save their homes or avoiding eviction, including making other living arrangements or working with a reputable lawyer to file bankruptcy or negotiate a loan modification. No matter what people are saying about the new California foreclosure law, it is a reality and one you should inform yourself about if you are a resident of the state.

For all of the fun and vicarious satisfaction that lawyers seem to get from running our lives by creating, enforcing, and interpreting various laws and opinions, it is a little bit surprising to learn that attorneys are at a much higher risk of committing suicide than any other profession. In fact, lawyers are six times more likely to take their own lives than members of the general population. Why is it that attorneys so often take the path of least resistance when their circumstances become difficult?

First, some statistics that have been found over the years shed some light on the depth of depression and abuse in the legal profession. For instance, 10% of the general population will have substance abuse problems, while the number is 15-18% among lawyers. Almost 12% of attorneys in one study contemplate suicide at least once a month. Over half of lawyers report experiencing stress at levels higher than the general public. The problem also affects male lawyers to a greater degree.

A number of studies have been done over the years that illuminate the type of person that goes into the legal profession. For instance, perfectionism and competition are two personality traits that many attorneys share, which may make them less likely to seek help if they are feeling depressed or suicidal. A perfectionist on the edge will try to cover up the problem and keep going on with his job, rather than admitting there is a problem and looking for solutions.

Another personality trait common among lawyers is pessimism. A study done by Johns Hopkins in 1990 showed that, when it comes to graduate school programs, students who were optimistic performed better than those who were pessimistic. There was only one exception where the pessimists did better than those with rosier outlooks on life. Of course, this was law school. Such a negative outlook on the future can lead to depression, disillusionment, and an unwillingness to trust anyone.

So studies have shown that the legal profession may just attract the type of personality who will later go on to commit suicide as a response to feelings of depression and stress. But what is it about the job of being a lawyer itself that can also contribute to the extraordinarily high rate of attorneys taking their own lives? Unfortunately, much of the work done by those in the legal profession is little more than acting like petty tyrants, distrusting everyone, and manipulating as many people as possible.

Many lawyers spend most of their days interacting with the State on behalf of their clients. Others are actual representatives of the State, including prosecuting attorneys. Judges are often lawyers who are forced to cross-dress, wear black dresses, and sit on a wooden platform raised a couple of feet off the ground to cover up their own insecurities about lording over people. The highest calling of any attorney is to be a cross-dresser in Washington, D.C., as part of the Supreme Court.

Language used by lawyers is also purposely deceptive and incomprehensible to the average person. And it was designed to be so. A system of government justice should be available to all people at an affordable price. A system of State rulemaking, however, is meant to deny justice, keep as many people as it can from using the system, and make it incredibly expensive to take part in the legal system. Justice is not the pursuit -- interpretations of laws to fit private interests is the goal.

This corruption of language is what attorneys have dedicated their lives to furthering. All of those motions, court filings, and court orders are written with words that have meanings very different from the ones used by the rest of us. And only another person with legal training is usually able to get the general idea of a document issued by or in court.

Under all the paperwork of being an attorney is a gun. While other professions use voluntary transactions and communication as the basis of their interactions, lawyers are much different. They spend their days deciding best how the government should use its monopoly of violence to force people to do whatever they feel like making them do. No one goes into court voluntarily; most people have to be forced in by the threat of increasing violence. And lawyers set the machine into motion.

It should be remembered that most legislators are also lawyers, with even more attorneys enforcing the rules in government agencies and interpreting them in the various courts. The average person is never involved in the process of a person's opinion becoming a binding law with set penalties, fines, prison terms, and other punishments. All of this petty squabbling over what laws to make and what they mean to control the life of people in the voluntary sector of society is done by lawyers.

Corrupting language to control the population with millions of pages of laws and interpretations, all the while attempting to hide the government guns under all of the paperwork and legalese. No wonder so many lawyers feel depressed, turn to substance abuse, and eventually commit suicide to escape! The system sounds as horrible from the outside as it obviously is to work on it from the inside, and many attorneys seem to agree by their high rates of job unhappiness.

This article is not about solutions, as finding a reprieve from one's depression and unsatisfying job is an individual matter. Also, the legal profession, medical industry, and legislators have made it clear that only a state-licensed doctor or psychiatrist can give out medical advice and diagnose any one person or another with depression or any other disease or psychological disorder.

Additional Resources:
Depression, The Lawyers' Epidemic: How You Can Recognize the Signs
Studies show high rates of attorney depression, substance abuse, and suicide. What do practicing lawyers need to know?
Lawyer Personalities May Contribute to Increased Suicide Risk

As a result of government intervention in the housing market, fraud has become rampant in the mortgage lending industry, and homeowners may be able to raise this issue when defending against a foreclosure lawsuit. Fraud is defined as an intentional deception which results in injury to a person. There are a number of elements of a fraud case in order to consider it fraud. These include the following:

• The statement must be a false and material misrepresentation.
• The person making the fraudulent statement must know it is false or be ignorant of its truth.
• The person making the statement must intend for the person to whom it is made to rely upon the that statement and in a manner reasonably contemplated.
• The person to whom the statement is made must be ignorant that the statement is, in fact, false.
• The person to whom the statement is made must have a right to rely on that statment or be reasonably justified in doing so.
• The person to whom the statement is made must suffer injury.

Fraud can occur in many ways during a mortgage transaction, and may often occur in several steps of a corrupted process. Any party to the transaction, from the real estate agent to the title company to the mortgage servicer, may be engaged in fraudulent activity. Any misrepresentation, concealment, nondisclosure of material fact, or misleading conduct may be considered fraudulent, depending on the circumstances of the case.

If a lender or mortgage broker has used some ingenious method to take advantage of homeowners, mislead them, or trick them, then fraud may be involved. There are even a number of different types of fraud. For instance, contructive (legal) fraud does not have to have an evil intent to cheat a borrower. Fraud in fact (positive fraud) is fraud that does have an evil intent and is specifically used to take advantage of someone.

Homeowners who think they have been defrauded by a party to their mortgage transaction may attempt to bring that party into the lawsuit, even if it is not the company suing them or proceeding with the foreclosure in the first place. It will be important, however, to prove that all the elements of fraud have been met in the case. For this reason, consulting an attorney may be advisable for borrowers wishing to make this defense to foreclosure.

One of the most well-known types of fraud in relation to mortgages is that of mortgage servicing fraud, where a servicer uses fraudulent tactics to push homeowners into foreclosure. This may be done through a number of ways, many of which are detailed in our mortgage servicing abuse articles. But too many homeowners have suspected their servicer of fraud for it to be all that uncommon. In fact, most of the biggest servicers have been sued for fraud and been found guilty or have settled out of court for hundreds of millions of dollars.

When homeowners are sold a home or given a loan by unlicensed representatives, it may help their foreclosure lawsuit defense to raise these issues in court. Governments throughout the country have imposed so many requirements on any person attempting to do business in banking, real estate, and mortgage lending, that it is almost too easy to find licensing violations. This is the good part about licensing laws for homeowners defending against foreclosure.

The bad part is that, despite all this government regulation, criminals can and do find their way into the lending industry and defraud large numbers of homeowners. Now that the economy has collapsed, some states have purged hundreds or thousands of mortgage licensees from the rolls who either had shady backgrounds or did not keep up on the requirements to hold a license. And all of the costs of licensing are passed along to the end consumers who buy properties and take out loans to finance them.

Thus, simply being licensed is really no guarantee of legitimacy or good faith dealing. And governments are often not equipped to go after small companies that break licensing laws, because it will cost the state much more than they can ever recover by prosecuting individuals not operating a scam on a large scale. Small time crooks who sell a few predatory loans may cause individual families thousands of dollars of damage, but may be too small of white collar criminals for government regulators to dedicate many resources to catch and prosecute.

However, it is still a good idea for homeowners to make sure that every party they deal with during their mortgage transaction is properly licensed. If they find out that no license was in place, and the lender knew about this factor or should have known about it, it may have a difficult time proving its right to foreclose on a property. And it may be vastly easier for borrowers to show conspiracy or predatory lending if parties acted together to create a situation in which it was impossible to pay the loan.

Mortgage brokers and real estate agents are currently licensed at the state level. There has been some talk of creating new federal mortgage broker licensing regulations, but this has not been put into place yet, and it is unlikely that the federal government will take over this much power from the states. Various federal agencies, though, do investigate financial and white collar crimes and may have some jurisdiction over practices engaged in by a mortgage or foreclosure scam company. Appraisers are similarly licensed at the state level, if at all.

Banks may be licensed either by the state or the federal government, depending on how large the institution is, how many states it operates in, and if it decided to be a federal or state bank. Banks, though, will often be regulated at both levels to some degree. The largest banks will be regulated more at the federal level by the Federal Reserve and the Office of the Comptroller of the Currency, while smaller banks will be licensed and overseen by state banking departments.

Although filing complaints with the proper regulatory agencies may not help in a current foreclosure lawsuit, especially if the unlicensed party has left the business and left town to avoid prosecution, it may help prevent that person from taking advantage of others in similar businesses and situation. As well, if homeowners can show that they were given a loan or sold a home by someone without a license, it may help bolster the rest of their case as to why the foreclosure is invalid.

When there are other legal issues in addition to a foreclosure, the housing situation becomes even more complicated. Especially in situations of divorce, separation, or even domestic abuse, there is a greater tendency for families to be broken apart and the basic issue of survival of either party to be questioned. And even worse, cases of divorce and domestic violence have been found to increase during times of high foreclosure rates and economic recession.

In these cases, there may be both a foreclosure lawsuit and a domestic relations lawsuit going on at the same time. The domestic relations case involves an abuser and a survivor, while the home defense case involves both of the former parties against the mortgage company. And neither case may help resolve the other, unless there is a more united front in the home defense case. In fact, a domestic relations case may limit the options the homeowners have for saving the property.

Especially if the abuser has stopped paying the mortgage, the legal counsel for the survivor may have to go to court to obtain an order that continuing payments are made. However, if a period of time has passed between the last payment and the court order, the servicing company may require far greater than just the regular monthly payment to be sent in. And lenders and servicing companies are not bound by the terms of a domestic relations order.

Some attorneys will attempt to bring the mortgage company into the domestic relations case, but this is not always successful. The times where it can be worth trying is if a stay of foreclosure or acceleration of the mortgage is needed for only a short period of time. In these instances, the domestic relations court may grant an injunction against the mortgage company based on the terms of the order. But it may be important to prove that payments will be made on time soon (within a period of a few months, at most).

Injunctive relief against a mortgage company may also be sought if the servicer refuses to accept payments from a survivor whose name is on the mortgage and the note. If a party's name is on the note, the lender is unable to refuse payment, despite a domestic relations court proceeding. In fact, the refusal to accept payments from a party listed on the note may bar future foreclosure proceedings or extend a redemption period guaranteed by law, as well as being a breach of certain duties lenders have towards homeowners.

In cases where a survivor's name is on the mortgage, but not on the note, the situation is slightly more complicated. In these cases, it may be best to have ownership rights and obligations of the note transferred to the survivor through an order in the domestic relations court. However, there is a danger that the party listed on the note to begin with may agree to a loan modification or other agreement that makes the loan unaffordable for the other party. Owners who are on the mortgage but not the note, however, may be able to file a Chapter 13 bankruptcy and cure the default, if the situation is appropriate.

Thankfully, the issue of mortgage acceleration just due to the transfer of the ownership rights in a domestic relations case is not something to worry about. Contract law and federal law usually prohibit the lender from accelerating a loan when there is a transfer of interest from an abuser to a survivor. The Garn-St. Germain Depository Act of 1982 prohibits acceleration when ownership is transferred between spouses, and the Equal Credit Opportunity Act prohibits discrimination on the basis of marital status.

Selling a property that is involved in a domestic relations case may be an option, but it generally requires court approval to get the legal authority to move ahead with this option. All ownership rights might need to be transferred to the seller, or a power of attorney granting rights to negotiate a sale may be necessary. Any remaining equity or debt, if there is a short sale, will need to be apportioned between the parties.

In all cases where the ownership of a home may be transferred or is in dispute due to a domestic relations lawsuit, it may be best to file a lis pendens on the property. This can prevent against equity stripping, further encumbering of the property, or transfer of the property. There may also be a court order which forbids withdrawing any additional funds from a home equity line of credit (HELOC) or obtaining any additional mortgages on the home.

Finally, if there are few other options than letting the house go into foreclosure, survivors of domestic relations disputes may be able to obtain a cash for keys offer from the lender. Tenants or former owners are offered these deals as a way for the lender to entice people remaining in the property not to cause any damage and to move out amicably. They often offer several thousand dollars in exchange for a clean house and the keys. Servicing companies should have few objections to paying a domestic violence survivor to move out of a property to avoid eviction after foreclosure.

There are a whole range of issues affecting a property in foreclosure, and many of these issues can be exacerbated or added onto if there is also a domestic relations dispute. Homeowners should have adequate legal counsel for both the foreclosure help and the domestic relations case in order to sort out as many of the details as possible. Foreclosure is complicated and stressful enough without piling on additional messy disputes and lawsuits.

Damages for pain and suffering may be awarded to foreclosure victims who have been taken advantage of in predatory lending or servcing abuse cases. Pain and suffering is a type of damages that a party to a lawsuit may recover for physical or mental pain and suffering. These would result from the wrong done to that individual as a result of the other party's actions.

Judges and juries have often awarded parties to a lawsuit with vast sums of money if they have suffered pain and suffering. Numerous cases appear in the media with a corporation being penalized with these damages, which can run into the millions of hundreds of millions of dollars.

The financial ability of the party who must pay damages for pain and suffering will, of course, be taken into account. This means that, if homeowners have been severely and flagrantly taken advantage of by their lender, the lender may be forced to pay many thousands of dollars more to the owners of the property than the mortgage is even worth.

Although homeowners who are defending a foreclosure lawsuit or initiating one to stop a nonjudicial foreclosure will have to prove in other ways why the lawsuit is invalid and should not be allowed to continue, it may be in their best interests to ask for monetary damages for pain and suffering if they have been taken advantage of.

Especially if some sort of fraud, predatory lending, or servicing abuse has been committed, courts may look more favorably on a request for damages for pain and suffering. Claiming this because foreclosure notice requirements have not been complied with may be more difficult for borrowers to show.

In any case, it may be best for homeowners to consult with an attorney to find out more about how damages for pain and suffering may be included in their lawsuit, if applicable.

The following are some miscellaneous legal issues that may affect a foreclosure case. These include the issue of putting a case into federal court from state court, as well as diversity jurisdiction. Finally, if homeowners win a case against a bank, and the case is appealed by the lender, the borrowers may be able to require the bank post a bond in order to move ahead.

Although some issues relating to a foreclosure lawsuit defense may involve federal laws, such as the Truth in Lending Act or Real Estate Settlement Procedures Act, many times federal courts do not have jurisdiction over a foreclosure or eviction case. These are matters that deal almost exclusively with state law and will more often be kept in state court.

However, some defendants to foreclosure may seek removal of a case from the federal court to the state court based on TIL or RESPA claims. In some of these instances, the argument is that the case would have been brought into the federal courts in the first place as the court of original jurisdiction over the homeowner's claims.

There is also an issue of diversity jurisdiction. In these cases, the homeowners must prove a number of circumstances to make the argument of diversity jurisdiction. These include showing that the parties to the lawsuit have diverse citizenship, as well as that the controversy is for more than $75,000. The amount of the controversy is considered to be the value of the object of the lawsuit.

In cases where the homeowners win a case against a bank, there is a good chance the lender will appeal the decision. In such situations, homeowners are well within their rights to request the court to require the bank to post a bond. In several cases, lenders have been required to do so in order to move ahead with their motions to the appellate court. This is similar to a homeowner being required to post a bond to bring an action into court to enjoin a nonjudicial foreclosure sale.

These are a few issues that some homeowners may come up against when attempting to defend their home or bring an action against the bank. In reality, they can be much more complicated than the standard foreclosure defenses, as they involve the lender's or homeowners' use of different court systems. Unfortunately, foreclosure is never as simple as homeowners would like. While these issues may be uncommon, they are not unheard of when dealing with a bank. This is, of course, one more reason that homeowners may wish to request professional foreclosure help when attempting to save a property.

While reading about how the produce the note strategy is working in various states, I came across some descriptions of case law from Florida and decided to put together a short reference guide for anyone interested. While the foreclosure crisis continues, even more cases will be tried using this type of claim, and it is hopeful that foreclosing financial institutions will have to make stronger cases for having the legal right to sue.

As with all information relating to the law, researchers should make certain to determine if these cases are relevant to their own experience, are still current law, or have been reversed or overturned. New cases are decided everyday, changing and altering the law in numerous ways that it is virtually impossible to keep up with. But the following descriptions should be taken as informational in nature and purpose only.

Philogene v. ABN Amro Mortgage Group, Inc., 948 So. 2d 45, 45 (Fla. Dist. Ct. App. 2006) -- the current holder of the mortgage and note is, in a foreclosure case, always a party in interest.

State Street Bank and Trust Co. v. Lord, 851 So. 2d 790, 51 U.C.C. Rep. Serv. 2d 191 (Fla. Dist Ct. App. 2003) -- plaintiff could not enforce note or foreclose on mortgage because it never had actual or constructive possession of the original promissory note.

Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. Dist. Ct. App. Sept. 12, 1990) -- assignment of mortgage not made until four months after foreclosure was filed; therefore, plaintiff was required to file new legal action.

Harmony Homes v. United States ex rel. Small Bus. Admin., 936 F. Supp. 907 (M.D. Fla. 1996) -- a lender that assigned interest in a property was not the proper party to file the lawsuit to begin foreclosure on the property.

Laing v. Gainey Builders, Inc., 184 So. 2d 897 (Fla. Dist. Ct. App. 1996) -- assignee of note and mortgage is considered the real party in interest in foreclosure case.

Lawyers Title Ins. Co. v. Novastar Mortgage, Inc., 862 So. 2d 793 (Fla. Dist. Ct. App. 2003) -- assignor improperly retained possession of note after assigning; however, assignee was the proper party to foreclose as assignment constituted constructive assignment even though the note itself did not change hands.

Dasma Invs., L.L.C. v. Realty Assocs. Fund III, L.P., 459 F. Supp. 2d 1294 (S.D. Fla. 2006) -- the plaintiff had only a one-page addendum to note and could not show complete original promissory note; court decided it had no standing to complain for foreclosure.

Looking at this list of deficiencies in lawsuits that lenders bring into court, it is difficult to imagine a case where the bank has properly protected its interest in a mortgage and note. There are dozens more cases from other state courts as well as the federal court system, where mortgage companies often attempt to have cases moved in order to make the process of defending the home more difficult for borrowers.

Many homeowners are becoming more aware of the defense to foreclosure that has come to be known as the "produce the note" strategy. This involves challenging the foreclosing lender or servicing company on its legal right to sue the borrowers in the first place. Essentially, if the bank can not prove that it owns the note and mortgage or deed of trust, it does not have the right to bring a foreclosure action against the homeowners.

However, not every challenge to produce the original loan documents has been successful, typically due to procedural errors or other easily correctable mistakes on the part of the borrowers. Homeowners should be aware of certain actions that have been taken in successful cases, so they have a better chance of having their own foreclosure thrown out of court for the bank's inability to prove legal standing.

First, if the homeowners are being sued by the lender in a judicial foreclosure state, it is important to deny in the answer to the complaint that the plaintiffs own the note and mortgage in the first place. This real party in interest issue can be raised through an affirmative action claim or by filing a motion with the court. However, if the homeowners do not raise the issue, the court will assume the issue of standing is not debated.

It is also important for homeowners to do their homework in checking the local land records for the property being foreclosed on. If there are documents recorded with the county indicating a different chain of title than the one the bank is trying to show through the lawsuit, the discrepancies may be enough to have the case thrown out until the foreclosing company can show it owns the note.

Banks will often submit unsupported affidavits when it will be difficult or impossible to produce the original note. But these documents can be challenged by the homeowners in their answer to the lawsuit. Simply having an officer of the foreclosing company state that it owns the original paperwork is not sufficient if it can not produce the note upon the borrowers' request.

Especially if there are other documents indicating another company may be attempting to collect on the mortgage, the issue of standing and who owns the original note become vital. If the court allows the lawsuit to move ahead without proof of standing, the borrowers may be in danger of being sued again by the correct party. Thus, it is important to keep and obtain any documents showing any other company's interest in the debt.

Finally, homeowners can demand that the lender produce evidence to show how, when, and whether the original documents had been assigned to the foreclosing party. Courts will be likely to look on this type of request as reasonable, especially if there are other questions of which company owns the loan or if there is other evidence (such as documents filed with the county) showing an incomplete chain of title.

In light of all the securitization and chopping up of rights to mortgages, the produce the note strategy of challenging the bank's right to bring a lawsuit against borrowers is becoming a more wide-spread defense to foreclosure. While it may not solve every homeowner's mortgage problems, it can delay a foreclosure by a period of months or years while the lender attempts to locate the relevant paperwork, time that the owners can use to save up money for moving expenses or to get back on track with payments.

Doing legal research can see like a difficult task for the average person. The law is written in a semi-foreign language where words and terms have vastly different meanings than the ones used in everyday communication.

On top of that, legal cases are being decided and indexed all the time, and it can be very difficult to find out what the current law is at any one time. New collections of cases and references to cases are published throughout the year.

Thankfully, the internet has made searching for court cases much easier in recent years. The following websites can be used to look up references to cases, decisions, as well as actual court documents, all without having to take a trip to the local courthouse or college law library.

Findlaw.com - http://www.findlaw.com/
NOLO.com - http://www.nolo.com/

US Code - http://www.findlaw.com/casecode/uscodes/
Code of Federal Regulations - http://www.findlaw.com/casecode/cfr.html
State Regulations - http://www.findlaw.com/casecode/state.html
State Statutes - http://www.law.cornell.edu/states/listing.html
State Statutes by Topic - http://topics.law.cornell.edu/wex/state_statutes

Supreme Court Case Opinions - http://www.law.cornell.edu/supct/index.html
Federal Court Case Opinions - http://www.law.cornell.edu/federal/opinions.html
State Court Case Opinions - http://www.law.cornell.edu/opinions.html#state

Bankruptcy documents - http://www.uscourts.gov/bkforms/index.html

There are also a number of books that describe how to do legal research in a law library or online. The most helpful one, in our recommendation, is Legal Research: How to Find & Understand the Law, by Stephen Elias and published by NOLO.

Homeowners facing foreclosure often receive the lawsuit paperwork in the mail and take either of two actions which will not help them escape the situation. Some frantically begin calling the lender or servicing company, attempting to work out a solution so that they can keep the home. Others will simply put the paperwork aside, not even opening the envelope and just hope for the best.

While calling the bank to begin negotiating for a loan modification, repayment plan, or other solution to foreclosure is a good idea, it should not be done at the expense of answering the lawsuit. The bank will have no problem opening discussions with the borrowers, all the while proceeding with the legal action and having the house sold. If the negotiations fail, the homeowners can be swiftly evicted.

This can occur because, if the borrowers do not answer the lawsuit or mount any kind of legal defense, the bank will obtain a default judgment. At that point, the bank can request that the home be auctioned off by the county at a sheriff sale. Although the bank can also cancel any sheriff sale, it will be very difficult for the homeowners to reopen the case and begin defending the home after the judgment has been entered.

Thus, it the homeowners do not provide an answer to the foreclosure lawsuit, the bank will file a motion for default judgment against them. The judge will usually grant this, since the borrowers' failure to file an answer is treated as if they do not disagree with anything the bank has claimed in the complaint. While it is usually a case of the borrowers not being aware of how the court system really works, the judge will usually feel that the owners have been given their day in court and passed on the chance.

Homeowners are also worried about having to pay something to file an answer to a lawsuit. In almost all cases, they will not have to pay anything to the lender during the lawsuit, even if there is a judgment for foreclosure. The home will be scheduled for a sheriff sale, at which time the house will be sold to pay off the judgment and any other liens. Usually, though, homes do not sell for the total amount owed, as there are few buyers, but this is one of the risks lenders take when making loans.

After the sheriff sale will be the eviction process. If the former owners have already left the house, the eviction will not really affect them. But if they are trying to remain there for as long as possible after foreclosure, the borrowers should make sure to keep on top of the process so they know when to move out. Calling the county sheriff is usually the best idea to find out when a lock-out will be performed on a particular property.

In almost all cases, homeowners should respond to the foreclosure lawsuit or contact an attorney to help them do this. If only to delay the final order of judgment against the home for a few months, the rewards can be much greater than any risks. Showing the bank that a real defense will be mounted to foreclosure can also persuade the lender to begin negotiating for other solutions to help the borrowers save their home.

In nonjudicial foreclosure states, homeowners who believe they can fight back against the process face an additional challenge that borrowers in judicial states do not have to deal with. In a nonjudicial foreclosure process, the bank is able to proceed with selling a home at a public auction with no involvement by the local court system. Authority for advertising and selling the property is given in the loan documents themselves.

The most important clause in the deed of trust document for homeowners in nonjudicial states is the "power of sale" clause. Through this, borrowers sign away their right to a fair and meaningful trial to determine if they are in default of the contract or not. The clause also authorizes the lender to follow a certain number of guidelines, meet state requirements for foreclosure, and then have the house auctioned out from under the borrowers.

All of this sounds like a gross violation of individuals' right to a speedy and meaningful trial, as well as due process rights, and many lawyers assisting borrowers in foreclosure situations tend to agree. The ability of the bank to inform the trustee of its intent to foreclose without providing any evidence of default, even to our admittedly imperfect justice system, gives these lenders a vast amount of power over deed of trust contracts.

Homeowners, it is argued, are able to defend against the process by filing their own lawsuit against the bank in county court and assert their rights and any defenses they have to the foreclosure. However, even this process works against borrowers, as they are now the ones in the position of proving their case against the bank. And court procedures may make the entire lawsuit too expensive to pursue.

For instance, many courts require that homeowners give security in the form of a bond if they are requesting a preliminary injunction or temporary restraining order against the bank's efforts to pursue foreclosure. The court decides the amount of the bond, and may require financially strapped borrowers to make monthly payments during the period of the lawsuit. This is designed to guarantee payment of court costs and other fees to the bank if it is decided the foreclosure was wrongfully prevented.

This bond requirement, if it is not waived, can present a significant problem for borrowers. While many courts have the authority to waive the bond, they may not always do so, unless the owners can show the bank will not be unreasonably harmed or there is a question of the validity of the deed of trust security instrument. Of course, lenders will fight for higher bonds to make defending the home almost impossible.

It is not only in nonjudicial states that borrowers may face the requirement for providing security in the form of a bond in order to have access to the courts. While it is most common in nonjudicial foreclosure proceedings, it may also be used in cases where homeowners are attempting to stop eviction after a trustee sale, stay a judgment of foreclosure when the case is being appealed, set aside a foreclosure auction, or in other similar circumstances.

Many courts have also found that the failure to post this bond is enough to make the challenge worthless. In one case, homeowners' appeal of a post-foreclosure eviction was thrown out because they had failed to post a bond. Homeowners attempting to save their homes from foreclosure need to be aware of the bond requirement and how important it is to courts that borrowers pay as much as (or more than) humanly possible in order to prevent foreclosure.

When banks foreclose on a home, the owners are often confused by the language used in the various legal documents. One of the terms that causes the most confusion is "default." There are at least two different ways that this word is used during the foreclosure process, neither of which have good implications for the borrowers most of the time. However, homeowners should know how the word will be used by the bank.

