The media, politicians, and armchair real estate professionals seem to have begun making a part time job of analyzing what should be done to solve the foreclosure crisis. The debates so far, however, have been somewhat limited to the possibility of the government stepping in and providing relief to homeowners, or doing nothing and allowing home prices to crash. Instead of expecting more from the government, it would make far more sense for the bureaucrats to scale back many of their activities in all aspects of the average person's life.

One simple proposal may just be getting rid of the personal income tax altogether. While no one would mourn the loss of the IRS, those who fear that all federal government services would dry up should realize that the government could be the size it was in 1997 if the income tax were eliminated. Also, even though many people never pay anything to the IRS and simply receive a refund every year, it would be much better for those people to have that money in their pockets all year to help pay for mortgages, transportation, or food. Giving an interest-free loan to the government all year when one is unable to pay back their own loans makes little sound financial sense.

Politicians should also stay out of the housing crisis altogether, as this is not a problem that we can legislate our way out of. The Orwellian named Foreclosure Prevention Act was a complete joke and illustrative of the impossibility of just creating more laws and acts to solve market problems, designed to take more tax money from homeowners in order to hand out tax breaks to home builders, banks, automobile companies, and the airline industry. Leave it up to the elected lawyers to redefine the phrase "foreclosure relief" to mean "foreclosure victims relieving corporations of their tax burdens."

As well, unless the Iraq War and our other overseas commitments are scaled back enormously, the perpetual borrowing and inflating needed to sustain the perpetual war industry will bankrupt the country. Spending over a trillion dollars every year on military bases, covert operations, no-bid weapons contracts for projects that are never completed, and subsidies for defense contractors creates an unsustainable drain on the productive capacity of society. There are many more goods and services that people want when they are at peace than when their efforts must be spent on repairing destruction.

A final idea would be for the federal government to begin to transition towards real, sound money, based on gold or silver or some basket of commodities. While it is unlikely that this will happen without a large-scale economic meltdown and reorganization, private citizens can invest in gold and silver coins on their own. Local governments, too, may wish to look into instituting their own local currencies, to put more direct control of the money supply back into the hands of people and communities. This would also strengthen towns and counties that have been hit hardest by lack of money or disappearing production and jobs.

Simply handing over one's tax dollars and then demanding a "solution" to the housing crisis from Congress is a sure way to an even deeper economic recession. As evidenced by the "Foreclosure Relief Act," it is clear that politicians spend more time thinking of how to trick the people into supporting more corporate welfare than actually addressing how to help homeowners stop foreclosure. Unfortunately, it may be that the country itself will face bankruptcy very shortly and the dollar will face a total collapse; therefore, the most effective solutions will be found with private citizens and in local communities, rather than the bureaucrats in Washington.

Considering the slowdown in the economy generally, the credit crunch, the meltdown of the subprime mortgage industry, and steep declines in real estate values, there is an increasing possibility of numerous bank failures. But for homeowners who are stuck in devalued homes or are facing a resetting payment or will be experiencing a financial hardship, hoping for a collapse of their mortgage company will probably not let them off the hook for paying the loan back.

In fact, in the event that bank failures are so severe in the coming months and years that there is simply no company to send the monthly payment to, homeowners should plan on saving as much as they can. Bill collectors have the longevity (and often the personality and appearance) of cockroaches -- even after a nuclear attack or planetary disaster or economic crisis, they will shake off the dust and start doing what they have always done: harass people into sending them money for debts they never owned.

Also, even if the federal government takes over the failed lenders and begins the administration of the bank's activities, the best that may happen is that the mortgage loan will be sold off to vulture buyers and the homeowners will have a new lender to send money to every month. For loans that are prime, the sale price may equal the value of the mortgage; for subprime loans, they may be sold at a discount to anyone interested (even for pennies on the dollar), but homeowners will be the last ones to know if their new mortgage company bought the loan for less than the total amount owed.

Homeowners who have loans through the largest banks have probably the least likelihood of seeing their mortgage simply erased due to a failure, but possibly the most danger if the lender does fail. The largest financial institutions have been designated by the government as "too big to fail," and will be bailed out for as much as necessary to keep them going until the government itself needs to be bailed out or fails. However, some investors and customers may lose significant portions of the money they have invested with these banks, although mortgage clients will still have to continue paying as long as anyone is around to collect.