The first way that banks use the word "default" is when they allege that the homeowners are in default of the mortgage contract. The borrowers sign the mortgage or deed of trust to establish the terms under which they will make payments to the lender or servicing company to keep the contract in place. Once payments are missed, the payment terms of the contract have been breached and the homeowners are in default.

So a default of a mortgage contract means that the homeowners have failed to meet one of the conditions for holding up their end of the agreement. While there are other ways to fall into default of a loan, the most common breach of the contract is when borrowers fail to make payments on time and the lender begins the foreclosure process. In the lawsuit paperwork, the lender claims the owners are in default.

The second way that banks use the word "default" is when they file a motion with the court during the foreclosure. This motion may be called an order of default, motion for default judgment, or some other similar term. For the purposes of this article, the motion will be referred to as an "order of default." However, homeowners should be aware that the same type of legal document may have a different name in their state.

An order of default means that the bank is attempting to get a judgment against the homeowners for foreclosure without having to go through a trial or other court procedures. Of course, this can not be done just under any circumstances, but it is often done in foreclosure cases due to the uninformed nature of most borrowers. The bank can begin a few steps of the process and then get a judgment without having to prove its case.

This is usually done when homeowners do not show up at an initial foreclosure hearing or file an answer to the lender's complaint. The borrowers' silence is taken by the courts to mean that they have no objection or argument with the bank's allegations of breaching the mortgage contract, nor do they dispute the lender's ability to bring a foreclosure into court in the first place.

Thus, if the homeowners did not file an answer to the lawsuit or show up or request a hearing on the matter, then the bank will request that an order of default judgment be entered by the court. Most courts will have little problem entering this order, as they figure the homeowners were given enough time in which to hire a lawyer, obtain a law degree, or learn the court procedures competently enough to file an answer.

An order of default is not the end of the line, however, as homeowners can try to have the default judgment vacated or dismissed. This requires that they file the appropriate motions in court in time. If the order to vacate the default judgment is granted, the bank will have to pursue the lawsuit more carefully. It will not be able to rely on homeowner ignorance of the process in order to have the home sold at a sheriff sale.

it is a small tragedy that most foreclosure cases are decided by default judgment. This is due to so many borrowers not filing an answer or showing up to foreclosure hearings. Thus, it is important for more borrowers to educate themselves on at least a few basic steps they can take to make it much more difficult for the bank to declare them in default of the contact and then get a default judgment against them.

The US Department of Housing and Urban Development (HUD) has established requirements that lenders must meet in order to bring a legitimate foreclosure action against homeowners. These rules apply to mortgages that are insured by the Federal Housing Administration (FHA) and include a number of steps lenders and servicing companies must follow before foreclosing on a property.

When lenders do not follow the FHA preforeclosure guidelines, the borrowers may be able to have the entire foreclosure declared invalid and thrown out of court until the requirements are met. In fact, the case does not even have to go to trial for it to be thrown out, as the homeowners have the ability to file a Motion to Dismiss the foreclosure due to the lender failing to meet a condition precedent.

For homeowners who have a loan insured by the FHA, this means that their servicing company must follow extra rules in order to foreclose on the house. If the requirements are not met, the foreclosure can not go forward. The most important aspect for borrowers to keep in mind, however, is that they must bring this defense before a judge, or else the court will just assume the lender has met all the requirements.

There are five main elements to this type of defense against foreclosure. The first, and most important, is that the loan must be insured by the Department of Housing and Urban Development. If the loan is conventional, hard money, or otherwise not insured by HUD, then the FHA preforeclosure requirements are not applicable to the situation and other defenses to foreclosure must be relied upon instead.

The second element is that the loan must be in default. This creates the responsibility of the lender or servicing company to comply with the preforeclosure requirements. The regulations do not define default or impose a statute of limitations, so the terms of the original loan documents should be checked out for actual definitions of default. Most often in a foreclosure case, default is falling behind on the monthly payments.

Third, lenders must mail a special notice to homeowners by the end of the second month of delinquency. This must be done before any foreclosure proceedings can be initiated. The notice is called How to Avoid Foreclosure. If this is not sent to the borrowers or is not sent in accordance with the regulations, the foreclosure case may be dismissed by the court.

Before three monthly payments are due and unpaid, the lender must make a reasonable effort to hold a face-to-face meeting with the borrowers. This must be done to determine if there is any way to work out a solution to foreclosure. There are a number of exemptions to this requirement, as well, which are listed here:

• The property is not occupied by the borrower.
• The lender and servicer do not have an office or branch within 200 miles of the property.
• The borrower has stated an intention not to work with the lender.
• Payments are caught back up through a repayment plan.
• The reasonable effort to make contact is unsuccessful.

The final requirement is that the lender must wait until at least three monthly payments are due and unpaid in order to begin the foreclosure process. Many servicing companies and banks wait this long anyway in order to attempt to put together a loan modification, refinance, or short sale with the borrowers, but this time period is mandatory for FHA insured loans. If the lender begins foreclosure earlier, it may be invalid.

With more mortgages being insured by the FHA through various federal foreclosure help programs, homeowners should be more aware of how the foreclosure process works for these types of loans. In addition to imposing more requirements on lenders, it also complicates the entire process by adding a layer of federal law on top of the state foreclosure laws and the terms of original mortgage contract itself.

One of the defenses to foreclosure that is becoming more widespread is the so-called "produce the note" strategy. Numerous cases have been thrown out once the bank has been unable to prove it owns the loan and can show the original note. Without having possession of the original note and being able to produce it for the homeowners' inspection, a foreclosure may be declared invalid.

For homeowners to use this defense, however, it is important that they put together all of the information they need and do the required amount of research. Not every court will look kindly upon borrowers raising this defense if there is no legitimate basis for it. Homeowners defending themselves are already viewed as more of an annoyance than anything, so they should do their best to prepare for this type of defense.

The first question homeowners may want to ask is if a copy of the mortgage or note is already attached to the complaint. This can be a good starting point to determine if the bank even has access to the original note, although a copy is not definitive proof of owning the note. Banks may attach a copy it obtained from a previous owner of the loan but not have actual possession of the original.

Borrowers also may want to research if attaching a copy of the mortgage or note is required in their state. Civil rules of court procedure would be the place to find this information, and can save homeowners a great deal of time if the state does not require the copy to be attached. Homeowners may still have the right to demand to inspect the original note, however, so the defense is not completely worthless if a copy is not required.

Also, homeowners should look in the foreclosure complaint for any affidavits from the lender relating to the original note. For instance, the mortgage company may include an affidavit stating that the copies of the note are true and accurate representations of the original. Another affidavit may state that the bank is in possession of the original note and mortgage. If these are present, the homeowners may wish to request that the original note be produced for their inspection.

Finally, homeowners should look into requesting the original mortgage and note to be included in the lawsuit paperwork for their inspection. This can usually be done through the discovery process, where homeowners are requesting other relevant documents and attempting to get straight answers out of the bank regarding the mortgage and foreclosure process. As other documents are requested (like payment histories), the original note can be requested to be produced.

If the bank fails to produce the original note for the homeowners' inspection, the case may be dismissed on this basis alone. Of course, borrowers should consult with competent legal counsel to find out more of this information and how it can be used appropriately in their state, but this new strategy to defend foreclosure is being used with more regularity due to the inability of banks to keep accurate records of the original note.

When homeowners are involved in a foreclosure lawsuit, either defending against the bank or initiating their own to stop a sheriff sale, there is a vast amount of information that can be obtained from the bank. Much of this information will be worthless, but there may be a few gems in the mix that make it much easier to show an invalid mortgage, a reason to dismiss the foreclosure, or violations of state and federal laws.

The only real problem is getting this information out of the bank, mortgage servicing company, or other appropriate parties. For such cases, homeowners and their attorneys can rely on the discovery process. Requests made to the lender and other companies to produce documents relating to the real estate transaction can assist borrowers in putting together an adequate defense of their home.

In fact, the largest problem may be figuring out which documents to request from whom and then going through all of the paperwork to find the applicable information. There are numerous documents that may be requested from parties such as the mortgage broker, appraiser, lender, assignees, trusts, and so on. Just a few of the documents are listed and discussed below to give borrowers some idea of the scope of the matter.

From the settlement agent, borrowers may be able to request copies of all canceled checks that were sent out to all of the parties after the closing of the loan. Especially in refinances, homeowners may take out a loan expecting to receive a substantial amount of cash back at closing, only to find out that it has all been eaten up by fees and charges. It may be a good idea to find out who all those fees were paid to and for what.

The actual underwriting guidelines in place at the time the mortgage was originated may also provide important information for borrowers. If there were basically no underwriting standards in place for the type of mortgage that was offered to the debtors, can the bank expect anything besides foreclosure as the likely result? Or was it instead a case of predatory lending, where the bank made a loan it counted on to fail?

If the homeowners are alleging a pattern of abusive lending by one company or servicer, requesting copies of files of other borrowers can be done. Often, a company that abuses one homeowner will be guilty of abusing many others in similar situations, especially if there is a financial incentive (in the case of servicing companies) to charge late fees and push homeowners towards foreclosure.

Homeowners can also request many of the complete files of other parties involved in the transaction. These might include the creditor's file, the mortgage broker's file, the home inspector's file, the closing agent's file, and so on. In cases of conspiracy or RICO charges, there may be a collusion between many actors that had the end result of lying to and fleecing the borrowers to steal money from banks.

Agreements between different parties in the origination or subsequent securitizing and servicing of the loan can also be requested. Lenders make agreements with brokers, assignees, home inspection companies, and more to get a loan closed and sold. Other companies will securitize the loan and make agreements with investment firms, mortgage servicers, and others. Even servicing companies will make agreements with subservicers or trustees to handle foreclosures.

Thus, all of the information that homeowners can request to stop foreclosure can become a huge pile of paperwork to go through. But the rewards may be worth far more than the time invested. If it can be proven that lenders acted fraudulently or in a manner designed to hurt borrowers, then the foreclosure may not be allowed to go through. Especially if homeowners believe they have been taken advantage of, they should begin requesting documents from the companies involved.

There is a growing trend among homeowners to fight foreclosure lawsuits by requesting mortgage lenders and servicing companies to produce the original note. When the lenders can not find the original note, courts are deciding that any foreclosure proceedings must be placed on hold until the note can be found. Without this document, it can be virtually impossible to prove that one company has the right to foreclose on the home.

Few borrowers, though, truly understand the importance of finding out who or what is the real owner of their mortgage debt. Obviously, the owner is the only party that can approve any final loan modification or other negotiation scenario, or move ahead with a foreclosure in the case of default, but there are numerous other legal aspects that make proving ownership of a loan extremely important.

In fact, the owner is the only party that has a right to foreclosure on the mortgage, as it is the owner of the contract. While the origination company may once have been the owner and may retain servicing rights, the vast majority of mortgages over the past few years have been securitized and sold to investors. The actual owner may be a trust, which retains the loan documents for those investing in the mortgage security.

These trusts, though, are often empty boxes, simply legal fictions created on paper that own these notes and documents, but have no resources or locations in which to store all of the paperwork. Documents are easily lost and the chain of ownership from one party to another may be confused or simply missing.

This creates a problem for these owners of the notes, as they can be held liable for a long list of actions taken by themselves or third parties. For instance, the owner of a loan can be held liable for actions regarding abusive lending practices, their own misconduct in the transaction, actions of third parties including the originator of the loan, and abuses by mortgage servicing companies hired to collect payments and pursue foreclosure.

Under the concept of assignee liability, the owner of a note may be held liable for abuse lending actions taken by the originator of the loan. If a mortgage is later found to be fraudulent, abusive, or predatory, the trust or investors in the debt security may find they own nothing more than an invalid investment that ends up costing them more than they paid for it.

As well, under the various theories of agency relationships, the trust owners of these mortgage documents can be held accountable for abuses that mortgage servicers engage in. And it is no secret that servicing companies engage in a long list of fraudulent tactics against borrowers. If the owner of the note can not be adequately proven, it may be impossible to hold the right party accountable.

The real issue of ownership of a note is raised during the foreclosure process. The courts have stated that forfeiture of property is a harsh legal remedy and should only be used as a last resort. The borrowers and lenders, in the case of foreclosure, should attempt to work out an agreement to avoid the loss of the home through the legal process.

But when the courts can not determine which company owns the debt, and no company moving ahead with foreclosure can produce the note, how can a judge be sure that foreclosure is being used as a last resort? The owner of the note is the final authority on any mortgage modification, short sale, or forbearance agreement, any of which may help borrowers stop foreclosure before the house is sold at a public auction.

From liability issues to making sure that foreclosure is the final remedy for the discharge of a debt, the actual owner of a note is extremely important. When lenders can not produce the note in court, the entire process is called into question, and no one can be certain the foreclosure is nothing more than an enormous fraud, with banks just making up ownership issues in order to throw people out of their homes.

The commonly understood meaning of the phrase "unjust enrichment" is that of an individual or company unfairly making large amounts of money at the expense of a client or customer. Based on the last few years at least, few homeowners or debtors have any real doubt that this is the exact type of business that banks and mortgage companies engage in every single day.

However, the phrase also has a specific legal meaning -- one that borrowers may be able to rely on if they face foreclosure or abuse by their mortgage servicing company. It is less well-known by debtors because unjust enrichment is not specifically covered by any of the federal lending laws. This is a type of common law tort defense to foreclosure that homeowners may raise if they are being sued or if the lender is moving ahead with a trustee sale of a property.

Instead of being based on concepts of contract law or regulations in statutes, unjust enrichment is based on the legal ideas of justice and equity. Therefore, the definition of what is unjust enrichment may be more subjective than violations of some other types of laws. A bank found to have been engaged practices to enrich itself at the expense of borrowers, however, must make restitution to the homeowners.

Just as with many other types of defenses to foreclosure, homeowners may wish to speak with an attorney to determine if the conditions of unjust enrichment have been met in their case. There are typically three elements to an unjust enrichment claim, although they may also vary a little based on state laws. These variations in state law make it all the more important for borrowers to consult competent legal counsel if they wish to examine this type of claim.

The cases where this claim may most appropriately be applied is when a lender or mortgage servicer charges homeowners for excessive fees or improper collection of some types of fees. These may include forced place insurance policies, improper late fees, and attorney fees to proceed with the foreclosure process. In any of these cases, borrowers may wish to raise an unjust enrichment defense.

Alternatively, when mortgage companies charge fees to homeowners in default or foreclosure that are not authorized in the original loan documents, an unjust enrichment claim may be raised. Banks may charge each time borrowers request payoff statements, for example, and the courts may see this as an unjust enrichment scheme in some cases. Again, it may be best to research state laws or speak with a lawyer to find out more about a specific charge.

There are a whole list of legal claims that homeowners can make when attempting to defend their home against a wrongful foreclosure. From the time the loan is originated to the time the property is sold at sheriff sale, banks and servicers have to comply with thousands of pages of laws and case history interpreting those laws.

This situation often gives homeowners the distinct advantage, if they can do enough research and get adequate foreclosure help before they run out of time. The unjust enrichment claim is just one more of these defenses that borrowers may wish to look into and speak with an attorney about, but which may help them save their homes, negotiate with the bank, or know that they have done everything possible to fight back.

One of the laws that give homeowners the most protection against mortgage lending abuses is the Truth in Lending Act (TILA). This act is designed to provide borrowers with adequate disclosures and to force lenders to make accurate disclosures of the cost of borrowing money. In many cases, if a mortgage company sells a loan to an investor or other lender, the new loan hold can still be held liable for any violations of the Act.

Mortgage servicing companies, however, operate in their own legal world far outside the bounds of morals, ethics, or prohibitions against evil, predatory actions. As many homeowners have discovered once they are pushed into foreclosure, they may have few remedies against mortgage servicing abuse. Another loophole in lending laws that servicers take advantage of is that TILA may not even apply to them.

While claims under the Truth in Lending Act can be powerful defenses to foreclosure and force banks to rescind loans completely, servicers are not treated as assignees of mortgage loans under the terms of the law. Unless the mortgage servicing company is also assigned ownership of the loan itself, the Act does not apply to it, and homeowners can not use violations of the law as defenses in a foreclosure case.

Even in some cases where the mortgage servicer does acquire the loan, it may not be treated as the assignee under the conditions of TILA. If the company acquires the mortgage solely for administrative purposes and convenience in the course of servicing the loan, it does not count as assignee. The only action the company has to take is to identify the actual owner if the borrowers request in writing.

Two cases may indicate that the servicing company does count as the assignee of the mortgage, despite its insistence that it does not. The first is if the company takes an interest in the loan beyond convenience of administration. The second case is if the company represents itself to the homeowners as the actual owner of the mortgage. In either case, the Truth in Lending Act may apply.

One final instance that homeowners may wish to research when defending foreclosure against a servicer is if the loan balance was misrepresented. In this case, there may be a violation of the TILA provision that requires properly disclosing account balances and other variable rate adjustments. When the servicer improperly charges servicing-related fees to a borrower's account, there may be a violation of TILA.

Unfortunately, homeowners may be best served by suing the owner of the loan directly when trying to stop foreclosure, if there are significant TILA violations. The servicing company may be joined to the lawsuit, but just going after the servicer based on TILA violations may result in the homeowners' claims being tossed out due to the inapplicability of the law itself. While there may be violations, the servicer is immune from liability.

Homeowners who have been blatantly taken advantage of during the mortgage process may have a defense to foreclosure based on the unconscionable contract. There are a number of factors that can point to unconscionability in a loan, and homeowners should do their research or hire a qualified attorney to help them, but the following list of five signs to watch out for may be a starting point for borrowers.

One clear sign a loan may be unconscionable is if the borrowers have a limited awareness or understanding of the language the contract is written in, and was unable to read the documents well. This gives lenders an opportunity to include terms and conditions in the loan that unfairly burden the homeowners. Mortgage companies have an obligation to make sure the borrowers understand enough of the language in order to sign the contract and know what it means.

Lenders that knew (or should have known) that the borrowers taking out loans could not afford to pay them back may be guilty of entering into an unconscionable contract. Many subprime loans were made using the unfounded assumption that homeowners would magically double their incomes in the space of a year. Other mortgages were made where the monthly payment was just a few dollars less than the total amount of income the borrowers received each month.

Another sign of unconscionability may be in cases where the borrowers are not represented at the closing of the mortgage transaction by an attorney, but the lenders have one that rushes the process. Combined with other factors, such as the ones listed in this article, there may be an indication of the lender attempting to rush the closing process and intimidate the homeowners.

If terms are changed in the mortgage at the last minute, and these changes negatively impact the borrowers, the loan may be unconscionable. While most loans change many times from the qualification stage to closing, last minute changes that increase the cost of credit or place large burdens on the homeowners may indicate unconscioinability. For instance, requiring one year of interest to be paid in advance and not disclosing this condition until closing may be a sign.

Finally, if homeowners apply for a loan and receive few, if any, benefits from the transaction, it may be unconscionable. For instance, if borrowers refinance and receive a higher monthly payment but no cash out or consolidation or any other benefit, the transaction is obviously unfair. But lenders may be able to get away with this by making large promises and then eating up any funds through fees, processing charges, and other administrative costs.

The main sign of an unconscionable contract is that it contains terms that are unfair to one party. For many mortgages given to people who had no ability to pay back the loans or were based on fraudulent appraisals or forged income documents, this may be a huge issue. As well, homeowners may be able to bring this issue into court when defending a foreclosure or attempting to stop a trustee sale.

When homeowners originally obtain their mortgage, there are a huge number of players with roles in the qualifying, financing, real estate transfer, and funding process. If any of these companies or individuals collude to defraud the borrowers, or otherwise force them into a loan with severely negative terms, there may be a case to be made for misconduct, unfair lending, or predatory lending, especially in the case of foreclosure.

With refinance or construction loans, and sometimes with purchase money mortgages, there may be a case of creditor overreaching. This can happen when mortgage companies fund a loan that is in their best interests but provides no real benefit to the borrowers. Lenders that make loans just to generate fees may be engaging in overreaching, and homeowners may have a defense to foreclosure if they received no benefit from the loan.

There are two main types of creditor overreaching. The first involves circumstances where a mortgage costs substantially more than the benefits the homeowners get from the loan. The second type of overreaching occurs when the terms and conditions were misrepresented, or important disclosures were not given to the borrowers before they took on the loan. Both of these can be evidence of lender misconduct.

Mortgage brokers can also be held accountable for misconduct in the mortgage transaction, especially if they are considered an agent of the lender. In these cases, misconduct or misrepresentations by the broker may be raised as defenses to a foreclosure lawsuit or power of sale. As well, brokers who were unlicensed at the time the loan was made may have facilitated a mortgage that is completely void.

Appraisers who take part in defrauding homeowners or lenders can also be held responsible for their actions, and these issues may be raised as defenses in foreclosure. During the real estate bubble, home values were often inflated as much as 1,000% percent above their true market level. Especially in subprime or FHA-insured loans was this practice common, and may represent unfair and deceptive acts and practices.

In many cases, homeowners may be able to raise defenses based on their state's Unfair and Deceptive Acts and Practices laws (UDAP laws). Each state differs a little in their definitions of what constitutes these types of actions. However, borrowers may be able to have their loan balance reduced significantly, force a renegotiation of a mortgage through loan modification, or have the mortgage voided or rescinded completely.

Of course, it may also be better to speak with a lawyer who is versed in these types of violations before defending the foreclosure entirely. If homeowners feel that they have been severely taken advantage of by their lender, the broker, the appraiser, or any other party in the mortgage transaction, though, they may wish to research this area of their state law further to determine if the lender has engaged in predatory lending.

In states that allow a nonjudicial foreclosure through a power of sale clause in a deed of trust, homeowners find that their properties are sold out from under them without a hearing or chance to defend themselves. In fact, it is up to the borrowers to bring a lawsuit into court against the lender and they then have the burden of proof in showing that the foreclosure should not go forward.

Although the courts have ruled that, in order to take away someone's significant interest in property, notice and a hearing are required, only a bit of notice is given to homeowners facing nonjudicial foreclosure. No meaningful hearing is given to the borrowers. State laws in nonjudicial states allow the sale of a property to satisfy a foreclosure as long as the trustee follows the regulations concerning notice.

And while this issue may seem to violate the due process protections given to individuals under the United States Constitution, the Supreme Court has found that due process protections only come into play when there is a state actor in the deprivation of property. Because a deed of trust and promissory note are executed between two private parties (homeowners and lenders), there is no automatic due process protection.

In the court case Flagg Brothers, Inc. v. Brooks, the Supreme Court found that there is no due process violation if there is no state action. Settlement of disputes between a lender and a borrower through a forced sale of property does not create state action. This is true even in the case of a sheriff sale or trustee sale of a property -- the fact that state laws determine how the foreclosure proceeds does not create state action.

However, homeowners facing foreclosure may have a defense against nonjudicial proceedings in two situations. The first is if a government agency is the foreclosing mortgagee. For instance, if HUD, the FHA, the VA, or a similar agency of the government owns the mortgage and is suing for foreclosure, then a state actor is involved in the deprivation of property, and the borrowers should be given due process protection.

The second situation in which homeowners may be able to assert due process protections is if the state foreclosure laws require that a government official participate in the process. A number of court cases have examined this issue, and many have found that significant state official involvement in the foreclosure process gives homeowners due process protections.

For instance, in Vermont's strict foreclosure process, state action can determine a whole range of issues relating to the disposal of the property, and homeowners are given due process protections. Another court found that state action is created even when a town clerk is required to record a lis pendens on a property facing foreclosure. Depending on the responsibilities given to such government officials, homeowners may be able to assert due process protection.

However, on the other hand, some involvement by state officials does not create due process protections for borrowers. For instance, courts have found that the involvement of a county sheriff in the sale of a property through nonjudicial foreclosure does not create state action. Similarly, the use of a county recorder in the auction does not automatically give due process protections to homeowners.

Homeowners facing foreclosure in nonjudicial process states have always had a more difficult time defending foreclosure than if they lived in a judicial state. Banks are more able to begin foreclosure without having to prove they even own the loan, let alone have a strong enough case to take the house back. While borrowers have few protections against predatory actions of banks, government action in the foreclosure sale may give them more protections.

When a mortgage company begins foreclosing on a property, most homeowners just assume that the bank really owns their loan and is able to prove it and take their home away. But this is not always the case, as banks assign and sell loans all the time without proper documentation, giving borrowers another defense to foreclosure.

Many more homeowners today than just a few years ago are raising defenses to foreclosure lawsuits based on the issue of the real party in interest. Typically, this is the party that possesses the right it is seeking to enforce. If a lender is not assigned a loan and mortgage properly, the issue may be raised by the borrowers.

A mortgage is composed of two parts. The first is the promissory note, which is the borrowers' responsibility for paying back the debt it takes out through a bank or other lender. The second part of the mortgage is the security interest the lender takes in the homeowners' property, which is made up of the mortgage or deed of trust.

In terms of a foreclosure lawsuit, courts have typically held that the lender or institution that has been assigned the note and mortgage is the party in interest. The servicing company or trustee may not be counted as the real party in interest, and the lender that was assigned the note must prove that it has the legal standing to foreclose on the property.

In fact, the assignee must be assigned both the mortgage and the promissory note. The debt itself is the primary obligation to pay, while the mortgage contract represents only a security interest in the property. Neither can be transferred without the other, because, if the lender can not show is has an interest in the debt by having the note assigned to it, it has no standing to foreclose on the mortgage.

A number of foreclosure lawsuits state that the foreclosing lender has lost the original note or mortgage, or it has been destroyed or is otherwise unaccounted for. In such cases, the lawsuit may still go forward, as long as the amount of the debt can be established by extrinsic evidence. In Mitchell Bank v. Schanke, the court ruled that the lender can move ahead in foreclosure without producing the note, as long as it can prove the underlying debt that is secured by the mortgage documents.

Homeowners may be able to delay a foreclosure for a significant length of time by raising the issue of who is the real party in interest. With so many lenders going out of business or being absorbed by other companies, and the securitization of the mortgage industry over the past decade, it can be almost impossible to tell which company owns a mortgage.

When homeowners begin to consider working with an attorney to defend their foreclosure in court, they often feel overwhelmed by the amount of nonsense and bureaucracy they are forced to deal with. But whether they are defending a bank's lawsuit against them, or initiating their own to stop an auction under a power of sale clause, there are three main categories of defense that borrowers can consider.

The first type of defense against a foreclosure by a mortgage company involves challenging the validity of the loan documents themselves. If the original mortgage or deed of trust was not drafted or executed legitimately, homeowners may be able to have the entire transaction rescinded, depending on the laws involved. In other cases, borrowers may question whether the lender suing them actually owns the note -- if not, there is no real valid contract between the two parties. Also, if there is a defect in the paperwork or illegal clauses, the mortgage may not be valid. Banks often violate state and federal law when creating mortgage, and it may be worth the time for borrowers to consult with an attorney about these issues.

Second, homeowners fighting foreclosure in court may rely on defenses that raise the issue of misconduct by the mortgage lender. Misconduct and predatory lending do not have concrete definitions, but a loan may be considered predatory based on numerous characteristics of it. If the borrowers were approved with no income verification or were given an interest rate that the bank knew the owners would not be able to pay, there may be a defense against foreclosure based on misconduct. Also, if the appraisal was inflated and the bank knowingly accepted the unreasonably high value, and gave the owners a loan based on the value of the home instead of what they could actually afford, it may be a case of predatory lending.

The final category of legal defense against foreclosure involves cases where the lender does not follow the required procedures before the sheriff sale. Every state and county has different rules that the bank's attorneys or the trustee must follow in order to foreclose on a house and have it sold at a public auction. Courts take for granted that the bank meets all of these requirements adequately, but homeowners may raise as a defense the failure to follow all the guidelines. In fact, lenders routinely violate the local laws and regulations, and the attorneys do not care to follow them because they know the banks own the courts anyway, for the most part. But procedural violations can be raised as a defense against foreclosure.

By focusing on these three types of legal defenses, homeowners may be able to drill down further and really specify the issues that affect their mortgage. Even if they just raise the defenses to force the bank to negotiate a loan modification or give them more time to sell or move out, education about lending laws is never a waste. As well, homeowners may decide to mount a full defense or hire a knowledgeable lawyer to help them.

When a mortgage is insured or guaranteed by the Federal Housing Administration (FHA), an agency overseen by the Department of Housing and Urban Development (HUD), servicing companies must follow HUD servicing guidelines. Some of these regulations involve the foreclosure process on a such a property, and failure to follow the guidelines may be used by homeowners to defend their foreclosure in court.

The following is a list and brief description of some of the court cases that have involved HUD and FHA loans that were improperly serviced, ones that were decided in favor of homeowners, and ones in which borrowers facing foreclosure were denied claims. Knowing some of the background of these cases may help homeowners decide if their loan is being properly serviced, or if it is worth their time to apply for an FHA loan.

One of the requirements to foreclose on a HUD loan is that the servicer must attempt to hold a face-to-face meeting with the homeowners before three payments have been missed. In Banker's Life v. Denton, homeowners raised the failure to hold the meeting as a defense against foreclosure. Also, the servicer did not send the request for the meeting via certified mail or attempt to visit the borrowers at the property. The court found for the owners in this case.

Notices of default must also be sent to delinquent borrowers in accordance with the HUD regulations. In Federal National Mortgage Ass'n v. Moore, homeowners raised the argument that the lender had not sent out a notice of default that was in compliance with HUD's regulations. The notice sent, according to the borrowers, was not valid because it was on a form that was not "approved by the Secretary" of HUD and was not sent in a timely manner as the regulations require.

Since these two cases had been decided, HUD's regulations have changed, but the language of the preforeclosure servicing, including notice requirements and review guidelines, have remained the same. In fact, another court case, Mellon Mortgage Co. v. Larios, decided that the requirements are the same now as they were before the statue was revised. Lenders failing to comply with these guidelines can still be used as a defense against foreclosure.

The face-to-face meeting with homeowners is also an important aspect of foreclosing on a mortgage backed by HUD. The minimum requirement to comply with this regulation is visiting the borrowers at home and sending at least one letter via certified mail. The issue came up in Washington Mutual Bank v. Mahaffey, and the lender was denied summary judgment because it had not sent the letter, even though someone had been sent to the property to visit the homeowners.

Of course, this is not to imply that every homeowner will win a case and successfully defend against foreclosure. Courts have also ruled against borrowers who raised issues regarding servicing. In Miller v. G.E. Capital Mortgage Servs., Inc., the court ruled that private citizens have no right to sue for violations of HUD's loss mitigation provisions. The law, according to the court, is meant to focus on regulation of lenders -- not creating rights for borrowers facing foreclosure.

Also, courts have found that the language included in deeds of trust insured by the FHA are not negotiated contractual terms. Instead, they are imposed by the FHA on both the borrowers and lenders, and the borrowers may not raise defenses in relation to breach of contract if lenders fail to follow the FHA guidelines. This case was decided in Wells Fargo Home Mortgage, Inc. v. Neal. If the homeowners and mortgage company can not bargain for that aspect of the contract, there can be no breach of the contract.

Homeowners, their loss mitigation professionals, and their foreclosure attorneys should become aware of some of the issues involved with HUD loans if they have a mortgage insured by the FHA or are considering taking advantage of the new government programs. While some protections may be offered to borrowers, others seem to be taken away by the courts if there is a question about a foreclosure. Knowing the issues through previously-decided court cases can help educate borrowers.

Most homeowners facing foreclosure will have to deal with either a judicial foreclosure or the nonjudicial type, as these are the two most common methods that states allow lenders to take back properties. However, a few states still allow two different methods, one called strict foreclosure and the other called foreclosure by entry and possession. While they are used in only a minority of cases, borrowers should be aware of them.

In strict foreclosure states, once the homeowners have fallen behind, the lender goes into court and obtains an order that states the borrowers are in default of the mortgage contract. At this point, the judge is able to transfer the title to the property directly to the lender, without there ever being a foreclosure auction or involvement by the sheriffs department in conducting a sale.

Title to the property is transferred through court order directly from the homeowners to the bank, without a sale. Homeowners are usually given the right to redeem the property by paying the balance due on the loan, but the court decides how long this period will be for. At the end, if the property has not been redeemed, the lender owns the house and is able to have the borrowers evicted.

Obviously, strict foreclosure is an extremely unfair deal for homeowners, and the more equity they have in the property, the more unfair it becomes. A property underwater may not be a great loss to borrowers, but one that has several hundred thousand dollars in equity results in a huge transfer of wealth to the lender. Because there is no sale, there is no possibility the homeowners will receive any proceeds from their equity.

Because of the inherent inequality of the strict foreclosure process, only two states still allow them, Connecticut and Vermont. For homeowners in these two states, facing strict foreclosure can be a harrowing event, as all of their equity will simply be transferred over to the lender, which will then be able to list the property on the market and take all of the profits as their own. For making years of payments, homeowners will get nothing.

The second type of foreclosure that is used in only a small number of states is called foreclosure by entry and possession. This is allows lenders to enter into a property and take over possession for a period of time, at the end of which the lender becomes the sole owner of the house. It is also often paired with foreclosure by a power of sale, which allows lenders to sell a house at a trustee sale without initiating a lawsuit in court.

After the sale of the home through the power of sale clause, the homeowners are typically given the right to redeem the property for a period of time. However, the lender may enter the house or property and gain constructive possession. At the end of the redemption period, ownership of the house is finally transferred to the lender. This type of foreclosure is usually used to supplement a nonjudicial foreclosure.

The states that allow for a foreclosure by entry and possession are Maine, Rhode Island, New Hampshire, and Massachusetts. This is a few more states than use strict foreclosure, but the terms of this type are not as severely negative to the borrowers. In order to defend against a foreclosure by entry and possession, though, homeowners will have to initiate a lawsuit in court and attempt to obtain a temporary restraining order.

Although these two types of foreclosure are not often used by lenders, homeowners should be aware of what other tactics banks can use against them to take properties. While foreclosure by entry and possession is seemingly benign, strict foreclosure can erase homeowners' hard-earned equity in a home through nothing more than a court order. Thus, borrowers should be on guard against any legal tactics their banks may use against them.

Many people facing foreclosure do not realize it, but there are several areas of the law that prohibit a mortgage lender from taking advantage of homeowners in a foreclosure situation. Every day, borrowers claim that their mortgage company "just wants my house because it is worth more than I owe.” In a few cases, this may be true, but legally, the lender must sell the home at sheriff sale for its fair market value and pay the former owners any proceeds over and above the amount owed. Banks may try and take advantage of the fact that most consumers do not know their rights when it comes to foreclosure.

The main issue homeowners run into is a lender selling the home as quickly as possible at a county auction, just to pay off the mortgage. They never seem to care about the previous homeowner and the money they could receive from a fair sale. For example, assume a home is worth $300,000, but the total payoff is only $275,000. The mortgage lender has a legal obligation to sell the home for as close to its fair market value as possible, which is $300,000. This would mean the former owners would get $25,000 back after the sheriff sale.

What usually ends up happening is the bank accepts the first offer they receive of, lets say, $250,000, then they sue the home owner for a $25,000 deficiency judgment. In a case where the bank should be paying $25,000 to the homeowner, they end up stealing the home and an additional $25,000, due to their refusal to sell the home at its fair market value! This is clearly a violation of the lender's duty to obtain a fair and reasonable price for a property that it is foreclosing on due to nonpayment of a loan.

For homeowners in the process of having your home foreclosed on, or those who have already lost the house to foreclosure, then it is imperative that the find out the current market value of the property. Borrowers may be owed thousands of dollars in the event the home is, or was, sold for less than it was worth. In fact, there are numerous cases where previous homeowners have gotten settlements in court for tens of thousands of dollars due to the bank's violations. Understanding foreclosure rights and the laws when it comes to facing foreclosure is probably one of the best ways of avoiding losing a house altogether. If homeowners did not understand their rights and were taken advantage of, there is a chance they can get their home back, or at least sue the lender for its misconduct.

The best way to determine a home's value is to is to get a full appraisal from a local, qualified appraiser. However, this can be somewhat costly, after facing foreclosure and it may be hard to justify “throwing good money after bad.” A better recommendation is to get a Broker's Price Opnion (BPO) or Property Valuation from a qualified source. I do not recommend using an online service that offers a free valuation, because they are rarely accurate and do not take into account the condition of the home or improvements made.

Ultimately, if a lender violated its duty to homeowners when foreclosing on a home and sold the home after the sheriff sale for a higher price, then borrowers need to take action sooner rather than later. Homeowners can not just sit back anymore and let the lenders get away with breaking the laws and taking profits on sales that they are not entitled to. As well, borrowers can not remain in ignorance of their rights, their lenders' duties, and simple fair dealings. Homeowners should take action today and force their lenders to answer for their wrongdoings and corruption.

As is the American tradition, one of the hallmarks of our culture and an activity a majority of the population engages in at one time or another, as soon as the housing bubble burst, the lawsuits began. Homeowners sued loan originators and Realtors, investment firms sued originators under buyback agreements, and everyone else sued as many people as they could. After all, everyone is entitled to utilize the courts, right?

The number of parties bringing lawsuits against each other for various aspects of mortgage fraud, combined with the already high foreclosure rates, has put a strain on government court systems across the country. Even in the best of times, the judicial system in America has been more concerned with preserving the myths of state power and awarding the rich with more judgments against the poor.

With the bursting of the real estate bubble, though, a number of parties involved in the inflation by fraud have entered the courts in an attempt to seek "justice," also known as trying to avoid any consequences of their poor financial decisions over the past decade. And with the complicated mortgage and real estate contracts, securitization documents, and buyback agreements, these lawsuits will put an even larger burden on local courts.

For instance, investors in toxic mortgage securities have begun suing the loan origination companies and lenders. The investors are stating that the originators should have made them aware that these subprime mortgages were more likely to default. The lenders, according to these lawsuits, failed to disclose the true risk of the assets. The problem with these suits is that so many originators have gone out of business by now.

Another lawsuit that has increased in popularity since the collapse of the housing bubble has been the investors in securitized debt against the Wall Street investment firms that bought the loans and then turned them into mortgage backed securities. Wall Street knew, say the investors, that the mortgage were junk and this should have been disclosed.

The investment firms also took the highest interest rate tranches of the securities. In essence, they sold investors payouts based on lower interest rates and kept the higher rates for themselves. But the low rates were part of the perception that the investments were safer than they really proved to be over time as the underlying loans went bad.

Local governments have also begun initiating lawsuits in local government courts (conflict of interest? ) against mortgage companies. The governments are alleging that they have been damaged by the pumping and dumping of their communities. They were obviously relying on the pumping of real estate loans to continue to fund higher tax rates, and the decline in home values has created massive problems of funding programs.

These few examples of lawsuits do not even begin to examine the numerous suits involving homeowners themselves, who are both being sued by banks and suing them for fraud, predatory lending, or initiating class action suits. But the government courts have become the arena in which many players in the real estate bubble have turned to in order to prevent losing even more as a result of the collapse.

Banks, judges, and lawyers typically all work together to get through as many foreclosure cases a day as they can. After all, the judges get more filing fees for their court by handling a larger caseload, and lawyers can bill all the hours they want to a bank that can create money out of thin air. But even in such a scheme as this, the judges that may want to evaluate a foreclosure case on its merits have to deal with deceptive lawyers.

The Herald Tribune in Florida, the same state in which some judges are going through 800 foreclosure cases a day, giving homeowners less than thirty seconds to defend their homes, reports that, "A Sarasota attorney, Richard Kessler, enlisted a few friends to go through 180 foreclosure cases in Sarasota County looking for errors. They found three out of four cases proceeded with incomplete or improper documentation."

So seventy-five percent of foreclosure lawsuits that banks initiate are based on wrong documentation. But too few homeowners even appear in court to defend their homes, and the ones do show up to a foreclosure hearing do not know enough about the law and their rights during foreclosure to mount a proper defense. Without pointing out the bank's lawyers' mistakes in just the right way, it would not matter anyway, with all of the procedural rules in courts.

The main finding in the study the report refers to is that few banks can prove that they actually own a mortgage that they are suing for foreclosure. The report states the following disturbing findings:

For instance, the survey found that only one in 12 cases had the documents to prove the company foreclosing on the property was also the company holding the mortgage note.

In half of the cases reviewed, the plaintiff said the mortgage note had been lost.

But simply not being able to prove that it has the right to collect on a loan does not stop the banks from filing lawsuits anyway. And the threat of a lawsuit, any kind of lawsuit, is typically enough to scare most borrowers into abandoning the home and moving out before eviction.

Another lie that the banks have their attorneys participate in is undermining court-ordered mediation services. When courts mandate that homeowners and lenders meet to discuss alternatives to foreclosure, the lawyers are just stating that the borrowers "had 'no interest in the program or declined,'" whether or not that is actually true. And it is often not true, despite the bank's attempts at deception.

The news story details a long list of practices that mortgage companies and lawyers representing those companies engage in to deceive judges and foreclosure homeowners into unlawful foreclosures. The list proves again that the courts are simply set up as formalities to "give people their day in court," while sabotaging any effort they may make in an actual defense of their home. A number of such legal frauds are listed below:

• Judges simply take foreclosure attorneys' at their word that all of the paperwork is in order and sign off on judgments and orders for sheriff sale or eviction.
• Bank lawyers file foreclosure lawsuits involving properties in other counties that the courts have no jurisdiction over, thereby taking advantage of a large caseload to get these fraudulent foreclosure through an overworked system.
• Lawyers file lawsuits on behalf of banks without documented proof the lender owns the mortgage or has the legal right to collect on it. In many cases, the bank simply says the note has been lost but still wants to go through with the foreclosure lawsuit. Judges comply.
• Lenders ignore county rules mandating they meet with borrowers to discuss solutions to foreclosure outside of the court system. Even if homeowners want to participate in negotiations, lawyers file paperwork stating the owners had no interest. No negotiations are ever held.
• Lawyers claiming that banks, in order to have the legal grounds to file a lawsuit against homeowners, have changed their names to the company that is shown as owning the loan, even if this is not the case at all.
• Banks offer to negotiate with borrowers and put the foreclosure process on hold during negotiations -- but file the lawsuit anyway and obtain judgments and orders against the homeowners, who were led to believe there would be no legal action.

The only really surprising aspect of the entire news article is that the Herald Tribune seems to believe that these lies are "a new tool in foreclosure." Unfortunately, these and similar fraudulent practices have been going on for years now, long before the housing boom turned into a bubble and then collapsed. The only difference now is that, with more and more homeowners in foreclosure, there is more lying being done.

These and other practices are just one more reason that homeowners in foreclosure should consider hiring their own foreclosure attorney or personal bankruptcy lawyer to help them examine various legal options they may have. If 75% of foreclosure cases have serious errors that the bank covers up through fraud and deception, then more borrowers may be able to save their homes or live mortgage-free for years just by spending the money to hire a good attorney to help them.

Although banks love the lawyers whose services they can buy, either as government legislators, regulators, or law firms who will lie to courts about foreclosure cases, these same lenders rarely enjoy talking to the legal representative of a homeowner. Although this seems a bit contradictory, it makes sense from the perspective of predatory banks with a lot of money that employ lawyers to justify their scams.

Homeowners facing foreclosure typically employ their own attorneys in two separate instances. The first is when borrowers attempt to defend against a foreclosure action in court by hiring a lawyer to represent or help them through the lawsuit. The second is, if there are no other options left to save the house, the homeowners decide to file for bankruptcy and hire an attorney to help them with this.

In either case, the banks do whatever they can to discourage the homeowners from seeking out legal counsel and fighting for a realistic solution to keep their properties out of foreclosure. Lenders would much rather let a house go into foreclosure and take it back quickly, knowing they can rely on government bailouts and Federal Reserve counterfeiting to keep them in business without having to help clients.

But especially in the case of defending a home in court, homeowners may be able to turn the tables on the mortgage companies. Simply by threatening to defend the lawsuit, homeowners may be able to convince the banks to begin negotiating for a more beneficial mortgage modification or other solution that will work out for the borrowers (and the banks) in the long term.

The are a number of benefits that homeowners receive by seeking out legal representation during foreclosure. First, a lawyer who is familiar with lending laws can usually find various laws or regulations the bank may have violated in the origination or servicing of the loan. Raising these issues in court during foreclosure lawsuit can severely derail the process and drag out the foreclosure for years.

Banks are willing to do almost anything to avoid having the foreclosure last for years, as this is all time that the home is under litigation, it is costing the bank in legal fees, and they are not collecting payments on the loan. In fact, this tactic can be one way for homeowners and their own lawyers to persuade the bank to offer a mortgage modification rather than going through with the foreclosure.

In terms of filing for bankruptcy, changes to the bankruptcy code in 2005 made it more time-consuming and paperwork-intensive for borrowers to discharge or reorganize their debts. Although it is still very possible for homeowners to file on their own, they may wish to hire a bankruptcy lawyer to help them with the process.

Lenders, of course, like bankruptcy just as much as they like homeowners who are defending their homes in court. Although these same lenders rely on homeowners and taxpayers to keep the entire banking system itself out of bankruptcy, they do not like when homeowners file to avoid foreclosure. Most times, they will do whatever they can, including outright lying through their own attorneys, to have the case dismissed.

This is not to say, though, that filing for bankruptcy is a great solution for homeowners facing foreclosure. In many cases, the reorganization plan under a Chapter 13 can be very expensive and will lead the borrowers right back into foreclosure once they miss a payment. Although banks know that bankruptcy will most likely fail within a few months, they still try to get the case dismissed and go right back to foreclosure.

It seems more than a little ironic that, given the banking industry's love affair with the law industry, banks would be so loathe to work with attorneys hired by homeowners in foreclosure. Obviously, the lenders believe that the law should be too expensive for the common person and instead defined and decided by those who own the lawyers, courts, and legislators; i.e., the banks themselves.

Lenders who make mortgage loans in a discriminatory basis may face liability under the Equal Credit Opportunity Act, which prohibits discrimination in lending. The Equal Credit Opportunity Act (ECOA) prohibits such discriminatory lending on the basis of several factors. These include race, color, religion, national origin, sex, and marital status. Violations of the ECOA may also be violations of the Fair Housing Act.

Red lining and reverse red lining are practices that are prohibited by the ECOA. These involve offering different credit terms (or restricting lending products) to certain areas based on racial characteristics. Red lining is when a mortgage company marks off certain neighborhoods or communities for reduced lending or higher cost loans on the basis of race or other discriminatory standards. In effect, the bank puts a "red line" around such communities and potential borrowers from these areas are denied credit.

Reverse red lining works in the opposite manner. A mortgage company or bank would establish lending practices that encouraged many more loans to flow into a certain area or demographic. This may be part of a classic pump and dump scheme, where lenders work to inflate the value of homes and provide funds to borrowers who can not pay them back. The lender then forecloses and is able to take the properties. Both redlining and reverse redlining are financially destructive to both borrowers and lenders, which is why the practice is somewhat rare.

Borrowers may have a very difficult time showing they have been the subject of discrimination in a foreclosure case. If they suspect this, however, it may be worth their while to consult an attorney who specializes in such cases. This is because liability under the ECOA may result in lenders being responsible for actual damages suffered by borrowers, punitive damages up to $10,000, and attorney fees. Some attorneys may work on contingency if a special case of discrimination is presented. It may be best at least to consult with an attorney before raising this defense in an answer to a foreclosure complaint.

The statute of limitations for violations of the Equal Credit Opportunity Act is two years. If homeowners obtained their mortgage more than two years ago, this law may not apply to them. Again, the best option in the case of suspected discriminatory lending would be for homeowners to consult with an attorney who specializes in this area of lending law.

The Home Mortgage Disclosure Act (HMDA) requires financial institutions to publicly release information related to ECOA lending. These reports are available online and provide information on the percentage of loans offered to minorities by different lenders in various cities throughout the country. The general public is able to look up zip codes, how many applications each lender took in the area, the racial characteristics of various groups, and the interest rate offered to each group. This can be a starting point for borrowers researching potential discriminatory or predatory lending practices.

Although violations of the Equal Credit Opportunity Act may be somewhat uncommon in the mortgage lending industry, homeowners may want to become aware of the law. However, the real estate boom of the past decade had been more a result of all markets being artificially inflated and anyone who could operate a pen was given a loan. This makes actual discrimination more unlikely, as the Federal Reserve set up the markets for bad investment and banks simply took advantage of any borrower coming through the door.

When attempting to defend a foreclosure lawsuit, there is a series of steps homeowners must take to have the best chance of saving their homes. The benefits of defending a foreclosure in the court system far outweigh any irrational reasons borrowers come up with to avoid the lawsuit. Simply by appearing in court, homeowners have a better chance of stopping foreclosure and forcing the bank to negotiate an alternative. This is a much better solution than avoiding the case, losing by default, and being evicted from a property within months.

The main problem, though, is that most borrowers just have no idea where to begin in mounting a defense to the lender's lawsuit. Beginning the moment the complaint is served by the county sheriff, it seems the foreclosure is much more "real" and stressful. But there is really no good reason to avoid the problem, as this only makes it more difficult to save the home in the future. The longer the problem is avoided and the borrowers do not seek help or confront the bank, the fewer options they will have available.

In fact, by following a series of relatively easy steps, and depending on the circumstances of the situation, homeowners facing a foreclosure lawsuit can not only defend their home but possibly even win the case, have their loan reversed (rescinded), or have the bank prevented from every suing them again. For a family struggling to pay the heat and food bills, having their loan rescinded and every penny they ever paid into the mortgage returned to them can be a welcome reward to fighting the bank in court.

Of course, this entire process can be a lot of work, and may drag out the foreclosure process for years. But if the bank presses the issue and files a lawsuit for the forced sheriff sale of the home, it is usually in the best interests of every borrower to go into court and defend the home. Also, homeowners should be aware that few cases ever go all the way through to trial. Instead, the most likely result will be that simply defending the lawsuit will convince the bank to offer a mortgage modification, accept a deed in lieu of foreclosure, or help the owners work out some other solution to foreclosure.

The following series of articles appeared on this blog in the past and describes the basic structure of defending a foreclosure lawsuit. Homeowners are encouraged to read it to begin understanding the most important tool for saving their properties. The next step for most will be finding a foreclosure attorney or other type of legal consultant that can help explain how the process works in their particular state and local area.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

If the bank does not attach the mortgage or note to the foreclosure complaint, homeowners may be able to have the lawsuit dismissed or defeated very quickly. This is one of the few mistakes a bank can make which homeowners can capitalize on to defeat the lawsuit almost immediately. Attaching the note or mortgage to the foreclosure complaint is typically a condition the bank must meet to begin the lawsuit at all. The bank must meet all of these conditions precedent to have initiated a valid lawsuit against borrowers.

The rules of civil procedure in many states will require that the contract be attached to a complaint alleging breach of contract. If the bank does not attach the contract and state it is the owner of the mortgage, the homeowners may have an easy defense. Unfortunately, this is not a requirement in every single state, so borrowers may still want to do their homework in researching their state and local rules of procedure to find out exactly which conditions the bank must meet.

The specific rule may have something to do with accounts or written instruments and state something to the effect that any claim founded on a written document must include a copy of that document to the legal pleading. In terms of a foreclosure lawsuit, this means that, if the lender is going to allege homeowners broke a mortgage contract, it must include the contract as part of its complaint.

Homeowners may have two ways to fight this procedural defect on the part of the bank. The first is to argue in a Motion to Dismiss that the bank has not even met the conditions necessary to begin a foreclosure lawsuit, and the complaint does not justify an answer. It should be dismissed immediately by the court until the bank can get its paperwork in order and not waste everyone's time bringing lawsuits into court based on documents it has trouble producing. The borrowers may also include this defense in their actual answer to the complaint.

Banks will often include a copy of the mortgage or note in the complaint (although sometimes it just states that it does not have possession of the note). Even in this case, homeowners should request that the lender show it has possession of the actual original paperwork that has the original signatures on it. Many banks only keep electronic copies of these documents and will have a very difficult time producing the original mortgage or note.

Even if the rules of civil procedure allow the bank to include a copy of the document along with an affidavit that it has possession of the originals, homeowners can request that the bank produce the originals for their inspection. If the bank can not do this, it may throw into question the affidavit stating the bank owns the note. Civil Rule 34(a)(1)(A) of the Federal Rules of Civil Procedure, for instance, gives borrowers this right, and many states will have similar rights guaranteed to homeowners trying to stop foreclosure in court.

Some homeowners may want to rely heavily on this defense, as the nature of the mortgage industry over the past decade throws into question the ownership of many mortgages, especially the ones most likely to go into default. Ownership may have changed hands hundreds of times, with no chain of title and the foreclosing institution not even owning the original paperwork. In such cases, the foreclosure lawsuit may be eliminated with a Motion to Dismiss or the entire action may be defeated.

As always, homeowners with more questions about their specific case may wish to consult with a foreclosure attorney or someone else knowledgeable about the law. There are also numerous resources for information online, and local law libraries can provide many useful reference materials. While the laws and courts are designed to keep non-legal professionals from having a fighting chance in court, the widespread information available through the internet and other sources these days give borrowers a much better chance than in the past to save their homes.

In nonjudicial foreclosure states, lenders can have a home in foreclosure auctioned without going to court. Borrowers have to bring a lawsuit against the bank to have the process stopped in court. States that have a nonjudicial foreclosure process typically use deeds of trust to show a lien on a home. In a few small cases, mortgages may be used that contain a specific Power of Sale clause. But in the majority of states that used nonjudicial foreclosure, deeds of trust are used instead of mortgages.

Deeds of trust act very similar to mortgages in that they record a lien against a property when homeowners borrow money to purchase a home. However, they contain what is known as a Power of Sale clause, which gives the lender the right to sell the house if the loan goes into default.

The deed of trust will typically include the exact terms that must be met for the homeowners to be in default. It also describes exactly when and where the sheriff sale of the property will take place, if necessary. Homeowners who are facing foreclosure can learn a lot of the tactics the bank will use to take the home back just by reading the original mortgage documents.

The state foreclosure laws in nonjudicial states also determine, to a great extent, how the foreclosure itself will proceed. Numerous notices may have to be sent to the homeowners, posted on the property, posted on the courthouse itself, posted in other public places, and published in local newspapers.

Names of the notices may differ by state: notice of default, notice of sale, notice of intent to foreclose and sell, and so on. But the state laws will dictate how the homeowners must be notified of the impending sale of the home. This is extremely important information for borrowers to pay attention to, as any deviations the trustee or lender take from the law can result in the entire process being reversed. If this happens, the bank has to start the foreclosure all over again from the beginning.

In nonjudicial foreclosure states, there will be no foreclosure lawsuit, and the owners will have no opportunity to defend against the charge of breach of contract of the deed of trust. The bank simply declares the owners to be in default and proceeds to have the trustee of the deed of trust send out notice requirements as required by law until it is able to have the house auctioned off.