Bank failures were a common event during the Great Depression and runs on the banks were even more likely to happen during local or system-wide panics. These failures, however, did little to stop the largest banks from coming in, buying up mortgages from failed regional banks, foreclosing on farms and homeowners who were behind, and taking large portions of the country under their own control. When the supply of money dried up for average workers and families, only the banks could create enough money out of thin air and use it for their own purposes to ensure the poverty of the nation for a decade.

Regardless of how the banking system operates in the coming months, it is becoming clearer that one party to many mortgages must fail. Either homeowners and Americans will be going into foreclosure while bailing banks out, or the banks will have to fail but maybe fewer homeowners will end up losing their own homes. The only way the people can bail out these banks now is by massive inflation, which has been the Federal Reserve policy for, well, ever. Rising food, transportation, and materials prices due to a transfer of money from people to the banks will just cause more families to fall into foreclosure, which will require even more liquidity injections into the banking system.

In any event, the best that homeowners can do during difficult economic times is to plan for the future as much as possible. Keep paying the mortgage, save for a rainy day, and examine or help set up solutions to foreclosure in the community. Money is drying up for the average family, as banks refuse to lend and money transfers back into the hands of banks to pay off loans. As it dries up even further and the Fed gives the banks even more hundreds of millions of dollars, prices will continue to rise and homeowners will continue to fall behind. The best time to stop foreclosure is before missing a mortgage payment.

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.

Although many homeowners consider bankruptcy as one of the last options to avoid losing a property, many seem unclear on just how late they can wait to file, and how it will affect the foreclosure lawsuit. They may believe that, since the bank has already sued for foreclosure, filing bankruptcy might not have the desired result of ending that lawsuit. However, it is still possible to file and seek protection of the courts even late into the process of losing the house.

Homeowners who have recently been foreclosed on can still file bankruptcy to avoid losing their homes even though the bank is pursuing foreclosure in the local courts. Just because the lender has initiated a lawsuit to take the house back does not mean that homeowners are unable to seek protection through the federal bankruptcy court system. In fact, it is precisely these types of collection efforts that the bankruptcy laws were set up to protect borrowers against.

Essentially, foreclosure proceedings are a collection attempt by mortgage companies to force homeowners to pay what they owe on the loan, or have their home auctioned off by the county government to satisfy the mortgage if there is no other way to pay the debt. There is nothing else secretive or fancy about the process, and it is little different from a credit card company or other creditor suing borrowers to force payment of a debt. The main difference is that the mortgage debt is secured by the property, so the bank has more of an ability to force the sale of the house.

Thus, homeowners are almost always able to file bankruptcy to stop foreclosure up until the time that they are no longer the owners of the home. This typically means that they can wait until just a few hours before the scheduled sheriff sale of the property to file the bankruptcy petition, and this will stop the foreclosure process from being able to continue. Of course, it is better to file before the very last minute, but sometimes homeowners are working on another solution that falls through and need to file an emergency bankruptcy.

Once a borrower files a petition with the bankruptcy courts, the automatic stay goes into effect, which precludes lenders from being able to continue collection efforts. Because the entire foreclosure lawsuit is a collection effort, the mortgage company will have to put its process on hold until the debt is resolved through bankruptcy, either through the payment plan or a dismissal. As can be expected, most lenders do not particularly want to deal with the extra hassle this causes, but they have no other choice than to put the foreclosure on hold.

So homeowners who are facing a foreclosure or have already been sued by the lender will be able to file bankruptcy and include the house in the petition anytime until the sheriff sale. After the auction, when ownership is transferred into the name of the new owner, then it will be too late to rely on this option to stop foreclosure, because the borrowers no longer have an ownership interest in the property. But as long as they do have title to the property, they can seek protection in bankruptcy court against the bank's collection efforts.

Although bankruptcy is usually considered to be little better than losing the home outright, owners may wish to keep the idea of filing as a last ditch effort if they need more time to stop foreclosure. Bankruptcy can always be used in self-defense just to buy more time, while homeowners fight for other solutions or defend themselves against the lawsuit. Unless they no longer own the house at all, it is possible for borrowers to file bankruptcy even if they are being sued by the lender for foreclosure.

It is not only homeowners actually in foreclosure who are dealing with the fallout effects of the housing market meltdown. Although they are the hardest hit, many more people who never miss a mortgage payment also must face the consequences of the high foreclosure rates, and local governments must also deal with trying to keep order in the community with fewer resources and rising costs.

The list of groups and institutions feeling the pain of the foreclosure crisis encompasses nearly every aspect of American life. County governments are faced with budget crises as property tax revenue falls. Mortgage companies are so far behind on selling homes that have been foreclosed on that they are holding off on beginning more foreclosure proceedings. Local court systems could not handle more foreclosure lawsuits anyway, as they are also far behind.