To defend against an unjust foreclosure or to delay it in court, homeowners will have to bring their own lawsuit against the bank. And then, the burden of proof is on the borrowers to show why the foreclosure should not be allowed to proceed. This process also costs homeowners more money than in judicial states because they will be responsible for filing fees and potentially posting a bond with the courts.

In fact, the borrowers may have to post a bond of several thousand dollars to get a restraining order against the bank. But the three orders that the owners must get from the court to successfully defend nonjudicial foreclosure are a Temporary Restraining Order, a Preliminary Injunction, and a Permanent Injunction.

The Temporary Restraining Order will bar the lender from selling the home until the courts have determined whether the owners have a case or not. The preliminary injunction prevents the bank from going forward with the foreclosure until the case has been heard by the court. And a permanent injunction bars the lender from taking the house back at all.

Many homeowners feel that this type of foreclosure is supremely unfair, in that they are given no chance to defend against a foreclosure that may have been initiated improperly. In a pile of complicated loan documents, they sign away their right to a trial and due process in the case of default. This is one more reason borrowers should learn about their rights in foreclosure and which exact laws and procedures the bank must follow to take the house back.

When homeowners fall behind on their mortgage, the lender will eventually begin the process of foreclosing on the home. Depending on the state laws where the property is located, type of documents used in the loan, and the terms contained in the documents, banks may pursue a judicial or nonjudicial foreclosure process. Typically, if a mortgage is used to secure the lien on the property (as opposed to a deed of trust), judicial foreclosure will be used by the lender to take the property back.

In a judicial foreclosure, the first step usually involves the mortgage company sending a notice to the homeowners informing them of their delinquent mortgage payments and stating an intent to foreclose on the property. If the borrowers do not work out some arrangement with the bank (such as a mortgage modification or repayment plan ), refinance their home (with a foreclosure lender or hard money lender ), or sell in time, the bank will send the loan to its attorneys. These attorneys will be located in the state in which the property is located and they will file the initial lawsuit in the county court against the homeowners.

The complaint will almost always be served on the homeowners, either by personal service (dropped off by a sheriff's deputy, in most cases) or sent via certified mail and borrowers will have to go to the post office and sign for delivery. Once homeowners are served with the foreclosure complaint, they will usually be given twenty to thirty days to file their answer with the courts or file a Motion to Dismiss the case or a Motion for Extension of Time, if they need extra time to begin their defense. Banks rarely argue against a Motion for Extension of Time, as long as the additional time requested is reasonable.

Unfortunately, this is the time when most borrowers simply ignore the lawsuit and fail to file an answer. This is nearly always a mistake and borrowers may want to consult with a foreclosure attorney to prevent from losing an opportunity to defend their home.

Although most answers are filed in the form of a proper legal document, some courts will accept almost anything as an answer. This may even just involve a letter from the homeowners explaining why they are behind and requesting more time to work out a solution or hold off on a sheriff sale. But when homeowners do not file anything, the bank is able to get a default judgment and have the home listed for auction very quickly, with no involvement or protest by the owners of the house.

Borrowers who mount a defense to a foreclosure lawsuit can often receive several additional months to stay in their home mortgage free. After all, the burden of proof is on the bank to show that the homeowners are behind on payments and that the bank has the right to collect on the loan. Oftentimes, the borrowers have fallen behind, but the financial company suing them has no real legal right to the payments anyway, and the lawsuit can be thrown out or severely delayed, depending on the circumstances.

But most often, homeowners in foreclosure simply ignore the lawsuit and do not attempt to defend it in the courts. The bank wins a default judgment and a sheriff sale of the property is scheduled at the first available opportunity. Some states may have a redemption period after the judgment and before the sale, but many will simply hold the foreclosure auction a few weeks to a couple of months later. After this, the new owners will be able to begin an eviction lawsuit against the foreclosure victims and force them out of the house within weeks or a month.

Many homeowners facing foreclosure in a nonjudicial state do not really know how to respond to the bank's ability to take their home from them. In fact, the laws make it very difficult to defend against such procedures because there is no hearing in front of a judge or complaint filed in court. However, homeowners can make a nonjudicial foreclosure more difficult on a bank.

This can be done by homeowners filing a lawsuit against the bank to stop the foreclosure process and requesting the court to grant them a temporary restraining order. This process is not very complicated and borrowers can call the county in which the property is located to find out more about how to file this, as well as consult with an attorney.

However, once the motion to stop foreclosure procedures (known as an action to enjoin the trustee's sale) is filed, there is automatically a lawsuit pending against the property. This means that the borrowers can file a lis pendens against their own house with the county recorder to alert any potential buyers of the pending court actions.

But how would this help a homeowner in a fight to save the property from the bank? In nonjudicial foreclosure proceedings, the lender does not have to file a lis pendens against the property because the entire process is handled outside of the court system. And as long as the process is outside the courts, it can go remarkably smoothly for the mortgage company.

When homeowners file an action to enjoin the trustee's sale, however, the process of foreclosing on the home becomes much more complicated. Filing a lis pendens alerts everyone to the fact that there is a lawsuit pending and that there may be problems with the bank's nonjudicial foreclosure.

What this really means is that, even if the bank goes ahead with the trustee's sale and has the property auctioned off, any potential buyer may not be able to keep the house if the bank later loses the lawsuit. A third party buyer would have to return ownership to the original borrowers, which would make bidding on the property entirely pointless.

Thus, homeowners, by filing a lawsuit in court to halt the foreclosure, and then by filing a lis pendens against their own home, dramatically reduce the chances that the property will receive any bids at a sheriff sale. Lenders, of course, do not want to own houses after foreclosing on them and do not want any complications in the foreclosure process that would discourage bids at auction.

And until the lawsuit is resolved by the courts, the homeowners have no reason to remove the lis pendens. The court can remove it (known as expunging it), but will have no reason to do so as long as the lawsuit is going on and the homeowners have a case to make against the foreclosure.

By filing a lawsuit to stop a nonjudicial foreclosure and then filing a lis pendens against the property, borrowers may be able to force their lender to begin negotiating with them. Otherwise, it is almost guaranteed the bank will end up owning the property at the county auction, and it would rather have more bidders than just itself.

Foreclosure laws are designed to prevent banks from being able to steal a property and to protect homeowners from fraudulent collection actions, right? In fact, all laws are designed to protect the children, save the environment, and assist Main Street while not rewarding Wall Street -- but how can we explain all of the laws that specifically harm borrowers?

For instance, so-called fast track foreclosures and nonjudicial foreclosure procedures deny due process rights to homeowners who may have fallen behind on their mortgages or are victims of predatory mortgage servicing. But without an actual trial, or even the right to respond to a bank's foreclosure, lenders can just steal homes with no adverse consequences.

This type of foreclosure is allowed in 30 states and the Washington, DC area, taking the right of a trial away from more than half of the country. The worst part? Judges have actually ruled that such foreclosure procedures do not violate Constitutional rights, despite the fact that in these cases, the burden of proof is on borrowers to show how a foreclosure is invalid.

Another loophole in all these laws designed to protect the little guy against the big Wall Street banks is that, in all states besides California, banks have no obligation to try and work out an agreement that would stop foreclosure. In fact, banks are allowed to proceed directly to the foreclosure process after the first missed payment.

Thus, the negotiation process is almost entirely determined and run by mortgage lenders and servicers. They do not have to administer adequate loss mitigation departments or provide any solutions to foreclosure besides homeowners defending their properties in court, if they are allowed and can afford to do so.

Furthermore, in all but three states, the lender can begin piling on outrageous default, foreclosure, and late fees as soon as the first payment is late. These huge fees are usually directly responsible for most homeowners who experience a temporary financial setback being unable to afford to pay tens of thousands of dollars to reinstate a loan that is only behind by a few months.

It is routine for a bank, in the space of six months or less, to charge a single borrower tens of thousands of dollars in late fees and interest, while its attorneys charge another ten thousand. By the time the foreclosure paperwork is finally filed in court, it is almost impossible for the homeowners to pay back what they owe even if they want to.

Thus, foreclosure laws around the country allow banks to loot borrowers' loan accounts by piling on outrageous fees, refuse to negotiate with homeowners for a mortgage modification or other agreement, and then pursue a fast track foreclosure that denies people basic due process rights. And all of it is legal and sanctioned by the courts.

Is it any wonder that so many homeowners find it difficult to believe that "the law is on their side" in the case of a foreclosure? Is it any wonder so many borrowers do not even bother to respond to a foreclosure lawsuit or show up at the court hearing ? Is it any wonder so many find it necessary to take out their frustration at the bank directly on the house itself?

Although many articles on this blog encourage homeowners to defend a foreclosure case on their own, the most that can probably be hoped is that they can delay the sheriff sale or eviction for a period of months. Getting actual justice in the case is probably not to be expected, however, as government judges are more likely to give preference to the banks that are paying the filing fees in the lawsuit.

Take the following story from Fort Myers, Florida, where courts are so far behind on foreclosure lawsuits that judges are now going through nearly one thousand of these cases every day. The point is not to judge the merits of the bank's complaint against the homeowners or the borrowers' circumstances or the legitimacy of the original loan or any potential servicing abuse. No, the goal of judges is, according to Lee County, Florida clerk of the circuit courts Charlie Green, to "get these cases off our books."

To get the cases off the books, judges have taken to conducting a twenty second hearing for foreclosure victims, asking two simple questions, and giving the owners a deadline to work out an agreement with the lender or face sheriff sale and removal from their home. The following experience quoted in the article is simply astounding in how little regard is shown to the homeowners and how much credit implicitly given to the bank's positions.

Hoping to save her house, Saundra Hill Scott arrived at the county courthouse clutching dog-eared mortgage bills and letters from her lender.

She need not have bothered. The foreclosure hearing lasted less than 20 seconds, with Judge John Carlin asking her two questions: Are you current on your mortgage and are you living in the home? She answered no and yes and then offered to show him her paperwork.

"I don't need to see that. That's between you and the bank," he said as he gave Ms. Hill Scott, her husband and three grandchildren 60 days to work out a deal with their lender or vacate their three-bedroom house.

Two questions! The judge asked the defendants two questions and then gave the responsibility of working out the mortgage with the homeowners to the original bank that is suing them to kick them out of their home. And the next eight hundred or a thousand people will be treated in exactly the same disrespectful manner, regardless of any predatory lending, fraudulent inducement of debt, or mortgage servicing fraud issues.

Can anyone seriously imagine this same judge asking the lender two questions and, based upon those answers, dismissing the case completely? It could certainly be done.

First question: were your borrowers able to afford this loan for the long term at the time it was originated?
Second question: do you own the original note and would you be able to produce it for the court's and defendants' inspection?

For a significant number of foreclosure cases, the lender's truthful answer to both questions would be "No." Many homeowners facing foreclosure were given adjustable rate mortgages (ARMs), Option ARMs, and other creative financing packages to get them into a house that they would never be able to afford for longer than a few years.

But these types of loans were designed from the beginning to spread the risk of default around. The originator sold the loan to a Wall Street firm, which packaged the loan with others and sliced up various rights to it. The mortgage servicer got to collect payments and take a fee, while the thousands of end investors around the world got a small percentage of the monthly income the loan generated. The original loan paperwork, however, may have been destroyed or lost somewhere along the line.

Maybe the judge could ask another question and immediately dismiss a thousand foreclosure cases a day. "Did the originating bank provide any real consideration for this loan or was the money created out of nothing; i.e., bank reserves?" All loans that banks create are from nothing, with the borrowers' promise to pay the only factor that creates a debt at all.

After all, who has the burden of proof in a foreclosure case? Certainly not the homeowners, who are the defendants -- so why should they be given the two-question treatment and then have their home scheduled for an auction? At the rate these judges are going, massive fraud and corruption will be missed in any number of mortgages. Who could possibly keep up with the subtleties of hundreds of foreclosures every day?

The smugness and superiority complexes the judges in this article exhibit should give most homeowners and foreclosure victims a good sense of how difficult it will be to argue and win a case against a mortgage lender. Some choice quotes are below:

"A guy hasn't paid his mortgage in over a year,'' says Judge Cary. "What's there to talk about?"

...

"The problem is that the lenders have spent all this money on attorneys and filing fees," says Judge Cary. "You are so far into it, would you really stop it at that point? It's an expensive proposition."

...

Many judges, including Judge Carlin, are giving homeowners much more time to stay in their houses than the law requires.

"That's pretty humane considering that many homeowners have been living rent-free for more than a year,'' says Robert Hill Jr., a Fort Myers lawyer who represents lenders.

The most important point for homeowners currently trying to stop foreclosure to remember is that they absolutely need to file an answer to the bank's complaint in the time allowed. When they do not do this, the banks and courts make it very, very easy to lose a foreclosure lawsuit. While researching the various issues that can be used as a defense or consulting with an attorney is best, any kind of written response can be considered an answer to a complaint.

The judges say they sympathize with the homeowners' hardships, but often the cases can be decided after a brief hearing because there are no legal issues in dispute which would warrant a lengthy trial. Some homeowners don't understand they are required to file paperwork before the hearing to challenge the lender's case. Many of them never file the documents or hire lawyers, the judges say.

The simple act of filing a couple of motions can mean the difference between extra months to defend the case, save up money, and move out comfortably -- or a 15 second foreclosure hearing. If nothing else, homeowners serious about defending their homes should at least consult with someone familiar with the law and file an answer. They should not expect justice, but they can hope to force the courts to respect their rights to a trial and due process.

One of the major problems with media outlets offering advice to homeowners on how best to face a foreclosure is that they will often recommend hiring an attorney. For most homeowners facing the loss of a job or excessive medical bills, this is simply impossible. But what is rarely mentioned is how many families are able to save their homes without the help of an attorney or with only a minor consultation from one.

Winning a foreclosure case in court may require the use of an attorney or an amount of dedication to legal research that most homeowners can not spare the time to engage in. However, this is often not a goal of many borrowers, who would just like to modify their loan, sell the house, In fact, most of the common solutions to foreclosure can be negotiated by homeowners on their own or with the use of a foreclosure assistance company. While many of these companies are run by lawyers or at least affiliated with one, they can be much more effective and cost less. This is because the borrowers pay for the professional research, consultation, and actions performed by the company, but do not pay for an actual attorney to represent them in court.

Even in the case of filing bankruptcy to stop foreclosure or to discharge debts, the use of an attorney may not be justified. Federal bankruptcy forms are available online and include instructions that make it very easy for people to file their own bankruptcy. As long as they are honest about their assets and debts, and do not try to hide anything from the courts, it can be surprisingly easy to eliminate old debts.

While getting an initial free consultation with an attorney to discuss possible ways to stop foreclosure may be a good idea for many homeowners, a better one may be to research options on their own. Especially attorneys who specialize in only one area of the law may recommend one method over another and borrowers will not know all of the possible ways they might be able to save their homes. Just like with any company offering foreclosure assistance services, independent research by homeowners will protect them from entering into a plan that is in the best interests of the company or attorney but will only harm the owners.

In nonjudicial foreclosure states, mortgage companies do not have to bring a lawsuit against homeowners in order to sell the house at a county auction. If the borrowers believe that the foreclosure is not warranted, they will have to bring a lawsuit themselves against the bank and prove that the house should not be sold. Obviously, this makes defending the lawsuit impossible, as the owners would have to bring the fight into court first and the bank would be on the defensive.

But bringing a lawsuit against a lender to stop foreclosure can be a costly and confusing process for most homeowners. They will have to follow a number of steps just to have the sale initially halted, and then attempt to prove that the foreclosure should not be allowed to go forward at all. This involves bringing a lawsuit, getting a temporary restraining order, posting a bond, getting a preliminary injunction, and finally getting a permanent injunction against the bank. The first few steps will be examined in this article.

This is almost certainly an area of the law in which homeowners would wish to hire an attorney to represent them or, at the very minimum, have attorneys do research to help them build their case. Unfortunately, though, foreclosure situations are one of the times in most borrowers' lives where they can least afford to hire a personal lawyer. Bringing a lawsuit initially against a bank will be an in-depth process, and doing only the first few steps may only result in a delay of a few weeks.

To begin the lawsuit against the mortgage company, homeowners must sue both the lender and the trustee. They must also request that a judge stop any foreclosure proceedings until the homeowners are able to argue why they should not be allowed to go forward at all. The first step will be to request that the court grant the owners a Temporary Restraining Order against the lender, barring it from moving ahead with the foreclosure.

It may be quite simple to get a Temporary Restraining Order against a mortgage company, since the basis for granting one is that the party requesting it would suffer "irreparable injury" if it was not granted. Losing a home to foreclosure is usually accepted as irreparable injury to homeowners, but this action usually only puts the foreclosure on hold for a period of a couple weeks, at most.

However, some courts may require that homeowners post a bond for the TRO to be granted, and if the bond is prohibitively expensive, it can hurt the borrowers' chances of getting a fair hearing in court. The bond is designed to protect the bank against economic harm if the owners do not have any legitimate reason to request that the foreclosure be halted, and they can be costly, in some instances.

Thankfully, homeowners who have suffered a financial hardship may be able to get the bond requirement waived. Having low income is one convincing argument for a waiver. But borrowers will also have to show that the lender will not suffer unreasonable harm if the foreclosure is delayed, or if it can be protected some other way (like if the owners make reasonable monthly payments while the lawsuit is ongoing). Also, if the validity of the mortgage is in question, a waiver may be granted. Banks suffer no harm as a result of the homeowners' actions if the mortgage is not valid in the first place.

Once homeowners are granted a TRO and have their bond requirement waived by the court, the next step will be getting a preliminary injunction against the bank. If this is granted, the homeowners may have already won the war, as the rest of the legal process may take several years. But the final step would be to obtain a permanent injunction, which would not allow the lender to pursue foreclosure against the house.

When faced with a foreclosure, the first reaction that many homeowners experience is a strong feeling of denial. Even after they have begun to miss numerous payments, they do not believe that there is any possibility of losing the home, and they hold onto an irrational hope that some miracle will fall out of the sky and save them. Unfortunately, this rarely happens, and the foreclosure continues until the borrowers are evicted.

But what if homeowners did begin to take vigorous action to keep their homes or at least delay the foreclosure for as long as they could? If this were to happen, many more people would successfully save their homes and the banks would be forced to offer more appropriate loan programs. Instead of a legal process lasting a few months, foreclosure could take years to wind its way through the courts.

The following story is a fictional representation of how homeowners could make the foreclosure just as trying and stressful for the mortgage company as it is for the owners. Simply by standing up to the lender, these borrowers are able to gain almost an extra year and a half to save up money and work on other solutions.

Peter and Nicole bought a house in 2006 for $300,000. The appraiser inflated the value of the property, which was worth only $275,000, in order to increase the commissions paid to the real estate agent and the loan broker. The mortgage broker gave the family an adjustable rate mortgage, and by the time it reset, the market had dropped.

Peter lost his job as a mid-level manager in the city's largest soap factory as the economy went into recession and profits revenues fell. Their home value has fallen to $175,000, foreclosure are rampant in their community right now, and they have paid off very little of the principal due on the mortgage loan.

Right away, when they knew that they would be unable to make their mortgage payment, Nicole called the mortgage company and asked for any solutions that were available. Their income did not allow them to qualify for a loan modification, but the lender delayed sending the loan to the attorneys for an additional two months while they attempted to work with Peter and Nicole.

Inevitably, though, the lender did send the loan to their local attorneys, who, after completing the required notices, quickly filed the foreclosure lawsuit in the courts. This was after they had missed six months of payments. The family knew the paperwork would be filed, as they were still keeping in contact with the bank, and were determined to fight the lawsuit every step of the way.

As soon as they were served with the complaint, Peter prepared a Motion for Extension of Time, requesting that the courts give him and Nicole an additional thirty days to prepare and file their answer. The bank's attorneys did not object to this motion, and the family used the extra month to research their options for solving the foreclosure and delaying the lawsuit.

After reading through the bank's complaint, Nicole believed that the lender did not actually own the loan and would have serious issues proving that it had standing to file the lawsuit in the first place. Instead of filing their answer to the foreclosure complaint, the couple filed a Motion to Dismiss the case based on this and other issues they had researched.

Filing the motion and serving it on the bank's attorneys gave the lender another fifteen days to respond to the motion, which they did on day 14. A hearing in front of the judge for the Motion to Dismiss was scheduled ten weeks in advance, which gave the family an extra two and a half months to keep working on their answer to the lawsuit, save money, and apply for other jobs and solutions to foreclosure.

At the hearing, the bank was able to argue to the judge that the lawsuit should be allowed to proceed and it established that it had enough legal standing to sue the homeowners. The judge denied Peter and Nicole's Motion to Dismiss and told them they would need to file their answer with the Clerk of Court, which they did a few days later.

Along with filing the answer to the complaint, the couple began serving discovery documents on the bank, title company, original mortgage broker, original lender, real estate agent, appraiser, and any other party whom they believed had information that could help their case. This process began to drag on for many months, as the couple had to compel the lender to answer questions and subpoena other witnesses to produce documents and information about the loan.

The lender, in the meantime, filed a Motion for Summary Judgment in the case, hoping that it could eliminate the homeowners' arguments and win the case without it going to trial. The homeowners filed their arguments in response to this, and a hearing in front of the judge was set for several months down the road. Eventually, the bank's motion was denied and Peter and Nicole were allowed to keep defending their home.

By this time, Peter had found a new full time job at a reasonable salary that would allow the family to keep on top of a housing payment. They were already over a year behind in their original mortgage and the lawsuit had not even come close to going to trial yet. Instead of trying to keep paying their mortgage, all the money that they could have paid to the lender was being put into savings.

In fact, the couple did not even want to keep defending this home, as they simply wanted to move on with their lives on their own terms. Now they had found a new house to rent and were ready to begin negotiating a final solution with the lender. They called the lender's attorneys and offered the bank a deed in lieu of foreclosure, in exchange for no deficiency judgment and both parties giving up the lawsuit.

At this point, the bank was finally willing to negotiate a settlement, take the property back, and cut its losses on the loan. After paying attorney fees for almost a year and a half, the mortgage company did want the case to go to trial, which would have cost them even more time and money.

Although the homeowners did not go through with the entire legal process and defend against the foreclosure in a trial, they were able to leave the home on their own terms and save up money while they were giving the mortgage company a hard time in court. But that is their right, and they were able to negotiate a solution even without having their "day in court" in front of a jury.

Once the bank accepted the deed in lieu, Peter and Nicole were able to stop foreclosure for good, not worry about being sued afterward, and moved out of their home and into a much more affordable lease. They had enough to pay six months of rent up front and avoided an embarrassing credit check. The bank took the house and listed it for sale, selling it a few months later to a new family.

For many homeowners who retreat into fear and anxiety once they begin missing mortgage payments, the process the bank follows to foreclose on the home can be surprisingly short. In fact, in just a few short months, borrowers can go from being delinquent on the mortgage to being sued to having their home auctioned off to being evicted by the bank or new owner afterward.

The following story is how a typical foreclosure in a judicial state (requiring a judgment for foreclosure) may proceed. It assumes that the family in the fictional story do nothing to save their home or defend against the foreclosure in court to try and buy more time.

John and Mary bought their home in 2006 for $250,000, at the top of the real estate market in their neighborhood. They put no money down because they had good enough credit to qualify for a 100% LTV subprime mortgage. Since then, the house has declined in value, like all of the homes in their neighborhood, and was recently appraised at $175,000.

They have paid off essentially none of the balance owed on the mortgage, and just recently John lost his job in a plastics mold manufacturing plant. He has found a temporary position, but instead of making $60,000 a year, now he is lucky to make $300 a week. Mary has taken up a part time job, as well, but her income is even less than John's, and they will be unable to afford their mortgage payment any longer.

Inevitably, John and Mary begin missing payments on the mortgage and their other bills, although they do not hear from the bank until three months have passed. Because they live in a judicial foreclosure state, their lender sends them a notice stating that, if they do not pay back the arrears within 30 days or make other arrangements, legal foreclosure proceedings will be initiated.

John and Mary do not respond to this letter, nor to any of the daily calls from the collections department of the bank. They assume that they will be humiliated and pressured into making a payment they can not afford, and they need every penny they are currently making to pay for food and utilities. So they do not contact the bank for workout solutions, and the bank takes the next step.

After the thirty days have gone by, the lender sends out a 10 day notice to foreclose on the home, and refers the loan to its local attorneys in that state. A few weeks later, the lawsuit is filed in the county court, and John and Mary receive a copy of a summons and complaint, giving them 30 days to file their answer.

Although the family consults an attorney about defending the foreclosure in court, they decide not to pursue this option due to the high cost and unlikely outcome of winning the lawsuit. Rather than hire an attorney or defend the foreclosure on their own, John and Mary decide that they will not answer the complaint and hope that something better comes their way.

But nothing better comes, and the bank requests the court to grant it a default judgment and order that the home be auctioned off at the next county sheriff sale. Since John and Mary did not file an answer, the judge grants the bank's motion for default judgment and the house is listed for sale. The lender sends the family a copy of the judgment and notice of sale, giving them until the date of the auction to pay off the total amount due.

The next month, the house is auctioned on the county courthouse by the sheriff's department, although no one purchases the home. Ownership reverts back to the foreclosing lender, which is the only party to bid on the property. The entire foreclosure process takes about 100 days from the time of the first notice until the bank takes back ownership.

Within days after the home is auctioned, the sale is confirmed by the court and the bank's attorneys request that the homeowners and any remaining personal items in the house be removed. The judge grants this order, and a 3 day eviction notice is posted on the property by a sheriff's deputy within a few days, to the shock, horror, and surprise of John and Mary, who thought they would be given more notice if they were to be forced out.

At this point, John and Mary have taken no specific action to save their home and are now in danger of being forcefully evicted from the property within 72 hours of receiving notice. Because they did nothing to stop foreclosure or delay the lawsuit from progressing, they have only had a little over three months to save up money to move. This is not enough to find an apartment, and the family must move in with relatives until they can afford a new place.

It is usually after about three missed mortgage payments that the bank will file the foreclosure lawsuit on a home. Soon after this point, homeowners will be served with the paperwork via certified mail or a sheriff's deputy leaving a copy of the complaint at the property. But the foreclosure process is full of complicated legal procedures and a lot of different factors can influence these to change when borrowers would receive the notice of the bank's lawsuit against their home.

First of all, federal and state foreclosure law has a huge role to play in determining how the bank pursues the foreclosure on the house. There may even be a period before the suit can be filed in which the bank has to work with the homeowners, which causes the bank to wait extra months before filing the suit. Also, local notice requirements may force the bank to publish the impending foreclosure in local papers for weeks before they begin the legal process in the county court.

Second, homeowners' efforts to defend their home will also greatly influence how quickly the bank files the foreclosure lawsuit. If they are keeping in contact with the lender and attempting to qualify for a loan modification, forbearance agreement or other solution with the lender or another company, the bank may be willing to give the borrowers more time to save their house. In this case, the lender may wait several extra months before turning the case over to their attorneys for the lawsuit to move ahead and notice to be served on the defendants.

Homeowners can also simply ask the lender to give them more time before it begins lawsuit proceedings to take the house back. Borrowers can just call the mortgage company, explain the situation that put them behind in payments, ask for additional time, and put their request in writing to the bank via fax or certified mail. More often than homeowners would believe, the bank will just hold off on filing foreclosure against the home to give the borrowers more time to come up with a solution on their own.

Third, the bank's own resources and competence level will influence how quickly it files the lawsuit. If homeowners are dealing with a huge, national bank that is attempting to handle a large amount of foreclosures, the company may be way behind on everything. This is a mixed blessing, of course, as the lender will be behind on filing the lawsuit, but it may also be difficult to get hold of if the borrowers do have a solution and need information from the mortgage company (such as payoff figures) to complete it.

Borrowers should also remember that simply defending the lawsuit in court can drag out the foreclosure process by several months or even years if the case goes to a trial. But homeowners could file a few motions before filing their formal answer to the bank's complaint and give themselves an extra half a year to stay in the house mortgage-free while they either negotiate with the bank or find other solutions. Receiving notice of a foreclosure lawsuit or the lawsuit itself can be delayed for long periods of time while the bank has to accept not being paid and the borrowers can work on other solutions.

Once a foreclosure case has gone to trial, there are really only three possibilities left. Either the case will be decided in favor of the lender and the foreclosure allowed to continue, the case will be dismissed and the lender forced to begin the foreclosure all over again or not allowed to do so, or one party or the other will attempt to file an appeal with a higher court.

Mortgage companies will often not be able to win a foreclosure lawsuit based on the merits of the case due to the near impossibility of following all of the rules and laws that govern mortgage lending. And if homeowners press hard enough, the entire complaint against them will typically fall apart. So the bank's attorneys will most likely have to rely upon mistakes made by the borrowers themselves in following the court rules.

When this happens, corrupt judges and corrupt attorneys can work together to force homeowners defending themselves out of the court system and justify it with confusing legal language or one-sided rationalizations. Borrowers who do not have years of legal training from a state-approved law school will find it difficult to convey their messages and will often be ignored or marginalized while the court and attorneys work against them.

But in some lawsuits, the bank may just have made so many egregious errors that it is impossible not to award judgment to the homeowners. In such cases, it is important for the borrowers to determine if the complaint has been thrown out with or without prejudice, because this difference will determine if the bank is able to begin the lawsuit again or if it is barred from beginning another lawsuit to force foreclosure of the house.

A dismissal without prejudice of the bank's lawsuit means that the lender can re-file the case once it has fixed the errors in the original case. If the case was dismissed due to the bank not following state pre-foreclosure notice procedures, the lender may be able to follow them correctly and throw the house back into foreclosure. But when cases are filed with prejudice, the lender may not bring the case back into that court.

If either party believes that the court made serious errors in deciding the case or allowed for gross violations of rules or law, it may be worth filing an appeal. Of course, if the bank loses its case, it will most likely appeal because it does not want to lose all of the money it has already put into the lawsuit and it has more to gain from doing whatever possible to take the house.

But homeowners deciding to appeal face a more difficult choice. On the one hand, if all they were doing was buying time and have found a solution to foreclosure, it may not be worth the expense and trouble of appealing. At this point, moving on with their lives may be best if they have put up a defense and simply lost to the bank, especially if winning the case was not the primary purpose.

On the other hand, if homeowners are aware of violations of the rules in favor of the bank and wish to drag out the foreclosure process even longer, filing an appeal may be the way to go. Appeals must be filed in strict accordance with the Appellate Court, so more rules of procedure will have to be printed out and followed. But this process can take additional years and homeowners can request a restraining order against the bank from taking any other foreclosure actions until the case has been reviewed.

If a foreclosure case actually makes it all the way through the legal process and goes to a trial and is decided upon by a judge or jury, homeowners can rest assure that they have done nearly everything in their power to stop foreclosure and drag the process out for as long as possible. It is at this point that they will have to decide where to go next, either to appeal or not, depending on the outcome of the lawsuit.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Of all the steps in defending a foreclosure in court, actually going to trial to argue and win a case may seem the most stressful to the average homeowner. But depending on how much care and preparation has gone into their defense to the bank's positions and their own claims against the lender, the trial may proceed much easier than they expect.

But in fact, most cases never even get to the trial stage of the legal process and all of the research and preparation serves to force the parties to compromise and set up some sort of mutually beneficial agreement. Lawsuits are either thrown out of court for one reason or another, ruled in favor of one party by summary judgment, or the plaintiff and defendant get together to work out a solution like mortgage modification that does not involve the court. This is almost always a better solution than the judge would be able to rule on anyway.

It is worth remembering that most of the work done by homeowners will be focused on shooting down at least one element of the bank's case, and this is what the defense will focus upon. In the case of foreclosure, this will be a breach of (mortgage) contract case, and the bank will have to prove four elements. These are the following:

• A legally binding contract existed between the parties.
• The lender did everything required under the contract.
• The borrowers failed to meet the requirements of the contract.
• The borrowers' breach of contract caused the bank actual damages.

In their initial complaint, the bank does not have to state what the elements are of the position they are relying upon. This leaves is up to the homeowners to determine the elements and begin trying to disprove each of them. But borrowers have a lot of material to work with in disproving these elements of the case, and all they have to do is create enough doubt in the judge's or jury's minds to prevent a ruling in favor of the mortgage company.

There will be a lot of methods homeowners may use to disprove the bank's positions, much of which are beyond the scope of a single article. Impeaching witnesses by pointing out bias, the impaired ability to observe the facts, and prior inconsistent statements is a start in knocking down any witnesses the bank brings. The bank may attempt to bring in witnesses to convince the decision makers that homeowners should lose their houses, despite any laws violated by the bank in the first place or even a predatory lending situation.

There are also numerous tools that can be used in the courtroom that follow the standard structure of a lawsuit. Homeowners should research how direct examination, cross examination, exhibits, making and responding to objections, witnesses and expert witnesses, opening statements, and closing arguments will fit into their case. Homeowners can use these tactics, as well as see them used against the borrowers by the mortgage company, so it is important to understand how they fit into the overall trial.

This is the part of the entire legal defense to foreclosure process where homeowners may wish to consult with an attorney, either to represent their case in court or simply to provide an awareness of how the trial will work. Both of these options will cost money, of course, but they can help prevent a home from being sent to a quick foreclosure because trial rules were not followed. The value of high-quality, relevant legal advice simply can not be overstated.

Homeowners, though, can try and defend the case on their own and have been successful in the past in doing so. Thus, there is simply no reason to become stressful at the though of arguing a case in court designed to stop foreclosure for good. After all, the case will most likely be settled long before the trial, and homeowners who do defend their foreclosure are much more likely to win or get a draw than those who simply give up on saving their homes and allow the bank to get a quick victory.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Some time during the process of defending a foreclosure in the court system, homeowners may cause the bank to file a Motion for Summary Judgment. This requests the court to forget about the trial and borrowers' case against the lender and simply award the foreclosure judgment to the bank. In effect, this motion states that there are no issues worth the judge's time to examine and that it would be much easier if the bank simply won the lawsuit and got to take the home.

Obviously, such a motion being decided in the mortgage company's favor would have a severely negative impact on the homeowners' efforts to save their home by knocking down the bank's lawsuit. But the bank or its attorneys may realize that they really do not have a strong case to have the property sold to satisfy the loan and will simply declare all of the defenses frivolous and not worth the court's time.

This tactic is almost always used by the lender sometime after the homeowners file the answer to the complaint but before a trial is set, in the hopes that the case will not have to go to trial at all. The bank and the attorneys know that having a judge find some way to ignore the defenses and simply get on with the foreclosure will be much easier than attempting to convince a jury of fellow homeowners that the bank should be awarded the property even though its case is shaky or nonexistent.

Homeowners who are forced to defend against a Motion for Summary Judgment filed by the bank are immediately put into a difficult situation. They must both argue to the court why the bank's motion should be denied and show other relevant cases to support their positions. The courts must be shown that there are genuine issues of material fact that must be decided upon before any judgment can be reached in the case and that a summary judgment would be in error.

However, borrowers can also file their own Motion for Summary Judgment if they believe the bank has no real case to argue for foreclosure of the mortgage. This can be due to violations of the Truth in Lending Act (TILA), an incorrect notice of rescission, or virtually any other reason that the bank should be disqualified from pursuing the lawsuit. Homeowners should be aware of this legal tactic to request the court throw out the lender's case due to a clear deficiency in its ability to sue.

If neither party files a Motion for Summary Judgment or all such motions are denied, the case will then go to a trial, either before a judge or a jury. Thus, this is the last chance for the bank to shoot for an easy win, as well as the homeowners' final opportunity in stopping foreclosure in the court to have the case thrown out before a trial. But if the homeowners have established a solid defense up to this point and answered the complaint effectively, there will be little chance the lender will be granted such a quick and easy foreclosure.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

At any time after the lawsuit is filed, homeowners can begin the process of obtaining information from the bank regarding the mortgage and the foreclosure. In the courts, this is known as "discovery," and can be used by either side to produce documents and determine which issues are at stake in the lawsuit. This process will also give borrowers more information on what defenses to raise, as they can begin it as soon as they have been served with the paperwork, and how best to argue the case if it goes to a trial.

There are a number of tools that borrowers can use to begin gathering information directly from the bank or other third parties, including the mortgage broker, real estate agent, servicing company, and originating lender. The most commonly used of these are depositions (either oral or written), interrogatories, requests for admission, and requests for the production of documents.

A request for the production of documents is self-explanatory and can be used by homeowners to force the bank to produce the original note or mortgage to verify that it has the legal standing to begin a foreclosure lawsuit. Other documents can also be requested, either directly from the lender or from third parties; some of these might include the sales contract from the real estate agent, closing documents from the title company, an invoice of the appraisal, and so on.

Third parties may also have to be subpoenaed to make them provide the requested information, but they can be a source of important information in raising a foreclosure defense. The court does not need copies of actual discovery requests that borrowers or the lenders make to each other, but they may require that a notice be filed that discovery requests have been fulfilled.

Interrogatories are questions or direct statements that one party asks of the other and can relate to almost anything in regards to the loan. Homeowners should note that this type of discovery can only be sent to parties to the lawsuit, which means anyone suing or being sued. So, it would not be possible to serve them on the mortgage broker or title company unless they are brought into the lawsuit. Also, the Federal Rules of Civil Procedure also limit interrogatory questions to 25 total so it is important to decide on the most important information to get from the mortgage company.

Typically, interrogatory materials begin with a list of definitions so each side is clear on what the other is referring to when using certain words or phrases and will force the bank not to fall back on the position that the homeowners' interrogatories were too vague to respond to. If the definitions are provided to the lender's attorneys, they will have to find out some other way not to answer or simply provide the answer.

Requests for admissions require the bank to admit or deny a particular statement. A position is stated by the homeowners and the bank will be able to respond with a simply "Admit" or "Deny." This helps clarify the issues which are being argued in the case and provides a list of facts that the bank and homeowners agree upon that do not have to be decided by the court. If borrowers are served with this type of discovery, it is vital to respond within the required time period (as determined by the rules of procedure), because a failure to respond is counted as admitting the truthfulness of the bank's requests.

Finally, depositions are a little bit more involved type of discovery and usually consist of questions one party asks anyone else face to face. Anyone can be the subject of a deposition, and these proceedings are done with a court reporter placing the deponent under oath. The main purpose of a deposition is to find out more about the bank's case and question any adverse witnesses that may be trotted out to injure the borrowers' positions. The issue of depositions deserves its own book and several have been written about them, to which homeowners are referred if they wish to use this type of discovery.

But as soon as the bank begins the lawsuit and the homeowners are served with the complaint, they can begin requesting that the bank provide documents and answer interrogatories. These can be done with the intention of forcing the bank to admit that it does not really have a case or its ability to sue is nonexistent or it did not follow the correct notification and pre-foreclosure procedures. Banks typically fail to follow all of the laws and rules, so the more research borrowers do into these laws and the more information they get the lender to provide, the easier it will be to stop foreclosure by shooting down the bank's court case.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Until the arrears due on a defaulted mortgage are paid off, either through a repayment plan, selling the home, or refinancing, the bank will never give up trying to pursue a foreclosure against the owners. No matter how many attempts to take the home fail, the lender and its attorneys will always return to court, filing motions and appeals which are meant to bankrupt the borrowers or intimidate them into giving up their defenses.

Thus, even when a Motion to Dismiss a foreclosure lawsuit is successful, the best the borrowers can hope for is a few extra months to plan for their future without the threat of being evicted. The bank will have to go back to the drawing board and begin the pre-foreclosure and notification processes again, which may take several months. But the loan will end up back in court -- there is little doubt of this happening.

Of course, this does not mean that homeowners should not file extensions for more time and motions to dismiss the case every time they have reason to do so. But eventually, the lender may actually comply with all of the laws in a manner that satisfies the judge in the case. Or else, the judge may just know who is paying the attorney fees and court filing fees in the case (the bank) and simply allow the lawsuit to proceed anyway.

Once this happens, the homeowners must file their answer to the foreclosure lawsuit. Every answer will have three major parts to it, along with a fourth optional part that homeowners may use if the case against the bank warrants it. These parts of the answer are statements admitting or denying the allegations of the bank, a list of defenses, a list of affirmative defenses, and any counter claims the borrowers are making which act as a lawsuit against the mortgage company.

In answering the complaint, then, homeowners will refer to a copy of the bank's allegations and the evidence it is relying upon to make them. If they do not have a copy of the complaint, they may obtain a copy from the clerk of court. Otherwise, it will be close to impossible to admit or deny the bank's arguments if the homeowners have no idea what those arguments are to begin with. And admitting one allegation or another does not necessarily mean the borrowers are admitting fault or that the bank has a right to take the home.

The defenses will list reasons why the homeowners believe the bank should not have filed the lawsuit in the first place. In most answers, these are presented as a list or an outline, rather than meticulously detailed. They simply put the courts and bank on notice of the defenses the borrowers will rely upon if the case goes as far as a trial. But owners do need to list every defense they will use, as they can not raise a new defense later on in the case if it was not contained in the answer or an amended answer.

Affirmative defenses are statements arguing that, while the bank may be right about one of its allegations, it should not matter for one reason or another. Thus, even though the bank may not be completely wrong in suing for foreclosure, judgment should not be awarded in its favor anyway. If the lender fails to meet notification requirements or it is the cause of the foreclosure itself (due to mortgage servicing fraud, for instance), the borrowers may be able to make the case that the bank should not be awarded a foreclosure judgment.

Counter claims act as lawsuits the homeowners file against the bank, but in the context of their answer and defense to the bank's initial lawsuit. Any counter claims the borrowers wish to raise should be included with the answer and not "saved for later." Once the lawsuit involving the mortgage contract has been decided, the borrowers will not have the opportunity to bring it back into court to make claims against the bank. They will have to be raised during the foreclosure lawsuit and listed in the answer for the courts to consider them.

Although it may seem like a lot of work, homeowners can put together a fairly robust defense against the mortgage company by researching a few laws and making sure they use the courts to their advantage. After a Motion for Extension of Time and a Motion to Dismiss have extended the foreclosure legal process by a period of months, it is time to get to the real work of defending the home against the bank's lawsuit. Filing an answer is the first step here, and will put the bank on notice that it will not have an easy time of taking the property from the borrowers without making absolutely sure it has complied with all of the required laws and regulations.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Once homeowners defending their home against foreclosure in court have received additional time by filing a Motion for Extension for Time, the next step is to begin researching their options for the actual defense. But if the bank has committed certain errors in attempting to establish their ability to sue at all, borrowers should hold off on filing their answer until a Motion to Dismiss is decided upon by the judge in the case.

However, there are only a handful of strong reasons for filing a Motion to Dismiss which can stop foreclosure before the the merits of case are even seriously considered. These defenses have much to do with the legal ability of the bank to sue the borrowers in the first place, or its inability to follow the necessary foreclosure laws and comply with notice requirements. But these can often be the most tricky requirements to meet, and any failure can be used against the bank to throw the lawsuit out of court.

Especially if the homeowners know that their loan has been sold around to various lenders and servicing companies, they should contest who actually owns the mortgage at the time of the foreclosure. Banks may be unable to show an assignment of the loan from one company to the next, especially if the lawsuit is being pursued by a large lender or servicer.

One clear indication of this deficiency is if the bank does not attach the note or mortgage to the complaint, either attaching a copy or admitting it does not have possession of the note. It is difficult to establish that a contract has been breached between two parties if the party suing for breach of contract can not even produce the original contract. This is the problem banks run into when they attempt to foreclose on a home but have not done the homework necessary to establish their ownership of that mortgage.

Also, if the borrowers have reason to suspect that the bank did not follow the state and county foreclosure laws dictating how notice of the foreclosure lawsuit must be given, a Motion to Dismiss for Insufficiency of Process may be filed in lieu of an answer to the complaint. Obviously, if the lender has not even fully complied with the requirements to bring a lawsuit in the first place, there is little worth defending, and the homeowners may be able to have the suit thrown out.

The bank will have to restart the foreclosure process all over again, but having the case thrown out the first time will give borrowers extra time to find alternative solutions to foreclosure. Having filed a successful Motion to Dismiss because of the bank's attorneys' mistakes in filing the suit to begin with will also drive up the costs of the foreclosure altogether and may help persuade the mortgage company to come to the negotiating table with a reasonable offer.

Possibly the best aspect of the Motion to Dismiss is that it will drag out the foreclosure for another few weeks at the most and potentially over a month or more. The courts have stated that defendants do not have to file an answer to the complaint until a Motion to Dismiss has been ruled upon. When borrowers file an extension for time, followed by a Motion to Dismiss, the bank's attempts to take the home quickly are put on hold. Although this may cost the homeowner more in the long run in interest and late fees, it also provides a much needed opportunity to look into other defenses or methods to save the home.

For the last few years, the mortgage industry has entered a state of disrepair, with hundreds of lenders going out of business, mortgage securitization firms filing bankruptcy or entering mergers or receiving federal bailouts, and even the nations two largest mortgage buyers, Fannie Mae and Freddie Mac, being nationalized. With all of this going on in addition to an alarming foreclosure crisis, banks may have a difficult time proving they can even sue families for foreclosure. But unless the owners try to have these lawsuits dismissed before they can be ruled upon, banks will continue to be able to steal homes.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Homeowners researching their options for stopping foreclosure in the court system can get bogged down in dozens of different defenses. From the note not being attached to the complaint, to constructive fraud, to to violations of state and federal racketeer influences and corrupt organizations acts (RICO), borrowers may feel overwhelmed at all of the various positions to raise in their defense.

But which ones are the most important and will quickly put the bank on notice that there may be serious deficiencies in its lawsuit? With so many possible defenses, homeowners may rightly feel as if they will never have the time to evaluate every defense, and if they choose one with only a small penalty, the bank will still be able to take the home. Thankfully, there are a few different defenses that should be looked at first, as the issues raised by these have stronger possibilities of alerting the courts to the fact that the lawsuit does not even deserve to be considered.

The first act that homeowners should become familiar with is the Truth in Lending Act (TILA). Violations of certain requirements of TILA can result in the entire loan being rescinded, with every dime the borrowers ever paid on the mortgage returned to them, the foreclosure lawsuit thrown out and, late mortgage payments no longer reflected on the credit report. For a family who is struggling to pay their bills, having their entire down payment and every monthly payment of principal and interest returned to them can be a significant help, not to mention this will stop foreclosure in its tracks.

Violations of other requirements of TILA can also result in the bank being counter sued for monetary damages and attorneys fees. And finally, if the originating lender never provided a right of rescission to the borrowers, the loan may still be able to be rescinded. In any event, this is the federal act that homeowners should initially research and spend the most time attempting to locate violations of, as there are many requirements that lenders must meet, many of which the original loan broker may not even have been aware of.

While violations of the Truth in Lending Act only affect purchase loans, a section within TILA also provides for rescission of refinance loans. The requirements the bank must uphold on refinances are spelled out in the Home Ownership and Equity Protection Act (HOEPA). When a loan falls under HOEPA guidelines, certain disclosure rules must be complied with, in addition to disclosing affiliated business arrangements. If the lender does not meet all of the requirements, the loan may be able to be rescinded if the defense is raised during a foreclosure lawsuit.

Finally, the homeowners can research who actually owns their mortgage at the time of the lawsuit to find out if the bank suing them even has the legal right (standing) to do so. Mortgages have been traded around the industry several times and the mortgage-backed securities made out of them may have changed hands hundreds of times, or there may not have even been an actual owner assigned to the loan. If borrowers suspect that the bank suing them is not the owner of the loan, they can contest this in court and request the lender show the assignment of the mortgage and the original note. If these can not be produced, there is a good chance the bank was not properly assigned the loan and has no ability to sue for foreclosure.

If the bank meets all of the requirements under these acts and legal issues, the homeowners may have to begin digging deeper to find potential violations of federal or state law or the court process. But these three defenses, TILA, HOEPA, and determining the real party in interest, may be the easiest to research and yield the best results for borrowers who are attempting to stop the foreclosure as quickly and most efficiently as possible.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Once the homeowners have gone through the rules that they and the bank's attorneys will need to follow in court and have requested additional time through a Motion for Extension of Time, it is appropriate to begin researching various legal defense options. While many of these defenses against foreclosure may be used in the answer to the complaint, a few of them should be looked into first to determine if filing a Motion to Dismiss is appropriate.

This part of the process can be labor intensive and quite time consuming, so borrowers must be willing to put in the hours of research into how various federal laws work, what would indicate a violation, and what the violation means to the bank's lawsuit. The use of one defense or another will, of course, depend on the homeowners' goals with the house, whether they want to keep it, force the bank to negotiate a mortgage modification or other solution, or simply get as much time as possible to sell or move out.

If they are trying to have a mortgage rescinded entirely, borrowers may not want to raise defenses with a maximum penalty to the bank of a few thousand dollars, for instance. Finding a stricter law with heavier penalties would make more sense. But for homeowners just trying to get some extra time to save up money to move out, the more that can be argued against the bank, the more time the lawsuit will take.

In any case, homeowners trying to stop foreclosure by defending the lawsuit should pay special attention to the defenses that would allow them to have the entire mortgage rescinded or the lawsuit thrown out of court. Certain violations of the Truth in Lending Act (TILA) and the Home Ownership and Equity Protection Act (HOEPA) would result in severe penalties for the bank. As well, the messiness of mortgage assignments may cast doubt on the mortgage company's ability to sue in the first place, if it can not prove it owns the original note.

Also, homeowners should have as one of their goals filing a Motion to Dismiss the case based on the bank's lack of legal standing or failure to follow the notification and pre-foreclosure procedures before initiating the lawsuit. Both the Federal Housing Administration (FHA) and state foreclosure laws dictate what a bank must do before it declares a house to be in foreclosure and attempts to have the homeowners removed by court order. If the lender does not follow these procedures, the lawsuit may be thrown out for the present time until the bank complies with the requirements. And these defenses can be raised before an answer to the complaint is even filed, if a Motion to Dismiss is filed instead.

Filing a Motion for Extension of Time may be almost automatic for homeowners facing foreclosure. The benefits of this apply to nearly all borrowers, including those who want extra time to mount a defense, work with the lender on a solution to foreclosure, or just want an extra few weeks to get their finances in order before moving out. But for those owners who are serious about defending their home in court, the next step after getting more time is simply researching what laws and regulations apply to their case and beginning to mount their defense.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Time is the most critical factor in any foreclosure proceeding. Homeowners never seem to have enough of it, and every solution to the problem takes too much of it. And all the while, the bank is accelerating fees and charges as time goes on, while its attorneys file one motion after another with the court to push the foreclosure through as quickly as possible. This is why borrowers who are defending against the lender need to obtain as much additional time as they can.

Obviously, there are numerous ways to do this, from requesting that the bank simply put the process on hold to filing bankruptcy to stop foreclosure. These methods can be quite effective, and most homeowners overlook simply asking the bank to give them an additional month to sell, refinance, or find another solution to foreclosure. And although most borrowers consider bankruptcy a last resort to save the home, it will put the foreclosure on hold indefinitely until the courts have sorted out the bankruptcy case.

But homeowners can also use their local court to gain additional time to save the house or put together a more suitable defense to the foreclosure lawsuit. By filing a Motion for Extension of Time, borrowers can typically receive at least an additional thirty days to file an answer with the court. Most of the time, lawsuit defendants are given 15-20 days to respond to an initial complaint, which may not be nearly enough time to research the applicable issues and put them into a coherently organized defense.

Borrowers who are facing foreclosure are also notoriously stressed out and uncertain of just how to proceed with their lives. Losing a job or facing a medical emergency can create a crisis moment in the life of a family, and having roughly two weeks to put together a defense to a lawsuit may be impossible.

Thankfully, courts are mostly favorable to a Motion for Extension of Time, and banks rarely even oppose them by filing an objection, especially if the request is for a reasonable amount of time. Of course, if the homeowners ask for an additional year in which to file their answer without repercussions of foreclosure, the courts will view this as nothing more than a blatant attempt to take advantage of the legal system and keep the foreclosure on hold forever.

But reasonable requests for additional time will most often be granted. Once the extra time has expired, however, the homeowners better have filed their answer, if they hope to utilize the government courts to stop foreclosure for good. If the answer if filed after this date, it will probably be thrown out and a default judgment awarded in favor of the lender. Thus, if a Motion for Extension of Time is filed, borrowers must use that time to put together their thoughts and answer the complaint.

Of course, if there is reason to file a Motion to Dismiss instead of an answer, this should be done. As discussed previously, an answer to the complaint does not have to filed until the hearing for the Motion to Dismiss has been held. If homeowners use their additional time from the Motion for Extension of Time to attack the bank's ability to bring the lawsuit at all, they can file a Motion to Dismiss, and avoid filing their answer to the complaint. This will drag out the foreclosure process even longer and make the bank defend its standing to sue in the first place.

The longer a foreclosure lawsuit takes, the more the bank may be willing to come to the negotiating table and offer the borrowers are beneficial solution. Few homeowners utilize the courts effectively and even attend the initial hearing for fear of being thrown into a mythical debtors prison or publicly humiliated, let alone defend the bank's efforts to take their property. But a few simple motions, filed in accordance with the applicable rules of procedure, will put lenders on notice that homeowners will not go down without a fight.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

When dealing with a foreclosure defense, homeowners' largest stumbling block will most likely come from the technical aspects of how the court system works. Various sets of rules are in play in every court in the country, and these rules will have state and local variations that must be taken into account by both parties to the lawsuit and all of the attorneys involved. But the complexity of each of the layers of state and local rules may give homeowners a tremendous advantage in locating areas where the bank violates procedure.

Courts have two different types of rules, one to govern criminal procedures and one for civil. These "Rules of Civil Procedure" will apply to foreclosure cases, as they are disputes between individuals (or corporations) and not violations of state or federal criminal laws. So homeowners should print out their state's rules of procedure, as well as any other rules that may be administered by the local court system. These can usually be printed from the State Supreme Court website, and copies of local rules can be obtained from the individual court.

Many states have now either adopted the Federal Rules of Civil Procedure, or have followed the general layout and numbering system in writing their own rules. If homeowners need to search a specific rule, they may be able to do so through the federal version online and have a general idea of where the similar rule can be found in the state version. But it is also important not to rely only on the federal rules, as changes in wording or numbering may be made by the states.

Homeowners who cite a particular rule in their defense will want to refer to the applicable state rule, rather than the corresponding federal one. This is another reason why it is important to refer to federal rules, since they may be easier to research online and gather definitions and background information about, but always make sure the numbering system follows the state's version, as that will be the set of rules that are followed in the courts where foreclosure cases are generally heard.

Actual violations of various rules will be examined in a future article, but for now, homeowners who are interested in the process of making a defense to a foreclosure lawsuit simply need to have the state and local rules in front of them. This serves a number of purposes that will keep the homeowners' case from being thrown out of court prematurely and possibly put the bank on the defensive.

First, the owners will be able to follow the rules themselves and make sure that the bank can not have the borrowers' case thrown out on some technicality. Second, homeowners can examine the rules looking for violations that the attorneys or bank have committed and attempt to have the bank's lawsuit thrown out. And finally, simply having an awareness of some of the applicable rules will give homeowners more confidence when they must appear at a hearing or state a defense to the bank's allegations.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Homeowners are encouraged to begin learning about how the legal process of foreclosure works and what role the courts play in forcing the loss of a home. Although there are good arguments that the government does not have any authority to take away someone's home, the sad truth is that it will if the owners do not defend their home vigorously in court. But the tactic borrowers use to save a house will widely differ depending on what their goals are for both their short and long term financial health.

One reason homeowners may try and defend against a foreclosure is simply to get as much time as possible before they sell the house, refinance with a foreclosure lender, or just save up enough to move out comfortably. The goal is not to win the case, per se, but to drag out the process in the court system through a series of motions that must be ruled upon, hearings that must be held, and a long discovery process that can take months to be resolved. The bank, of course, will be adding more fees and interest to the loan, but this may not matter much to homeowners who already have scarred credit and need the opportunity to repair their finances.

Another path borrowers can take in defending a foreclosure in court is to try and force the bank to negotiate some aspect of the loan or winning a case that indicates the lender has overcharged for a mortgage. Homeowners may try and drag the process out and request the judge to force the bank to consider a loan modification or other solution, or the owners may try and make the case that, while they are behind on the loan, they should have to pay a lesser amount than the bank is demanding for reinstatement. Winning counter claims against the bank may also lessen the damage of the foreclosure by rewarding the owners with some monetary damages.

Possibly the most risky but certainly the most rewarding method to use in court is trying to show that the bank violated major provisions of the Truth in Lending Act (TILA) and that the loan should be rescinded entirely. This means that the homeowners would get to keep and save their home, the foreclosure would be ended completely, the lien on the house would disappear, and the bank would have to pay back every single penny the homeowners have ever paid the lender. Obviously, this is a very serious loss for the bank, and it is up to homeowners to learn more about the types of violations that would result in rescission of the loan.

Even if they know how the court system works and how to file certain documents in the foreclosure case, without really having an end goal, homeowners may have a severely negative experience in the courts. But as long as they have a clear idea of what they want to accomplish, they can usually get some concessions from the court and their mortgage company, either on their own or with the assistance of a qualified attorney. While every borrower may not win their case by defending against the bank's lawsuit, it is certain that every one who does nothing will lose and the lender will be awarded a swift foreclosure process and auction date.

Defending a Foreclosure
Step 1: Figure Out What You Want
Step 2: Play By The Rules
Step 3: Get More Time
Step 4: Research Your Options
Step 5: Who Owns the Loan and TILA
Step 6: Have the Lawsuit Dismissed
Step 7: Answer the Complaint
Step 8: The Discovery Process
Step 9: Summary Judgment
Step 10: Go to Trial
Step 11: Lose, Win, or Appeal

Once homeowners fall behind on their payments by a few months, the bank will inevitably begin the process of filing foreclosure paperwork. In states where the lender must (or usually does) go to court to be able to have the home auctioned, a lawsuit is filed against the owners. This is when the clock starts really ticking against borrowers, who must file an answer to the bank's lawsuit, but there is a step that may be taken even to delay the process at this initial juncture in the legal process.

When homeowners are served with a foreclosure lawsuit, they are typically given 20-30 days to file their answer with the court. In the answer, they are able to respond to the allegations the bank made in its complaint, state any affirmative defenses, and claim any defenses to the lawsuit. This is when borrowers can really start making the bank defend each of its positions or attack the lender's ability to bring the lawsuit in the first place.

But homeowners can take a step even before filing their answer that may buy them some extra time and force the bank to begin defending its legal action against the borrowers. Filing a Motion to Dismiss before the answer will put the entire foreclosure process in the courts on hold for a time until the Motion to Dismiss can be ruled upon by the judge in the case. With the slow speed at which many courts operate in the country, this simply maneuver can buy homeowners an extra month or more even before the bank can get a foreclosure judgment on the property.

This is also a way to eliminate a lawsuit very quickly without spending more time defending the bank's arguments point by point in a formal answer. The federal rules of civil procedure state that it is not necessary to file an answer to a complaint until a Motion to Dismiss has been ruled upon by the court. It is also important to note that this legal tactic may be called by other names in other states; for example, it may be referred to as a Demurrer o a Preliminary Objection, depending on the state laws and rules.

One way to begin arguing against the bank's lawsuit without filing an answer addressing the entire complaint is to file a Motion to Dismiss based on the bank's inability to bring the lawsuit in the first place. Homeowners can state that the bank has not shown it even owns the mortgage for it to have a claim to any of the borrower's property. If the bank does not have a right to collect the mortgage payments and foreclose, it is not the party in interest and may not bring a foreclosure lawsuit against the owners.

Especially if the mortgage or note with assignment proof is not attached to the complaint, the bank may have trouble showing it is legally allowed to foreclose on the house. Simply filing a copy of the original mortgage or deed of trust is also not quite good enough, as these documents are a matter of public record. The bank must produce evidence that it is the current owner and assignee of the original note.

Insufficiency of process is another defense homeowners can use to file a Motion to Dismiss before addressing the actual substance of the bank's complaint. When banks do not correctly follow the laws and rules in serving the borrowers with the paperwork, the lawsuit is not valid and may be thrown out of court until the lender can get it right. This is mostly a matter of being familiar with the state and local rules of procedure and pointing out which ones the bank and its attorneys have violated.

Jurisdiction and standing are also issues homeowners may raise in a Motion to Dismiss because they force the bank to prove that it is able to bring the lawsuit and that this particular court has jurisdiction over both the homeowners and the issue. If really pressed on the issue, it is doubtful that the bank's attorneys could prove jurisdiction with facts and evidence, rather than mere legal opinions backed by nothing but fancy legal language designed to trick non-lawyer borrowers.

No matter what defenses they make in their Motion to Dismiss, though, homeowners need to be aware that this tactic only puts the foreclosure on hold until the motion can be ruled upon. It does not stop foreclosure entirely, and the clock will begin running out again if the motion is denied.

For this reason, homeowners need to prepare for more than just this one hearing, and should be working on other solutions to foreclosure, as well. Filing the motion, just like requesting a delay of the sheriff sale, is one more good way to get more time, but homeowners who do not have a long-term plan to save their home will end up homeless anyway. It is much better to use these ideas in context, rather than as an end in themselves.

Every step of the process of owning a home and being foreclosed, from applying for the financing to being served with an eviction notice, is heavily regulated by the federal and state governments. While all of these laws are ostensibly designed to protect consumers and homeowners from lenders, the large amount of paperwork these laws create serve mostly to confuse borrowers and allow fraudulent bankers to prey on them.

The foreclosure process itself is no different, although it is almost entirely determined by state laws. Homeowners find themselves thrown into a complex legal system just when they are most unable to afford adequate legal representation. The bank can easily pay several thousand dollars to a local law firm in order to pursue a foreclosure, while the actual victims may just be struggling to put food on their family's table or pay the electric bill.

But mortgage brokers, loan originators, real estate agents, appraisers, title companies, banks, credit reporting agencies, financial investment firms, and foreclosure attorneys are all responsible for following the rules of the real estate and mortgage process. It is inevitable that someone along this chain will miss a disclosure, fail to provide a document, change terms without the borrowers being made aware, or otherwise violate one of the federal or state laws governing these procedures.

And when the bank finally sues owners for a foreclosure, all of these violations can work against the lenders and in favor of homeowners. The Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) are two federal laws that can be used to defend a lawsuit and point out mistakes in the original mortgage, as they cover aspects of a loan from the interest rate, annual percentage rate (APR), disclosure rules, and prohibitions against kickbacks, among many others.

Even if homeowners believe that their loan was done perfectly in accordance with all of the applicable laws (not very likely), simply raising defenses in court based on these laws can drag out a foreclosure case in court for months or years. And if the court finds the lender has violated the TILA, for instance, the entire loan can be rescinded, meaning the borrowers get back every penny they have ever paid since the mortgage was originated and the bank is unable to pursue eviction. Getting back thousands of dollars in monthly payments all at once would certainly help a family in a financial hardship.

But other defenses, while not carrying the weight of a potential rescission, would also allow homeowners to postpone a sheriff sale or eviction, and may even result in monetary damages or an injunction against the bank. This may give borrowers a long period of time in which they can negotiate for a mortgage modification, sell the house, or simply save up money to repair their finances before finally moving out.

There are simply too many laws for the banks to follow to be able to originate and service a loan in accordance with every law out there. While most lenders are fairly strict about following such regulations, the subprime mortgage boom allowed fly-by-night companies to originate one junk loan after another and Wall Street investment firms could never get enough. Now with the collapse of hundreds of mortgage companies, homeowners can and should begin contesting every aspect of a foreclosure that they believe could have been done incorrectly. After all, the burden of proof is on the bank to show it owns a properly executed loan which is in default, a burden of proof that many banks may no longer be able to meet.

An important point that homeowners should consider is keeping on top of all of the court proceedings if the bank sues them for foreclosure. Borrowers have every right to know and defend against any actions taken against them by their lender; simply falling behind on a mortgage payment does not automatically mean eviction is inevitable and will occur randomly, which is what many homeowners irrationally fear. If for no other reason, homeowners should keep up with the legal process just to know how much time they have left to save the house before a sheriff sale or move before being forced out.

The first way to track any foreclosure court proceedings is to keep an eye on the mail, especially any certified letters or documents posted directly on the property. All documents that are filed with the court in connection with a case, from the initial complaint to the order for eviction, must be sent to both the plaintiff and the defendant. Banks often have the local county sheriffs department or a professional process server hand deliver the complaint and any orders of the judge to the homeowners to make sure that they have been notified of all the steps taken during the foreclosure.

Also, many county governments now have the docket for each case available online through the official county website. This may be just a chronological listing of all of the actions taken during the case up to the present time, or it may even include digital scans of the actual documents filed, which may be available for download or purchase. In many cases, the most basic information given will include the contact information of the parties involved in the foreclosure lawsuit, any attorney information, the most recent motions filed and by whom, and if there is a hearing scheduled for any reason and when.

A final way to track foreclosure proceedings through a court is to call or visit the county clerk of court, who retains copies of all documents filed in civil and criminal cases. Homeowners are able to review or make their own copies of the complaint, answer, and all other motions right at the courthouse where a government official can answer (or not) any questions. This is also a useful resource for learning how the foreclosure process works in that individual state and county, as rules and laws vary considerably throughout the country.

One of the most common complaints of homeowners in foreclosure is that they feel they are in the dark about how the process works and how much time they have left. Especially if they have failed to pick up certified letters from the bank or have not read the complaint delivered by the sheriff, it may be difficult to know where their house is in the legal system. Too many homeowners do not find out about the auction of their house until the new buyer shows up to inspect the property or the bank is granted an order for eviction. Even if homeowners have no intention of defending a foreclosure lawsuit, though, they should pay careful attention to where the case is in the courts so that they can adequately plan for the future.

In the foreclosure crisis, it bears mentioning that it takes "two to tango." Homeowners and lenders worked together to take advantage of the low mortgage rates and easy money conditions, and now they are forced to work together to prevent rising defaults from decimating the real estate market. But in this case there may be dozens or hundreds of other parties involved in the dance, as well, as ownership of delinquent mortgages have been called into question.

So homeowners took out a mortgage they did not understand and are now in default of? It seems that few people analyzing the situation have much sympathy for homeowners using the strategy of forcing the lender to show it owns the promissory note and has legal standing to foreclose on the underlying collateral and take the house back. In any such case where borrowers have missed numerous payments, though, it is only the owner of the mortgage that should be able to take the house through foreclosure.

But just who owns the mortgage?

Is it the original subprime lender that is now probably out of business? No, the original lender sold the loan to Wall Street in packages. Loans were originated and at the end of the month, potentially hundreds of similar loans were sold in bulk to Wall Street Investment firms, which may have provided the initial lines of credit to the mortgage originators anyway. In fact, lenders were really just front companies and conduits for Wall Street: money was loaned by Wall Street to homeowners through these lenders, and then Wall Street bought back the loans in order to take further steps to increase their profits on these mortgage collateralized debt obligations (CDOs).

Is it the Wall Street bank? No, investment firms sliced up rights to the packaged loans and sold them to other parties. Once the packages of loans were received by the investment banks, they were put into any number of different accounting vehicles or trust, typically a Structured Investment Vehicle (SIV) based in the Cayman Islands. Rights to payments were categorized by risk and the SIVs issued bonds based which were sold to investors, while rights to collect monthly payments from homeowners were sold to mortgage servicing companies.

Is it the SIV in the Cayman Islands that was assigned the mortgages? No, this was just the bank's financial sleight of hand to get the loans off its balance sheet. In any event, the investment firms sold off the legal ownership of the mortgages once they were securitized. Of course, now that many of these mortgages are going bad at incredible rates, the SIVs may have to be taken back by the banks and claimed on their balance sheets and written down to their current market values. The hundreds of billions of dollars in writedowns already taken may be just the beginning if these SIVs fail to meet the accounting rules for separate treatment. But they are still not the end owners of the mortgages.

Is it the mortgage servicer? No, they only bought the rights to collect the payments and take a portion before sending the rest onto the investors. Homeowners who are forced to negotiate with such a company for a mortgage modification or other solution to foreclosure are often turned down by the servicer because "the investors denied the request" for assistance. The servicing companies have always admitted that the final decision to foreclose or work out a plan is not in their hands; thus, they can not be the owner of the mortgage with full rights to make decisions about the loan.

Is it the investors? No investor was assigned as the owner of any specific mortgage, as the entire point of these mortgage CDOs was to spread the risk around. If hundreds of hedge funds, mutual funds, pension funds, and individual investors own small percentages of a single mortgage, then all of them would have to agree to move ahead with a foreclosure. But even then, if this ownership scheme were the case, then an assignment of the mortgage deed of trust should be somewhere in the names of all of these owners. Of course, this is almost impossible, and no mortgage that was sliced up and sold off in bonds has been assigned to the final investors.

Granted, homeowners who have fallen behind on their mortgage should eventually bite the bullet and try to find a way to stop foreclosure once ownership of their loan has been established in the courts. But if a hedge fund in the Cayman Islands, a pension fund in Australia, and a mutual fund in Chicago are all part owners of this same mortgage, then who could blame the borrowers for fighting this unnecessary complexity any way they can? It may be impossible to negotiate any solution besides foreclosure to such a tangled financial web of lies designed to spread the risk of foreclosure to hundreds of investors but leave all the harm of foreclosure squarely with the borrowers.

After all, it would be a little ridiculous for a bank to issue a mortgage and then the homeowners transfer their rights to the house to thousands of other people to "spread the risk." In fact, banks have clauses in loans to prevent just such a plan from happening with Due on Sale Clauses standard in mortgage contracts.. Homeowners, though, are simply expected to allow their mortgage to be assigned to hundreds of parties counting on their payments who have no real ownership interest in their loan and then quietly, with no fight, watch these same banks and investors foreclose on their house and render them homeless.

In terms of saving a house from foreclosure, defending the lender's lawsuit in court may be one of the most effective ways of going about this. Banks can easily become frustrated at the slowing down of the legal process and are more open to settling the matter out of court. While banks and corrupt judges will try and railroad homeowners defending themselves, hiring a competent attorney may allow borrowers to negotiate a resolution to the foreclosure that benefits all parties involved.

Even without using new or creative defenses to foreclosure, such as a produce the promissory note strategy or a Jerome Daly defense, homeowners can gain the upper hand in the legal system simply by having an attorney attempt to delay the sheriff sale for as long as possible. Every motion filed with the courts will have to be given attention and a potential hearing, all of which delays the bank's ability to take the home and increases the costs of litigating the foreclosure case. Lenders that are already faced with hundreds more foreclosures this year than last year do not want to spend additional time and resources fighting borrowers.

The benefit of hiring an attorney to file such motions to delay the public auction really comes in the form of a stronger negotiating hand in dealing with the bank. Most foreclosure victims simply roll over and let the mortgage company foreclose with no objection in the courts; in fact, banks and lenders' attorneys count on this when initiating the proceedings, hoping for a quick lawsuit and property auction in order to begin regaining losses on the loan. Borrowers who are represented in court by a competent lawyer show the bank that it will cost much more to go through with the lawsuit than simply to settle the matter in some more beneficial way.

Of course, before the bank even gets to the lawsuit portion of the process, homeowners should attempt to work out a mortgage modification or other plan to get the loan back on track. But if the lender does not cooperate with these types of negotiations, then it should not expect the borrowers to cooperate with the foreclosure lawsuit and simply give up the house with no fight. Defending against the court proceedings may be a last resort, but it can be a most effective one for forcing the bank to come to the negotiating table.

There are several different settlement options that homeowners may bring up, as well, depending on the financial circumstances they are currently in. While asking for another chance for a repayment plan is one option for borrowers who can continue to make their payments, those who can not save their homes but wish to avoid the most negative consequences of foreclosure can also negotiate with mortgage companies. All the bank will be offered in return is that the lawsuit defenses will stop and maybe that the owners will keep the property in good condition until ownership is transferred to the bank.

For instance, these types of borrowers can require the bank not to pursue a deficiency judgment after the house is sold, or to accept a deed in lieu of foreclosure instead of pursuing the sheriff sale at all. Another option is to have the bank auction the property for its market value, which will preclude any taxable forgiveness of debt. Borrowers can also ask for extra time, from a few weeks to a month, to stay in the house and move out peacefully, or even request a cash for keys deal in which the bank pays them to move out of the home without causing any damage.

In fact, the types of negotiations homeowners can enter into with lenders are nearly infinite. But none of this can be done without mounting the initial legal defenses in court, or else the bank, its attorneys, and the judge will most likely ignore the borrowers and push the foreclosure forward. This is why understanding the foreclosure process and hiring a competent legal counsel may ensure the best chance for finding a way to stop foreclosure, or at least avoiding the worst financial and credit consequences of defaulting on a mortgage and losing a home.

Every homeowner facing foreclosure, whether it is possible to save the house or not, should do everything possible to put their finances in order before being forced out of the property. In some states, though, the foreclosure process lasts only a few months, which is not always enough time to recover from a hardship and begin to get out of debt and establish a savings plan. This is why most borrowers should do everything they can, in and out of the courts, to delay the sheriff sale and eviction.

The best way to begin gaining extra time to save up, pay down other credit lines, or just find a new place to live after foreclosure is to fight the banks in the local court system. The lender can not take a house through foreclosure without using the county courts, and the (lack of) speed at which government organizations do business can work to the owners' advantage. Once the bank begins its lawsuit, the clock starts ticking -- but homeowners can also push give themselves months worth of extra time simply by playing by the court's own rules.

Once the initial lawsuit paperwork arrives, either via mail or served by a processor or county sheriff, homeowners need to determine how much time they have to file an answer. They are given a specific time period in which to file their answer to the complaint with the county clerk and serve a copy upon the lender. File too late and it is thrown out for not having been completed in time; file too early and the time for foreclosure is shortened. If the courts give defendants 28 days from the date of service to answer a complaint, homeowners may want to file their answer on day 26 or 27.

Then, when the lender gets its copy of the answer to the complaint, it may have another brief period of time to respond, and then the homeowners get a chance to respond to the bank's newest arguments. All of this can take several extra months where the legal process has not made much, if any, progress. As well, this is all before any trial or hearing is set to discuss the motions in front of the local judge in the case. Two extra months of living mortgage free can mean a great deal for homeowners attempting to get back on their feet.

Also, it may not even really matter what arguments the homeowners make in their answer. Although they should contact an attorney or do the requisite legal research on their own to make the best defense possible, if the goal is simply to drag out the process and make the bank prove every aspect of its case, there are a number of ways to delay and argue every minor point. Homeowners can argue that the court does not have proper jurisdiction, the bank did not file its paperwork in accordance with the rules of procedure, the lender does not have possession of the loan and has not standing to complain, and so on. Every argument will require an answer by the bank and will take weeks or months to be heard by the court.

But even this is not the end for each motion that the bank or homeowners file in the foreclosure lawsuit. Whenever the judge makes a decision, either denying or granting a motion, the homeowners can appeal that decision to the higher courts. These types of appeals are called interlocutory appeals and are typically used when a decision may be severely prejudicial to one party. Although it may cost a few hundred dollars to open a case with the appellate court, this process can take up to six months in some areas -- a few hundred dollars to live mortgage free for an extra half a year is certainly worth it for homeowners who need the time. And an appeal can be made on any court decision from pretrial motions to the final judgment.

If all else fails and the owners lose the case due to the bank's diligence in obeying all laws (not likely) or the corruption of the local courts (more likely), the last resort may be to file bankruptcy to stop foreclosure just a few days before the sheriff sale. This can delay the process for an extra few months via the Order for Relief (automatic stay) that prohibits creditors from engaging in any further collection activities after the bankruptcy is filed. In fact, it may be best at the end to discharge the mortgage in Chapter 7 proceedings, stay as long as possible in the house, and then never have to worry about a deficiency judgment.

Homeowners should not have as their primary goal buying a house, defaulting on the mortgage, and then living rent free for nearly a decade. But banks should also not be given a free pass to foreclose on houses without a fight from borrowers. At the very least, homeowners should contest the bank's ability to sue them and make it produce the documents proving it owns their mortgage. For too long, lenders have relied on rising property prices and borrowers unfamiliar with the government court system to make obscene profits through foreclosure; now, with home values in decline and more homeowners facing homelessness than ever before, it is long past the time for them to make a stand.

One of the main problems with foreclosure is that the legal system the banks utilize to force homeowners out of their properties can seem intimidating to those unfamiliar with it. From the original complaint and summons to the eviction order delivered by the sheriff, the entire process is more a show of government force and alliance with financial interests than an attempt to secure justice for homeowners.

The first step in the legal foreclosure process is typically homeowners receiving the bank's complaint. This means they have a certain number of days from the date that they were served with the paperwork to serve their answer to the foreclosure complaint on the bank's attorneys and to file the answer with the court clerk's office.

But, it would not be a legal process if words like "complaint" and "answer" did not have confusing, uncommon meanings. Filing an answer does not just mean sending the attorney a letter explaining why the mortgage is behind -- it is a legal term expressing a certain way of addressing the lender's arguments in its complaint, stating legal defenses and references, and mentioning other positions in contrast to the bank's statements.

An "answer" is a legal term and indicates the homeowners opportunity to fight back against the bank's lawsuit against them. Borrowers can contest the lender's ability to sue for foreclosure in the first place, or attack any of the claims made by the lender in the original lawsuit documents, or point out that the bank has violated court rules or government predatory lending laws and regulations and the complaint is not valid.

Every answer should be unique, depending on the circumstances of the case, where homeowners go in answering the complaint is up to them, but it is usually a good idea to research the correct manner in formatting and filing an answer or consult with an attorney. The rules of procedure that govern such court proceedings are needlessly complex, with state rules, county rules, and individual court rules that must be adhered to, or else the judge can throw out or ignore any motions on technicalities.

The original foreclosure lawsuit paperwork may also have a court date on it somewhere; if not, the homeowners should the courts as soon as possible to find out when it may be held. But in many cases, courts usually do not immediately schedule court dates on an initial complaint. What usually happens is the homeowners file their answer within the required amount of time and then a court date is scheduled once the bank and borrowers have filed any other motions.

In the beginning, though, homeowners should be aware when they are served with the paperwork that they have just been thrown into a complex system of rules, regulations, and judicial discretions. It is almost impossible for any lender, no matter how high-priced or expert the law firm it hires, to follow every necessary clause in every law, any one violation of which may invalidate the entire foreclosure process or even the mortgage itself, depending on what mistakes were made at what time.

There are probably dozens (if not hundreds) of ways in which banks could be construed as to have broken laws, agency regulations, or even the courts rules. Whether any judge will listen to these arguments or simply ignore them in order to railroad homeowners depends on the specifics of the court proceedings, but every borrower should learn at least the basics of the legal process and do whatever they can to stop foreclosure or delay the auction as long as possible before final judgment is awarded to the mortgage company.

It must be noted that we are not giving advice on whether any particular property or borrower can avail themselves of the new FHA loans. For that, the borrower will have to have the situation underwritten by the FHA lender. These comments are generalities only, but bear upon a borrower's consideration of whether they have any real chance of obtaining such a loan.

This Act gives the FHA 300 billion dollars to be used between October of 2008 and September of 2011 to refinance certain loans made prior to January 1, 2008. It is intended to allow homeowners who cannot afford their present loans to refinance them through cooperating lenders and holders. This legislation has been heralded as a way for almost 400,000 homeowners to avoid foreclosure. Critics, however, have noted that the Act really will not help many who will be foreclosed upon. In truth, we believe that the Act will be of some assistance, but cannot help but comment that it, by its basic construct, is not really intended to help most of those in trouble.

To begin with, if one takes 300 billion dollars and divides it by 400,000 expected beneficiaries, that is an average loan size of $75,000 while the average mortgage in the United States is well in excess of $120,000. If that mortgage amount is used, the number of borrowers that can be helped is only 250,000. If there are another 2 million foreclosures over the next 3 years (which may be a low figure) that is less than 15%.

This legislation, in our opinion, was a compromise with powerful banking lobbies. In most markets values have depreciated over 25% over the past 2 years. In many markets that depreciation can be as large as 40%. As will be discussed, the FHA loans cannot be in excess of 90% of today's market value. Thus, in an average market, that means that the present lender would need to forgive almost a third of the loan amount. It has been our experience that, in terms of obtaining deeds in lieu of foreclosure or short sales, lenders are anything but keen to accept losses of that amount. Lenders are under absolutely no requirement of participating in the program at all, or, if so, to any extent. That is the inherent problem with the legislation and evidences the compromise reached.

We believe that it is prudent to assume that, where depreciation has been greatest; generally where foreclosures have been greatest, holders will be unwilling to accept this level of loss. Although one can argue that this loss is still better than what they would experience in a foreclosure, it does not take into account the fact that, in a foreclosure, in most instances, the holder can still pursue the borrower for a deficiency judgment.

Some would say that holders know that they almost can never recover those judgments, and will not try to collect upon them. But, lenders may still use them as leverage to obtain some amount, at some future time. Even if the borrower declares bankruptcy seeking a wage earners Chapter 13 plan, the holder will receive a portion of that deficiency amount. Only some borrowers can obtain a release through a Chapter 7 bankruptcy. In all other instances the holder will garnish wages or attach other assets to receive some amount of the deficiency. For this, and other reasons, lenders may take their chances in a sheriff's sale and simply foreclose.

Other proponents of the Act claim that lenders will be under enormous political pressure to allow FHA refinancing. Although only time will tell, we believe that lenders will largely "dig in their heels" when they think that they can obtain a better deal in a foreclosure.

That is the primary reason why this Act may not be beneficial to many homeowners.

Secondly, the qualifications for an FHA refinancing will disallow many to qualify.

1. The borrower must show that it cannot afford the payments today. Does that mean that, if they can get by on what is considered possible by the FHA, they do not qualify? Will the FHA assume that a family of four must live on $100 per week of groceries; or that they can sell their already financed automobile, or that they can take public transportation even when that is really not feasible? No one has those answers and our guess is that it will vary greatly and subjectively between one administrator and another.
2. The borrower must show that it presently has a ratio of mortgage related expenses to gross income of over 31%. That should not be much of a problem for most families in trouble, however, in more than a few instances, that ratio may be difficult to apply in circumstances where the borrower has variable income-for instance salespeople who have made better money in the past than they are able to make today, or in the future.
3. The borrower must be able to prove the ability to qualify for the new loan based on income that is verifiable through their tax return. While this may be fine for many homeowners, it is not the case for those whose loans were made based on "stated income" at the time of their present loan. This is where a lot of abuse took place and lenders simply "fudged" income numbers. For those in that situation, coming up with tax returns showing the amount of income today, will be very difficult.
4. If there is at present a second mortgage held by a holder other than the first mortgage, that second mortgage must be paid off. In so many instances, borrowers have second home equity or other loans with lenders other than that on the first mortgage. Almost no holder of that second mortgage will agree to simply let the borrower go without obtaining a good portion of that loan. For a huge majority of those with two mortgages, that virtually eliminates the possibility for an FHA loan under this Act.
5. The borrower must be able to put down approximately 3.2% of the new FHA loan (possibly more). Many borrowers are not in the position to do so. They may borrow from someone who is not a party to the transaction, but that loan must be entirely subordinate to the FHA mortgage, meaning that it may not be repaid before the FHA loan is. As these loans are 30 year fixed rate vehicles, that may be a long time.
6. The borrower will pay the FHA rate, considering their creditworthiness and assets. Although that rate may be 25 to 50 basis points (one one hundredth of a percent is a "basis point") less than a convention rate, that may not be the case given the bad credit of most people facing foreclosure. On top of that the borrower must pay an "insurance fee" of 1.5%. When you add that together, it may make the loan rate considerably higher than a conventional rate. Still, of course, the rate applies to a much lower principal balance, so it is still a "good deal". But, in terms of actual monthly payment, perhaps not as good as what may be obtained in a good mortgage modification.
7. If the borrower sells the home or refinances it over the five years after the FHA loan, the amount over the loan amount will be split between the FHA lender and the borrower at a rate starting at 90% to the lender and going down to 50% in year five. This is still, obviously, a good deal for the borrower.
8. The FHA program will only apply to the borrower's primary residence and not to any investment property.
9. The amount of the maximum loan is gauged to the marketplace in which the home is located which is good, in that, in high cost areas, the cap will be larger than in lesser cost areas; however, the cap in high cost areas, may still knock out many loans that are over the conventional limit for a GSE loan.

The borrower must recognize that there is a dilemma which is faced in relying upon the FHA program. From a pure negotiating standpoint, if the borrowers are dead-set upon obtaining the FHA loan, they may miss the opportunity of obtaining a loan modification which will keep them in their home. Some holders of the present loan may dismiss the FHA option out of hand. In that event the borrower must immediately move toward a modification. In order to push their qualification for the FHA loan, the borrowers may show that they cannot handle the present loan and detract from their ability to pay a modified loan. It is critical for a borrower to know exactly when to abandon the hope for the FHA loan and push for a modification. It is also necessary, in convincing the holder to look at the FHA loan, that they not "shoot themselves in the foot" and create a problem in asking for a modification. This is a balancing act that few borrowers and even credit counselors are able to do well.

Remember, the holder is going to look at all of its options. They can foreclose and go after the borrower for a deficiency judgment. They will weigh that against their cost of forcing a "short sale" where they may get more than the 90% of fair market value that the FHA loan provides. In fact, if a home is really worth fair market value, forcing the property to be listed for 90 or more days, may bring in a buyer that pays more to the lender. If they find a buyer for more, they will force the borrower to take the short sale. They will also look at the costs of a mortgage modification which, in many instances, is the best situation for them. That is why we believe that the FHA program will actually help borrowers to obtain a modification that will allow them to stay in the home, more often than the actual making of the FHA loan.

At ForeclosureFish, we believe that our aggressive pursuit of a lender in terms of weighing the cost of a contested foreclosure (based on facts which show them that the origination of the loan may have been done improperly) will give the borrower the greatest hope of obtaining the holder's consent to the FHA program, but, if that does not make sense to them, to allow the borrower to obtain a modification that will comfortably allow the borrower to stay in the home. It is necessary to weigh all of the pros and cons of both approaches, before deciding upon a strategy for negotiation.

The most important element of the legal process known as foreclosure is time. Homeowners never seem to have enough of it to recover fully from their financial hardship, to work out a solution with their lender, or move out of the house before eviction. However, there are a number of ways to put the process on hold even just for a few extra weeks.

Even for families who have no desire or ability to stop foreclosure and keep making payments on a house, it may be helpful for them to live in the property for free for as long as they can. This gives them time to put together a savings plan, pay down other debts, or just begin to recover from the hardship that pushed them into foreclosure. And for homeowners who do want to save their homes, the longer they can try to find a way out, the more likely they will be to succeed.

Probably the most important tactic will be to contest the lender's foreclosure lawsuit at every turn, either through the use of an attorney or by diligently reading and understanding the rules to make motions in court. Banks are often given a free pass by homeowners to steal houses because the lawsuit is not challenged. The mortgage company gets a default judgment and the property is fast-tracked to sheriff sale, while the eviction date approaches ever closer.

The best way to make sure homeowners have more time is simply to answer, contest, or object to every paper that the bank files in court. With thousands of rules and laws and regulations at every level from local to state to federal, it is almost guaranteed the lender did something wrong. The trick is for homeowners to learn how they can identify these rules violations or contest the foreclosure based on other legal concepts, and make the best defense they can.

Of course, it is also vital for the borrowers to make sure that they are following the court rules as closely as possible. Many courts allow between 15-20 days for an answer to be filed after the date of service. The sooner homeowners file their answer, though, the sooner the bank will file its own answer again; thus, for homeowners looking for more time, it may be beneficial to file the paperwork on the 14th or 19th day (depending on when it is due). The lender also needs to be served with any motions filed in court, and sending the paperwork certified or registered mail will take up another few days.

With the length of time a typical lawsuit can take, and the complexity in a contract law case involving foreclosure, this simple tactic can give homeowners 1-2 years of extra time to remain in their home without making a mortgage payment. Two of the more creative methods of defending against a foreclosure that have come up recently is contesting who owns the original loan, and requesting the entire loan be rescinded due to violations of the Truth in Lending (TIL) regulations. Of course, these may not be successful in every case of mortgage foreclosure, but getting more time to work on a long-term solution is the main goal.

But combined with a contingency plan for bankruptcy, homeowners can take even more time to plan for their financial futures and eliminate one of the last remaining headaches -- their other debt. Declaring bankruptcy even just a few days or hours before a sheriff sale has the effect of immediately stopping the auction and putting the foreclosure process on hold while the issue is tied up in bankruptcy court. This can give borrowers another few months to stay in their home mortgage free and save up money.

Also, if the homeowners are in foreclosure because of a financial hardship, and have loads of other credit lines that are in default, it may make sense for them to discharge these debts and get a fresh start with Chapter 7 bankruptcy. Once the mortgage is finally dealt with and the owners have to move out (hopefully years after the initial missed payment), there may be little logical reason to keep paying other unsecured debts like credit cards or personal loans with skyrocketing interest rates and huge junk fees.

A few thousand dollars in credit card debt can quickly balloon to tens of thousands of dollars once interest rates go up to 29%, and homeowners just getting over a foreclosure may not want to deal with this past headache. As well, with two years of late mortgage payments and a foreclosure, their credit can not get any worse so it may be the perfect time for bankruptcy. Hopefully with two years of savings, homeowners will not feel compelled to borrow money at 19% interest ever again. Bankruptcy can give such families the one way ticket they need out of the debt trap.

Homeowners are facing foreclosure in record numbers due to the predatory lending, financing, and investing activities of the largest banks in the world. Much of the coming depression was engineered, either inadvertently or purposely, and it is up to the borrowers to defend themselves against the economic devastation anyway they can. It is a mistake for homeowners to give these lenders a free pass, allow them to foreclose with no objections, move out of a house too soon, and put the financial health of the banks ahead of their families' futures by continuing to make impossible payments on debt that was never designed to be paid back.

When homeowners receive a bank's foreclosure complaint in the mail, they are usually given from fourteen days to a month to file an answer with the court. While the circumstances of the situation should determine how exactly the owners will respond to the lawsuit, there are a number of different options they may consider when fighting back against their lender's attempt to auction the house.

In most cases, though, the first thing homeowners may wish to do is consult with a local attorney to make sure that they are accurately following all of the local and state Rules of Procedure. It may be as good an idea to read the rules on their own and begin to formulate their answer to the complaint based on them. If the rules of procedure are not followed to the letter, there is a good chance the bank's lawyers will attempt to have the answer discounted or thrown out altogether.

The bank, in its original complaint, must lay out a number of issues and prove certain elements of its case to the court. For example, the bank must show that it has a legally binding contract with the homeowners, that the bank performed its end of the contract as agreed, the homeowners breached the contract, and that because of this breach the bank has suffered actual damages. If the bank fails to make its case on any one of these points, it may not be able to prove it is entitled to foreclosure of the house.

Recently, one defense against a certain element of the bank's case has becoming increasingly popular. Since the bank must prove that it has a contract between itself and the homeowners, some borrowers have used this to challenge the lender's ownership of the mortgage loan. If the lender can not show that it owns the loan, there exists no contract between the two parties, and the bank can not sue for foreclosure. The fact that many prime and subprime mortgages were packed up and sold off in slices and never had individual owners assigned to them from the huge pool of investors means that many mortgage are floating around with no real party to the contract who is due the monthly payments and has standing to sue the owners.

Rules of procedure also apply to the mortgage company and its attorneys when attempting to sue homeowners. If the borrowers can show blatant disregard or breaking of certain rules, the court may have no choice but to throw the case out of court for the time being. The bank may be able to start over from square one and bring the suit back into court, but at least the attorneys will be a little more careful next time and the homeowners will have bought more time to find a longer-term solution to foreclosure.

Certain jurisdictional issues may also come up, if the owners do not believe that the court in which the bank brought its lawsuit has the power to compel them to answer the complaint. In fact, it may be very difficult for any plaintiff to prove that the court has jurisdiction over the defendant, for the simple fact that the entire issue is based more on legal opinions than concrete facts. Proving jurisdiction factually, if the owners really want to stick the issue, may create problems for the lender's attorneys.

Of course, no legal defense may be good enough in the presence of a corrupt judge who railroads every homeowner through the system and throws out objections on any grounds possible. County courts, through the filing fees paid by lenders seeking foreclosure judgments, have a financial incentive to keep their clients, the banks, happy and get in and out as many cases as the court can reasonably handle, regardless of the economic health of the area's homeownership community. In such cases, homeowners should make their case but also know when to appeal bad decisions and when to give up and simply move on.

For borrowers who really want to stop foreclosure any way possible, answering the foreclosure complaint is a virtual necessity. Even if it just drags on the process for a few extra months, the additional time may present a final solution to the mortgage. But homeowners can also make a strong case in the courts and may have a good chance of having the bank's lawsuit thrown out for now. There are various ways to go about filing an answer, and borrowers should consult their county and states rules of procedure, but the widespread corruption and deception in the mortgage markets over the past years may make it somewhat easier to shoot down a bank's arguments.

For homeowners who have dealt with the loss of a home due to a mortgage company's fraud, misconduct, or illegal activities, it is little surprise that banks most often win their foreclosure lawsuits against the clients they target. Nearly all of the laws are designed to give some token disclosure notices but, more importantly, make sure that homeowners are kept as much in the dark as possible about what is actually happening to them in the mortgage process.

There have been a surprising number of cases coming out in the news lately, however, that illustrates just how corrupt the mortgage industry had become in the decades-long run-up to the boom and the orgy of bad loans during the subprime fiasco. Mortgage servicing fraud, banks taking advantage of bankruptcy laws, the impossibility of banks to prove they own the mortgage to have standing to sue for foreclosure, and now violations of the Truth in Lending Act may eventually give homeowners some new opportunities to hold their lenders accountable.

Mortgage servicing fraud occurs when a servicing company is hired by the financial institution which holds a mortgage to collect payments from the homeowners and take care of the administration of the loan. Because the financial companies are more interested in getting as much as they can out of homeowners, and the fact that simply collecting interest does not provide a huge return, servicers routinely turn to fraudulent methods of jacking up loan fees and pushing homes into foreclosure for the purpose of resale at a higher price.

Homeowners who have gone through this type of predatory collecting report the forced insurance, escrow account balance discrepancies, obscene legal and late fees, and other charges that can add tens of thousands of dollars to their mortgage balance. Although they may initially believe it to be some sort of dreadful mistake on the part of the lenders, many quickly realize that their efforts to stop foreclosure are thwarted at every turn by the bank's lawyers. Numerous class action lawsuits have resulted in some servicing companies being forced to pay their victims, but this often comes at a much later date than the initial foreclosure and the companies are given a slap on the wrist and allowed to continue perpetuating fraud on clients.

This kind of fraud and obscene profit taking by mortgage companies is also apparent in the bankruptcy process. The bankruptcy reform laws were designed to prevent borrowers from taking advantage of the process to avoid their loan obligations. However, this was never a problem so much as the huge fees, interest charges, late charges, and so on that banks charge to homeowners (and other borrowers) once they fall behind on their payments.

Bankruptcy courts have recognized this, although there is little that they can do about first mortgages right now in terms of lowering the total balance owned. There has been some talk of allowing bankruptcy court judges to reduce the total to be more in line with the actual value of a given property, but this proposal has so far gone nowhere in Congress. Banks and their constituents, the politicians, have argued against giving this kind of power to people to wield in their most desperate financial hour against banks.

One of the more surprising defenses that homeowners have used recently to fight a foreclosure lawsuit is demanding that the bank prove to the courts that it has the original mortgage contract and has standing to sue for foreclosure. With the Enronization of the mortgage industry, this can be a difficult requirement to meet for the banks, which often only hold various rights to a portion of the mortgage. The loans were sliced up and sold off to investors in packages, meaning that no one in particular was ever assigned ownership of a particular mortgage. For some courts, this has indicated that the company coming in to sue for foreclosure has no right to do so, since no one can sue for default of a contract they do not own.

Finally, a relatively new type of lawsuit by homeowners against banks has been to point out blatant disregard of the Truth in Lending Act (TIL) and that the bank failed to provide disclosures required by law. A class action suit that is being allowed to proceed against a lender is seeking that mortgages found to be in violation of the act be rescinded, or canceled altogether. Clear violations of the TIL have never been taken lightly, but the possibility of lenders having to release their loans because of this fraud should cause significant worry in the boardrooms of many of the largest mortgage companies.

If the plaintiffs receive a victory in this case, it could be a significant victory for homeowners facing foreclosure, many of whom were not given required disclosures or did not fully understand how their mortgage worked. With so many admissions by financial professionals that no one working for the banks knew exactly how the loans worked, it may be somewhat easy for homeowners to make this case even if they did sign the disclosures. After all, if not even the bank's high-priced lawyers can explain how the mortgage works, then how could the homeowners themselves really understand them?

State attorneys general have also gotten in on the new game of suing lenders long after the fraud has been perpetrated on the constituents of the states. Countrywide Financial Corp., one of the largest mortgage lenders in the country and one hardest hit by the subprime fallout, has been sued by three states so far for such practices as misleading customers, making risky loans, discriminatory lending, and deception. The states are attempting to have the lender pay for its violations and unfair business practices and provide restitution to homeowners, although this may be a bit too late for homeowners who have already lost their homes.

Although it may seem like small consolation to homeowners trying to find some way to hold onto their homes, any new legal methods to fight back against the bank should be welcome tools. There is still no guarantee that corrupt judges will not just let banks railroad homeowners attempting to defend themselves, and the banks will fight back against these tactics vigorously. However, the growing trend of using the bank's own profit-maximization-risk-elimination schemes against them may point to more power of homeowners and local and state governments to make sure that banks can not come pump and dump the wealth of a community, taking massive profits and leaving massive poverty in their wakes.

One of the more creative defenses to a foreclosure lawsuit that has surfaced in the past year is that of requesting the foreclosing bank to prove that it owns the mortgage note and has standing to sue the homeowners. In the vast majority of foreclosure actions, banks do not produce the original note, instead relying on the ignorance of homeowners not to challenge the bank's positions.

But with the predatory lending and investing that went on during the boom years of the subprime mortgage industry, many of these loans have been sliced up and sold off piece by piece, packaged into mortgage-backed securities and sold to hedge funds, pension funds, and other investors. In fact, the originating mortgage companies may now be completely out of business, with the collapse of the subprime industry claiming over 250 lenders so far.

So the loans were originated by a company that is now out of business, and then it was sliced up and the rights to various parts of the mortgage were sold to other companies. But in order to sue for foreclosure, the bank initiating the lawsuit must have been assigned the mortgage, and investors in the mortgage-backed securities are not even assigned ownership in a specific property unless and until the homeowners fall behind on the payments. They have simply been bundled up into one huge pool of mortgages with no specific owners of any particular note.

Thus, the companies that invested in these mortgage securities were not parties to the original transaction -- they never participated directly in the origination of the mortgage nor its subsequent sale. Investors are merely assigned to particular mortgages after the fact, and there was no true sale of the security to the investors, which is an element of a valid securities sale. Investors and banks, it seems, can not prove the own the mortgages, can not prove that they were assigned a particular mortgage that they are now suffering damage from its default, and can not show that they even bought a legitimate security.

And these are the companies that are presuming to sue homeowners for foreclosure! After doing everything they could to induce people into fraudulent loans and limit their own exposure to the inevitable defaults, banks are discovering that all of these shenanigans have only insulated them against actual ownership of the loan. So, because lenders rely on the ignorance of homeowners to foreclose anyway, this is the defense they have turned to for the majority of foreclosure cases.

Many lenders are now submitting an affidavit to the courts that they do not own the original loan but they swear they have standing to complain against the homeowners. Essentially, they are just requesting that the judge take it on their word that they can sue for foreclosure and are counting on homeowners not challenging this position. Unfortunately, few homeowners read the foreclosure paperwork or hire an attorney to defend them, so they do not realize just how shaky the bank's lawsuit really is.

This is just one more vitally important reason that homeowners should read the paperwork they are sent by their lenders and challenge everything that seems unfair to them. Especially if the mortgage company is claiming that they have the right to sue but can not prove they have that right, borrowers may wish to consult a contract attorney who can help them defend against the lender's misconduct. Such a legal defense may only stop foreclosure for a short period of time, but it is up to the banks to prove homeowners should lose their homes -- not for homeowners to supplicate themselves at the feet of predatory banks and corrupt judges.

Does foreclosure create a debt when the bank files the lawsuit? What happens if there is a judgment -- do the homeowners owe both the mortgage and the judgment now? These are some of the questions that homeowners have when facing the loss of their homes. Due to the complex nature of credit and finance, it is quite easy to get confused about how mortgages work and what happens during foreclosure.

However, foreclosure is not a debt; it is a legal process taken by a mortgage lender when a debt secured by a property goes into default. The foreclosure itself is the method by which a mortgage company will attempt to use the local court system to take a house back from homeowners who have failed to pay their mortgage as determined by the terms of the original contract. It is not a debt in itself, but it is the legal mechanism by which a bank can collect a debt secured by real estate.

The debt the property owners owe to the bank is the mortgage balance that is currently due on the property. Homeowners take out a loan for a certain principal amount and agree to pay a set interest rate on the money borrowed, plus any other fees or charges that are listed in the loan documents. These extra charges typically have trigger effects, such as paying after the due date will trigger a late payment, or defaulting on the loan will trigger legal fees and court costs that will be added to the balance of the loan.

Taken together, the principal, unpaid interest, and other charges constitute the debt owed to the mortgage company to pay off the loan in full. The bank, when they sue for the foreclosure, are stating that the homeowners need to pay this amount in order to keep the house, or else the house will be auctioned by the government to satisfy this debt. Of course, the court has to agree to this amount -- banks can not just add fees arbitrarily or unreasonably -- but few homeowners defend against the foreclosure lawsuit, which allows banks to get away with adding any fees they wish without justification.

Thus, when a bank pursues a foreclosure on a house, the legal process does not create a debt owed by the homeowners to the lender; this debt already exists as the mortgage on the property. Suing for foreclosure only indicates that the bank is attempting to prove in court that they are unable to collect their payments which the borrowers agreed to make when they took out the loan. Because of this default and the fact that the property was pledged as collateral for the loan, the bank is requesting that the court order the property to be sold to satisfy the debt that already exists as the mortgage.

The judgment that the bank is typically granted against the homeowners is simply the judge's decision that recognizes that the lender is owed a certain amount of money and that the owners have not paid it. Even this does not create a second debt that must be paid back; it is simply a local judge agreeing with the bank and ordering that the house will be auctioned at a sheriff sale to pay off the defaulted loan. The judgment amount is always based on the total payoff amount that the homeowners would need to come up with in order to own their home free and clear.

Homeowners in foreclosure always owe only one debt per mortgage that they have on the house. The foreclosure process can not even begin without a lender or creditor showing that they are owed a specific amount of money on a debt they own, that the owners have not paid this nor made arrangements to pay, and that the property is fair game to auction to satisfy the debt. If a creditor can not prove these facts, as well as the other elements of a foreclosure case, then the homeowners can only lose by not showing up at the court date or by having corrupt government officials overseeing it.

With all of the fraud and deception coming to light during the current foreclosure crisis, it is easy to overlook the massive fraud that has been a staple of the mortgage industry for years. When loans are originated, they are often quickly sold off to large investment banks, which then hire mortgage servicing companies to collect the monthly payments.

But these servicers have been involved in the practice of stealing homes from uninformed, vulnerable property owners through a variety of schemes. They may hold payments made on time for a few extra days, thereby making them late, or place forced property insurance onto an already-insured home, or engage in any number of other activities that set up an easy foreclosure if homeowners fall behind due to a hardship.

This is the type of situation that gives servicing companies a bad name and exposes them to widespread claims of mortgage servicing fraud. Misapplied payments and selling the loan without informing the homeowners of the new creditor are two common activities these companies engage in that pushes homeowners straight into foreclosure and make it more difficult for the owners to find out what is really happening to them.

Homeowners, of course, have rights and can try to protect themselves against such deceitful acts by the lenders, but it is often very difficult for them to win court battles without a class action lawsuit. One reason for this is that the banks pay hefty filing fees to initiate the lawsuit, which pays the salaries of the judges and court employees; and they also hire high-priced attorneys who will lie, misrepresent, violate rules, and otherwise fight as hard for the mortgage company as they can to keep their client happy.

In cases of suspected mortgage fraud, possibly the best action homeowners can take is to learn as much about foreclosure and the legal process as possible. If it is not possible to hire their own attorney, then they need to understand what resources they have in the court system to put an end to the fraudulent foreclosure. This will not guarantee they will be able to stop foreclosure, but they may learn enough about the scam to help themselves or others avoid it in the future.

It is also in their best interests to consult with a company or attorneys who specialize in such cases of mortgage lender misconduct to determine if the bank has violated any state foreclosure laws or rules of procedure. If this is the case, the entire foreclosure may be reversed and the bank will have to start all over again from the beginning, or give up their lawsuit if they can not prove their case or follow the rules.

One of the more devious aspects to situations like these, however, is that the mortgage servicing company will keep making these "clerical errors" like misapplying payments or putting forced insurance onto a property and never inform the owners. But if the owners miss a mortgage payment, then the foreclosure process will start up and proceed very swiftly, while the bank uses its own errors and fraud to pile on the reasons that the homeowners have defaulted on their mortgage.

Because they often engage in such fraud and misconduct, servicing companies in particular seem to feel the need to move forward as quickly as possible with the foreclosure. This has the effect of pushing the owners into a desperate attempt to save the house any way possible, instead of examining critically the errors that the bank is making in the process.

The fact that the homeowners will often miss a payment also leads them to blame themselves for the situation, rather than the mortgage company's fraud and mistakes. The entire foreclosure lawsuit is often nothing more than a distraction, a legal method of stealing a home that relies on the desperation and ignorance of the owners to fail to recognize the scam.

One of the most serious decisions homeowners facing foreclosure may be asked to make is to sign over the deed to their home. Transferring ownership of the property diminishes their ability to keep control over the house, and may just reward a scammer with an easy target. Just as serious and potentially dangerous, though, is the decision to sign over a power of attorney to a third party to represent the homeowners.

Homeowners in financial hardships who are being sued for foreclosure need to be cautious when anyone says they can help them if the owners just sign over a power of attorney to the third party. Oftentimes, this will be in the context of selling the property to a Realtor or investor through a short sale. The question the homeowners should ask is what the third party will do to "take care" of the foreclosure lawsuit and other matters, and if they can help the owners do these tasks on their own without giving them the power to represent them as attorney in regards to the foreclosed house.

Anyone requesting the power of attorney to take care of the legal issues surrounding the foreclosure may be especially suspect. The summons is simply a legal document that the court sends foreclosure victims to inform them that they are being sued. The bank is suing for foreclosure of the house, and the people responsible for paying the mortgage are being "summoned" to court to make an answer to the lawsuit. Either the homeowners or their attorney can file an answer with the court or request more time to sell the home.

For this reason, it may be a better idea to hire an actual real estate attorney or contract attorney to help in dealing with the courts and the Realtor or investor who wants the short sale. That way, the homeowners will know who they are hiring and that the attorney is competent to deal with the legal process of the foreclosure. Just giving any third party power over the home is usually not a good idea, and is something that will be taken advantage of.

In fact, the vast majority short sales set up by real estate agents or private investors do not involve the owners signing a power of attorney. A power of attorney would be used if the owners were disabled or otherwise unable to get to court to represent themselves and they wanted someone else to represent them just in that one instance of the foreclosure lawsuit. These types of limited powers of attorney are more common between family members or trusted friends, rather than third parties trying to put together a deal in their own best interests.

Unless there are a lot of other protections for the owners in the deal, it might not be a good idea at all to sign over power over the house. Maybe if they can revoke any decisions made by the representative, they will be able to retain enough power to rescind any bad decisions made by the limited attorney. However, even in this case, it is more likely the third party who will benefit the most from having near-complete control over the fate of the house.

Thus, it would probably be best if the foreclosure victims found a Realtor or investor who guided them in what to do about the summons on their own, and was just there to facilitate the short sale or other deal to stop foreclosure. Realtors already represent the homeowners if they are listing the house for sale or attempting to locate buyers -- owners do not need to give them even more power to represent them in court, as well.

One very real danger is that they will use the power of attorney to sign over the deed to the house into their names. Then the owners will have no way of defending themselves in court on their own because of the power of attorney, and will not even have control of the property anymore because ownership was transferred into someone else's name. Homeowners need to be careful of what powers they are signing away and how they will be used.

Giving away any power during the foreclosure process is a decision that homeowners can not make lightly. Simple promises from a third party of "help to save the home" and assurances to "trust me" are just plays upon the emotions of desperate homeowners and should be viewed with extreme skepticism. Foreclosure is a situation when homeowners should try to keep as much control over their property as they possibly can, and signing a power of attorney can have just as destructive consequences as signing over the deed to the house.

There has been such a backlash against the subprime mortgage market that even homeowners in foreclosure have realized the fraud that has been perpetrated on them. In such times of economic crisis and blatant corruption, government representatives have little choice but to pretend they are protecting the public from greedy mortgage companies and bad loan products.

It is in this environment that some homeowners have begun to contest their foreclosures and have actually had some lawsuits thrown out of court until the bank can prove its case. The two most publicized cases have involved the ownership of the mortgage paperwork and the lender having standing to sue for foreclosure, and the underlying fraud of the loan contract invalidating the entire agreement.

The first type of case, in which the homeowners ask for proof that the foreclosing bank has the ability to sue, has certainly been a temporary blow to the banks. One of the main reasons for inflating the subprime market was so that loan originators could sell the mortgages to financial institutions or other banks which could then sell the rights to the monthly mortgage payment income to investors and transfer the responsibility to collect these payments to specialized mortgage servicing companies.

The problem with this approach is that it has resulted in the slicing up of the mortgage contract, with no party really having ownership of the original paperwork. When homeowners fall behind, the servicer or trustee tries to initiate lawsuit proceedings to sell the house at a foreclosure auction, but judges are beginning to realize that neither of these parties originated the mortgage and can not prove that they own the loan.

In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit into court, they must have been assigned the mortgage. Because this was not done in many cases where mortgages were originated and quickly sold off in large loan packages, banks do not have signed assignment paperwork; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company.

This puts these mortgage loans into a kind of limbo, where the homeowners are not making their payments but the banks can not prove they have any rights to those payments anyway. Homeowners who argue this case have met with some level of success so far, with the banks being forced to stop foreclosure proceedings on the house until they can prove they were assigned the loan from the originating company.

The only drawback to this victory for the homeowners is that these cases are being dismissed without prejudice, meaning that the bank can begin the lawsuit again if they can prove ownership of the mortgage. The judges are not ruling on the merits of the case (whether the owners are behind and their home must be auctioned to satisfy the debt), but only on the lack of standing to sue -- if the bank can get an original assignment, they can begin to foreclose again.

But in a mortgage environment where so many homeowners were given bad loans that they did not deserve and banks are being bailed out by the public for bad loans they never should have made, it is only fitting that the owners should score a handful of victories in the courts. In the future, there is a good possibility that judges will argue that banks do not need to own loans to foreclose on houses, thereby erasing the legal standing defense of people against corporations; but for now, homeowners have one more defense they can use to stop foreclosure.

In nearly all cases of foreclosure, when the bank files its initial lawsuit, the homeowners have a chance to respond to the complaint and file their own answer. The problem is that, while mortgage companies hire local lawyers, the owners of the house may have little idea of how to go about filing an answer. While this is an extremely variable topic, with local, county, and state rules all coming into play, a small introduction may help homeowners find the confidence to take on the bank in court.

First of all, though, any specific contents that can be put into the answer should probably be discussed with an attorney to make sure the language is accurate and all court rules are followed, or homeowners can research these issues on their own. Every foreclosure case is a little different and individual circumstances can be addressed specifically in the homeowners' answer.

In terms of just filing the answer in the correct manner, homeowners should take a look at how the original foreclosure complaint is structured. The bank must send them a copy of the complaint (usually served by the county sheriff or sent Certified Mail). The case number and caption (Bank vs. You), and all of the "}" marks should be included in the foreclosure victims' answer to make sure they are using the proper form. Judges will throw out their answer if it is not formatted correctly and does not include all of the proper information.

Procedure and silly rules come before justice and the right to a fair and meaningful hearing, so homeowners need to read up a little on their local rules of procedure, as well as the state rules of procedure. They can usually just do an online search and find the rules; e.g., Michigan rules of court procedure, Cook County rules of court procedure. Those should inform the defendants of any other silly rules they will need to be aware of, such as if the defendant's answer has to be printed on blue paper or other such nonsense designed to make nonlawyers lose their cases on technical matters.

Once they have the answer formatted correctly and the content is to their liking, the next step for the homeowners is to file the paperwork with the county clerk of courts. There are two ways to do this: by mail or in person. In most counties, they can simply mail in the answer to the county courthouse and the clerk's office will file it with the appropriate court case. Otherwise, homeowners can go to the courthouse and ask for the clerk's office. Then they will need to ask to file their answer with the clerk. Also, most government employees have absolutely no familiarity with private individuals doing anything on their own, so homeowners may have to deal with mass confusion and incompetence at the courthouse before their paperwork is filed correctly.

It is also important that homeowners bring at least one extra copy of their answer with them, so they can have it stamped in the clerk's office and then sent to the mortgage company and their local attorneys. These parties need to be served with any documents the homeowners file, so they should be sent a copy Certified Mail with a return receipt. This way, the judge can not throw out the answer just because it was never seen by the lender or its attorneys. If they never saw it, let it be the bank's fault -- not the homeowners.

What I would do for the contents of my answer is simply file a Motion to Dismiss before anything else. That would be based on a lack of standing by the bank to sue for foreclosure and no jurisdiction of the courts over the matter. If I am presumed innocent of the foreclosure lawsuit, then the judge has to presume me innocent also of jurisdiction, which is an element of any justiciable controversy. Lenders (and everyone else) never prove with facts jurisdiction or standing to complain -- they just assume they have it based on their own legal opinions, which are backed by nothing. Far too often, people let the bank off on this point.

Let the banks prove what they want to prove; the burden of proof is entirely on the mortgage company and they can not prove anything with facts, which is why they hide behind complicated-sounding legal opinions. In the meantime, I would question and contest every single nonsensical legal opinion (and they are all nonsensical), and ask for the facts backing up their case. I do not want more legal opinions, since we all have those and I can not question an opinion like I can a fact. And if the opinion is not backed up by a fact that I can contest, then it is just as worthless as any other opinion, legal or otherwise.

Answering a complaint in any manner does not guarantee that the homeowners will get out of their foreclosure with their ownership interest in the house intact. In fact, they may do nothing more than enrage the judge and expose the scams inherent in the judicial system. This may set up the case for a longer process through the courts and then through an appeals process, depending on how many rules of procedure the judge allows the bank to violate. But when homeowners are trying to stop foreclosure or delay the process for as long as possible, using the courts they fund through their taxes should be one line of self-defense against fraudulent lenders.

The following article should probably be considered for educational or entertainment purposes only. It is rare to find such a knowledgeable judge working for government that puts the interest of the individual over the financial interests of the banks and their system of credit and money creation. Homeowners facing foreclosure should absolutely be aware of this case and the arguments, but taking any of this as actual legal advice should be warned against.

I first stumbled across the very curious case of Jerome Daly through an article by Ellen Brown, author of the book Web of Debt. It concerns a foreclosure case in Minnesota in 1968 that has yet to be overturned, and the issues go straight to the heart of the sleight of hand that the banking system is built upon. The case also presents an optimistic view of how individuals can take back the power to create money from the private banks.

Jerome Daly was a homeowner living in Minnesota who stopped paying his mortgage. The lender, First National Bank of Montgomery, of course, sued the man for foreclosure. Daly presented his argument before a jury as to why he did not owe the bank anything.

Essentially, he argued that the bank had not provided any consideration for Daly's promise to pay back the loan. Consideration is one of the requirements for a valid contract, and without it, a contract is void. Daly was arguing that the mortgage contract was void and did not need to be repaid because the bank had not actually given him any money. The lender had created the money out of thin air in response to the promise to repay the loan.

This credit, argued Daly, was not real money that counted as consideration and therefore did not need to be paid back. Without valid consideration, the mortgage contract was null and void and nothing was owed to the bank. Astoundingly enough, the jury agreed with him and declared that the mortgage was not a valid contract.

The judge and a representative testifying on behalf of the bank also agreed with Daly's argument, in effect. The bank's president, Mr. Morgan, admitted that the money did not exist until Daly was given the mortgage, and the money was created out of thin air.

The judge wrote a supporting decision in the case agreeing with Daly, writing "The money and credit first came into existence when they created it. Mr. Morgan [the bank's president] admitted that no United States Law or Statute existed which gave him the right to do this." Thus, the lending of the money to Daly in the form of a mortgage did not constitute valid consideration. The bank did not even have the authority to create money out of thin air according to any known law or statute.

This case has been suppressed far more than argued against, and it has not been overturned. What this means to homeowners facing foreclosure is that they may not even owe their bank any money, and the lender is trying to take the home to pay an illegal contract. This case is, quite possibly, a get out of debt-jail free card.

But that does not mean that the local judges will allow these kinds of rational arguments in their courtrooms. Just because mortgage contracts can be proven invalid and the lending system a scam does not mean that corrupt judicial systems will allow the truth to be told about the equally-corrupt banking system. Political power and money work hand-in-hand.

Thus, it should not be surprising that people who have used the Daly arguments to protect against foreclosure have not always been successful in finding a court to listen to them. Rubber stamping foreclosure lawsuits generates good money for lawyers in the form of legal fees and for local county courts in the form of filing fees. (Of course, neither of these parties seem to be aware that the money they are helping to steal was created out of thin air itself, and they are selling out fellow human beings to an illusion.)

Homeowners, as I mentioned above, should be aware of this argument, because it shows the banking system to be the scam that it is. Now that so many more homeowners were given bad loans and are losing their houses because of them, will more of them rely on the argument of a void mortgage contract and the unconstitutionality of the monetary system itself? That remains to be seen, but it is a convincing, rational, and very interesting argument that Daly put forth. Even more interesting is that the judge and jury agreed with him.

But, on the less interesting side will always be the corrupt judges, lawyers, and others who benefit from the banking scam. As one of them stated in regards to this issue, "If I let you do that -- you and everyone else -- it would bring the whole system down... I cannot let you go behind the bar of the bank... We are not going behind that curtain!" The "whole system" supports the banks and the government -- why should we expect them to help people defend against unlawful acts and contracts?

Over the weekend, we received an interesting email from a former homeowner who had lost a house to a sheriff sale. The experience of this foreclosure victims illustrates the fact that many of those in danger of losing their homes are unaware of many aspects of how foreclosure works, both before and after an auction. The full text of this email, somewhat corrected for grammar, is represented below:

You are probably aware of this, but please tell people in your articles to be aware of any other defendants' names on the foreclosure. I broke my back in 1999 and became disabled, losing my income, and the Bank of America foreclosed on me in 2001. Unbeknown to me, I had a surplus at the auction of $30 thousand dollars, which was given to the county and then to the state as unclaimed. In 2006, one of those defendants took the money even after they were discharged in the bankruptcy. I just found out about this in 2008 and I don't know if I have any recourse. Let them know if anyone's name is on the foreclosure with them and they don't owe them money to try and have it removed. Also tell them to be aware of the bank and its attorney. My house was auctioned at the end of December 2002, and before that somehow the bank let the winner of the auction take my house and a lot of my property in October 2002, previous to the auction. You get screwed in these foreclosure. If you ever get hurt in this country, you lose everything. Yet now the government is going to bail out all these people and their mortgages. I say let them go through what I went through -- nobody came to me, my wife, and my seven kids' rescue.

The homeowner was entitled to $30,000 in proceeds from the auction of the house, but it appears that someone else with an ownership interest in the property named as the defendant in the foreclosure lawsuit was able to claim that money from the state. This may have been from a co-signer or just someone else listed on the deed to the home or named in related title paperwork. In any event, the homeowner who faced foreclosure is now out all of that money, which could probably have made a significantly positive impact on his family's life.

This case also illustrates the fact that the government is not there to protect homeowners' property. Although this is one of the three reasons that governments are established in the first place (to protect life, liberty, and property, i.e., "the pursuit of happiness"), it is clear that the state did not lift a single finger to protect the homeowner's $30,000. Instead, it simply kept the money for itself as "unclaimed" until someone came along to request it. After all, if the government court named a defendant to a foreclosure lawsuit, then the government will give the proceeds of that lawsuit to whoever is named. Being correct is irrelevant, as the homeowner's silence was taken for consent.

Unfortunately, the homeowner in this email is probably correct when he guesses he has little recourse. He can try to sue the other party who claimed the $30,000, but will not be able to hold the government accountable for paying out the money to someone who did not have a real claim to it. Governments have "sovereign immunity," which means they can not be held accountable, in most cases, when they fail to uphold their duty to protect life, liberty, or property. For example, people can sue a thief for stealing their car, but can not sue the police department for failing to protect that car, even though they have a constitutional (both state and federal) duty to protect the property of "citizens."

Therefore, the homeowner may be able to go into the government courts again and sue the person who took the $30,000, but if it is already gone and spent, then it may be very difficult to get any portion of it back. Also, if the government decides that the original foreclosure lawsuit paperwork is correct, it may declare that the $30,000 went to the third party legally. Going back and showing how the paperwork was wrong and the parties should not have been named in this manner may be even more difficult, expensive, and time-consuming.

This should serve as another warning to homeowners in danger of foreclosure. Avoiding opening the mail or reading through the foreclosure paperwork can have serious, negative, costly, unintended consequences later on, even years after the ordeal is over. It is also quite admirable that this particular foreclosure victim took the time to write a warning to other homeowners in similar situations, and it should be ignored only at other homeowners' peril. The government and banks should never be trusted to conduct the foreclosure process in the correct manner -- always make them prove it in court. This is the best way to keep on top of the parties and make sure that even the smallest benefits will go to the homeowners.

It seems a majority of homeowners do not attend the foreclosure hearing when the bank is suing them to take the house. This is almost universally a mistake, however, as the banks and courts are well aware of the fact that the owners are facing financial hardship and can not make the mortgage payment. This gives the foreclosure victims more leverage in working with the court and lender for a solution to avoid taking the home through the sheriff sale.

Especially for homeowners who can not save their homes, they may wish to attend the foreclosure hearing. Of course, if they have concluded there is no way to save the home and they do not have any problem with the mortgage company taking it through foreclosure, then they can probably skip the foreclosure hearing with no adverse consequences. The foreclosure process will continue according to the state foreclosure laws and the homeowners may never have to deal with a government bureaucrat or representative from the bank. With no effort by the homeowners, there is no chance to stop foreclosure, however.

The courts will award default judgment in the foreclosure lawsuit to the bank if the homeowners do not file an answer or appear at the hearing. If the foreclosure victims do not want to save the home or argue against any of the claims being made by the lender, then there may be no real reason to file any paperwork and get involved in the court process. Foreclosure can take months to wind its way through the court system, which just gives the mortgage company more time to add interest and attorney fees to the total amount owed on the defaulted loan.

This is not to say that it is always a good plan to avoid going to the court hearing, as homeowners can get concessions from the bank and courts, as well as more opportunities to prevent the full foreclosure. The best idea for going to the hearing, even if the owners do not want to keep the house, would be to tell the court that they have been trying or would like to try to sell the property to pay off the loan but have not had any luck yet. The owners can request some extra time (up to 1-2 months) to put the process on hold and find a buyer. The judge can allow them the extra time to work out the problem before going ahead with the foreclosure auction.

Possibly, with 2 extra months to sell the home, the owners would be able to find a buyer to stat the process, at least. And if they can find a buyer to put in an offer, even at a reasonable short sale, the bank will be much more willing to hold off on the rest of the foreclosure process until the sale is complete or the deal falls through. This can even include postponing an upcoming sheriff sale, as the mortgage company would rather have the loan paid off through a regular sale, instead of having to take a loss on the loan and end up with the property back. It costs the banks less money to help their clients stop foreclosure and avoid the worst of the consequences afterwards.

Requesting the court for more time to sell the house might be the best chance for the homeowners to save some of their credit, as well. Paying off a loan, even if it was in foreclosure, will be a much more positive sign to potential lenders in the future, and will avoid the homeowners having to explain why they did not save the house. Not disputing the foreclosure is one thing, but appearing at the hearing just to request more time to avoid losing the home entirely might be worth it in the long run. Even if the homeowners can not save their property, it may make sense to use the court in self-defense and get more time to improve their financial positions.

For homeowners who are not behind on their mortgage yet, but are worried about falling behind, it may seem that their bank is acting quite illogically. Most banks refuse to accept a short sale or modify the terms of a mortgage unless the owners are numerous months behind in payments. The homeowners come to the bank to ask for help to avoid foreclosure before it happens, but the bank says they can not offer any actual programs until there is a real danger of foreclosure. But by this time, the homeowners may not even qualify for a solution because they are too far behind.

Unfortunately, systemic stupidity and shortsightedness are not crimes in America (yet), so the banks are able to get away with this circular logic which pushes people into foreclosure in order to save their homes from foreclosure. In such cases, the owners of properties may feel like they have very few legal resources available to them. They are right to feel this way, as the courts can be very inhospitable to homeowners trying to work out a solution to foreclosure without actually being in default.

In essence, their legal resources probably involve very little more than negotiating with the lender to change the contract as written. But this brings into play the situation where the bank refuses to negotiate the mortgage there are no missed payments. Thus, homeowners who make payments on time are rewarded with no extra help when attempting to sell in a down market, while those who are unable to pay the mortgage are given numerous concessions which may lower the rate or allow them to sell for less than the total amount owed and help them stop foreclosure.

If the homeowners have any evidence the mortgage company has not been keeping up its end of the mortgage contract, they could sue the bank for defaulting on the contract and try to discharge the mortgage loan entirely. Obviously, banks and courts do not look too favorably on this, even if the bank has committed egregious acts of mortgage fraud or servicing fraud. If homeowners could prove that banks are criminal organizations and have their mortgages discharged, politicians and bureaucrats who receive much of their power from the banks would be quite threatened. So this legal resource is open in only a very small number of blatant cases or class action lawsuits.

The possibility of mortgage fraud may be present if the homeowners were given a really shoddy loan and not informed of various aspects that would cause penalties or higher payments. For example, many states still allow the bank to attach a prepayment penalty if the loan is paid off too quickly, and many homeowners are coming out and stating they were not aware of receiving adjustable rate mortgages until their payment doubled. If they signed a piece of paper disclosing these types of aspects but did not ever bother to read that piece of paper, though, they might be out of luck showing how they were tricked into a particular mortgage.

Otherwise, homeowners in these kinds of situations could use the legal resource of bankruptcy to stop foreclosure to establish a payment plan for the housing debt and unsecured credit lines, but that would not make sense since this article is about those who are not yet behind on the mortgage. Bankruptcy is a legal method for dealing with a mortgage loan and other creditors, but it would not be appropriate for people who are not behind, since judges are not currently able to lower the total amount owed to reflect the current market value of a house. There is some talk in Congress to change this and allow judges to adjust the total debt, but it is unlikely to result in any more than talk.

Unfortunately, getting a second home that is more affordable and letting the first one go into foreclosure might be the option that stubborn banks push homeowners to consider. Seems a bit ironic since the lender will be hurt much worse in this situation than the homeowners. But if the homeowners are not far enough behind on their mortgage to qualify for a solution, but will not be able to keep their home for much longer, and it is unlikely the bank has done anything legally wrong (and stupidity on the part of a bank is perfectly legal, or else we wouldn't be able to have banks), homeowners have very few legal options to make the lender negotiate on a mortgage that is not in default.

Most homeowners are acutely aware of the fact that the final step in the process of foreclosure will be the eviction. Although most are not exactly sure when the sheriff will remove them from their house and change the locks, it is probably the single greatest fear among foreclosure victims that they will be evicted with little or no warning at a randomly-determined time. But the actual legal process that banks must follow when repossessing a house has a number of steps that must be followed exactly. Homeowners should not be overly concerned with being thrown out of the house, but they must understand how the eviction process will proceed against them in the courts, and how they may be able to postpone or delay it.

A little-known fact is that these steps, which the bank must follow to evict a homeowner, are very often broken or violated. This can provide the foreclosure victims with reasons for the eviction to be delayed or stopped completely until the lender and its attorneys are able to follow the correct procedures. Because these are government rules and procedures, many of them contradict each other, as well, and their language is incomprehensible and boring, so many attorneys simply never read the actual rules. Every time they file a lawsuit, and every motion they file in regards to that lawsuit, may have violated numerous rules.

But the bank, after the sheriff sale, will have to request that the court order the former owners and current unlawful occupants to be removed from the house. Usually all they would do is show that the title was transferred on the day of the sheriff sale, which establishes the new owner as having a legal right to determine who lives in the property. After the foreclosure victims have used all of their options to stop foreclosure with no success, and the sheriff sale has been conducted, the eviction process will usually begin very soon.

This request that the bank makes to the court for an eviction order, though, is another opportunity that the foreclosure victims can use for their own purposes. The owners will always get a chance to respond to any motion the bank makes in court, and the bank's attorneys almost always violate some rule of procedure. There are simply too many of them to keep up with, with state-wide rules, county rules, and specific court rules, many of which claim to be in agreement with each other but are contradictory. Obviously, it is up to the foreclosure victims themselves whether they want to answer every motion the bank brings and drag out the process and increase the legal fees that will eventually be added to the total payoff, but most lenders and attorneys have little idea of what they are doing in court.

The main adversary the homeowners will usually have to face when arguing that the lender has violated the rules of procedure is the court judge himself. Judges are frequently aware of the fact that no one can enter court without violating numerous rules, and they will do their very best to protect their lawyer friends from having to play by rules that lawyers have established. When dealing with homeowners in foreclosure, they would rather have the parties work out a solution outside of court, or simply order the house to be sold at sheriff sale, thereby earning their part of lawsuit fees. Making sure that everyone follows written rules and guaranteeing that homeowners receive a fair and meaningful hearing are the last things they care about.

Thus, homeowners have two main options when faced with a possible eviction. First, they can try to work out some deal with the bank, either for more time to stay in the property until they move out, or to purchase the property back somehow but continue living there until they have accomplished this. Or, the former owners may want to argue against the bank in court and point out the numerous rule violations that have occurred. This usually results in the judge allowing the bank and its attorneys to violate these rules, but may be grounds for an appeal and a stay of the eviction order until the appeals court process is over. Either way may buy the homeowners more time to save their homes or move out with the best chance of a quick financial recovery.

Although receiving the paperwork for a foreclosure lawsuit in the mail can be one of the most unnerving aspects of the entire experience of losing a home, homeowners should keep this event in perspective. The bank has simply filed a complaint against the owners of the property for nonpayment of the mortgage loan, and the court is requesting that the owners come and make an answer or appearance at a hearing. The court is simply the third party that is involved and has been petitioned by the bank to resolve the differences between the lender and their clients. Simply filing a complaint does nothing to prove that the mortgage company is correct or the homeowners are guilty.

But when they avoid the hearing altogether, foreclosure victims do themselves no favors. Without being shown a single fact, they simply accept the premise that the bank's claims are correct and that the court can order their home to be sold out from under them. The court is too happy to oblige the lender, since the homeowners did not show up to defend against the lawsuit, and the sheriff sale will be set and the bank will proceed through to the eviction.

Of course, homeowners do not necessarily have to go to court, but they most definitely should, just to tell their side of the story to the judge at the hearing, and to have their questions answered. Especially because they will not understand every aspect of the bank's complaint against them, they can question the lender or their attorneys. They can also also ask the court for some kind of workout solution or repayment plan, and the judge in the case can order the lender to work with them to stop foreclosure outside of the legal process.

Any solution that is worked on to get the mortgage payments back on track, though, will depend on the foreclosure victims having enough money to pay back over time the amounts they have fall behind. Thus, they will most likely have to show the bank that their income is stable and that they would be able to make payments again, if given a fresh chance on the loan. If there is simply no way to pay back the amount behind, the homeowners may want to consider asking for more time to sell or offer the bank a deed in lieu of foreclosure. Using the courts to file bankruptcy to stop foreclosure may also be considered as a last resort.

But avoiding the foreclosure court hearing will just mean that the mortgage company gets its judgment against the homeowners automatically (default judgment), and then they will take the property to sheriff sale. This is the most common path taken by homeowners in foreclosure, but it completely lets the lender off the hook in terms of proving their case and following all of the correct court procedures. Most banks and attorneys, even if they are aware of all the state-wide and local rules of procedure, will cut corners, fall behind on schedules, or file paperwork incorrectly. Unless someone is there to challenge these violations, the judge will simply accept them.

Even though the homeowners are well aware of the fact that they have fallen behind on paying the mortgage, the lender still has the burden of proof in front of the judge. Foreclosure victims should not make it easy on them to take the home away and sell it by force. The bank is appealing to the government to steal their home, so the homeowners might as well use the government in self defense to keep it for an extra few months or make sure that the lender's attorneys have followed all of the rules. Homeowners who truly wish to save their homes owe it to themselves to find out if the bank or their lenders are acting correctly in this process.

Going to court will also give the homeowners an extra opportunity to ask for options to stop foreclosure, such as a workout program, or more time to sell the house, even if they can not prove that the lender violated any rules. The judge can order the bank to consider other options before going ahead with the foreclosure. The worst idea, though, is for homeowners just to avoid the hearing and give up on saving the home.

The lender hires a local law office to take the home, but these attorneys earn the $1,000s of dollars in fees from the owners' equity. Thus, the bank hires the attorneys, but the homeowners will end up paying for them to take the hard-earned equity and down payment. It would seem prudent for these foreclosure victims to make sure that the lawyers earn the astronomically high fees that will come out of sale proceeds that would otherwise benefit the former homeowners.

In nearly all cases of foreclosure, homeowners should seek out legal advice. This does not have to mean filing bankruptcy necessarily, but instead having a basic understanding of the legal process and how foreclosure will work its way through the courts. The lender spends thousands of dollars on lawyers who will pursue the legal process, and homeowners would be well served with the same type of advice. In the cases where legal help is absolutely essential, foreclosure victims can hire a lawyer to try and help defend against the foreclosure lawsuit by the bank, or to help file bankruptcy.

With defending against the foreclosure, the owners will be hiring their own attorney to go up against a whole firm of the lender's attorneys. This is not a very appealing situation for any individual lawyer to be in, no matter how sympathetic he may be to the homeowners' situation. And, if the foreclosure victims really are behind on their mortgage, what is their defense? They will most likely have to find a way to have the case thrown out of court and not play by the rules, but attorneys are specifically hired to make sure that the parties have played by all the applicable rules.

The homeowners signed a contract stating that they had an obligation to make the mortgage payments or they would lose the house, and then they defaulted on the contract. Arguing this side of a case in court in front of a judge is a bit of a losing battle for both the homeowners and their attorney, while it is quite an easy process for the lender's attorneys. And the more that the homeowners try to fight the foreclosure, the more the attorneys will be paid by the foreclosing bank for legal fees, filing fees, court costs, and anything else they can charge.

But in the case of filing bankruptcy to stop foreclosure, many attorneys know exactly what paperwork to file, where to file it, and how much to charge for these services. In most cases, the homeowners just fill out a few forms with general information and their name will be inserted into the same form motions and pleadings used by everyone else. For attorneys who specialize in it, filing bankruptcy is a relatively simple process and it will stop the foreclosure process immediately. Of course, it is not an inexpensive process for homeowners, who may have to come up with thousands of dollars to file and then establish a very expensive payment plan to reorganize their debts, but it is easy enough for the lawyers.

Homeowners should absolutely get as much legal advice as they can afford from a competent attorney before taking any step in the foreclosure legal process. But the lawyer has a choice between attempting to defend the homeowners in court against a lawsuit that has very little chance of getting thrown out, or helping them file bankruptcy and actually working on a short-term solution that will stop foreclosure in its tracks, at least for a little while. And it is much less work for any lawyer to go the bankruptcy route, and the results are probably more optimistic in the short term.

Obtaining legal advice, as stated before, should be a path pursued by every homeowner in danger of losing a home to foreclosure. While many will recommend bankruptcy, it is more important that the foreclosure victims have a solid understanding of how foreclosure works, rather than just pursue the most expedient method of stopping the process. Consulting with a lawyer for some general information will allow the homeowners to work more easily with the courts, if necessary, and will help them understand how much time they have to come up with a solution that will stop foreclosure for the long term.

One of the many problems with the legal process known as foreclosure is the fact that the plaintiff in any case is typically an institutional lender with tens of millions, if not hundreds of millions or billions, of dollars in a bank account. Combined with a large mortgage portfolio, these banks can hire