And the group most affected by the foreclosure rates is the homeowners and neighbors who have large numbers of abandoned properties sitting in the community. Ripe for vandalism and squatting, these empty properties are magnets for crime. With fewer homeowners in an area even to report the disturbances, and police departments reeling from lower budgets and higher fuel costs, the suburbs may quickly turn into the new slums.

It should also come as no surprise that homes that have been abandoned or are not sold are falling into disrepair as no upkeep is done on them by the owners (usually the foreclosing bank). Broken windows are not fixed, leaky roofs lead to severe water damage, and a broken sump pump may cause a basement flood to remain undiscovered for months. These are far worse than just an overgrown lawn and will contribute to a longer-term decline in house prices.

One good idea that local governments have had in some ares has been to take over these abandoned properties and make sure they are maintained or simply tear them down to improve the neighborhood. Although governments owning large portions of a community may not be a good idea, it can only be better than multinational banks owning these properties and leaving them to disrepair and crime.

But even governments that take over foreclosed homes must put the cost burden onto current homeowners through higher property taxes on fewer homeowners. In turn, the higher tax rates means that housing costs will be higher in particular areas, so home values must come down even further to induce buyers to move into an area. Falling property values, however, make it more difficult for homeowners to stop foreclosure by selling, and contribute to higher foreclosure rates.

Homeowners have also been forced into the mortgage trap as the housing market cools considerably. Even if they have never missed a payment, many home loans of the past decade were made up to 100% of the value of a property that may now have fallen 40% or more. Homeowners who wish to sell and upgrade or take a new job opportunity in another area of the country are unable to sell for enough to pay off their mortgage, whether they are in foreclosure or not.

Unfortunately, even as homeowners in foreclosure are forced to deal with the loss of their home and the negative consequences of this, the people institutions that are left behind often fare no better. The foreclosure crisis is contributing to a cycle of lower property values, more crime, and more desperate actions by local governments. Nothing yet, however, has been able to slow down the crisis in some areas of the country, and it may be that the mistakes of the subprime criminals and suburban sprawl will have to be paid for by mostly innocent homeowners and communities.

Homeowners facing a financial hardship often contemplate filing bankruptcy to get some relief from their debts, but many would like to avoid the negative consequences of this solution. Far too often, though, homeowners in foreclosure may find a solution to save their house, but they find they have run out of time and will be facing a sheriff sale. Unless they have prepared in advance for the possibility of filing a bankruptcy petition, this may no longer be an option for them.

Filing Chapter 13 bankruptcy will stop a foreclosure as soon as the papers are filed with the bankruptcy court, including immediately stopping any sheriff sale. The automatic stay goes into effect immediately upon filing, and will stay in effect as long as the issue is in the legal system. There is no one perfect time for filing Chapter 13 bankruptcy, and the longer homeowners wait to file, the more it will cost them to get out of bankruptcy and the more likely they will be to fail the legal payment plan and have the case dismissed.

Once a mortgage payment is missed, lenders will almost immediately begin adding late fees and racking up extra interest charges, which make it more expensive for homeowners to get back on track. The longer this goes on, the further behind borrowers become -- even if they have only missed a few payments, the total amount needed to reinstate can be the equivalent of many more monthly installments. This large financial burden can make it more difficult for homeowners to pay back all of the arrears through a Chapter 13 bankruptcy payment plan, and the potential of failing the plan and having the case dismissed increases greatly.

Most homeowners wait to try several different methods to stop foreclosure before relying on bankruptcy. Refinancing through a foreclosure lender or working with the lender for a mortgage modification or forbearance agreement may be easier and result in less damage to the homeowners' credit histories. In fact, bankruptcy is often recommended and used as a last option to stop a sheriff sale or put the process on hold due to the imminent loss of the house when another solution has fallen through at the last minute.

However, with the new bankruptcy rules that went into effect in 2005, homeowners should prepare sooner rather than later for the possibility of having to file as an emergency, even if they never actually need to file. The new rules now require bankruptcy counseling as a prerequisite for beginning the court process at all, so homeowners will not simply be able to file bankruptcy as a last ditch effort a few hours before their home is auctioned off by the county -- they need to file proof of completing the counseling with their bankruptcy petition or it may not be accepted.

As soon as homeowners become aware of a financial hardship that will cause them to miss a mortgage payment, they should begin preparing for how to avoid foreclosure. This might include working with the lender right away, consulting with a Realtor to list the house for sale, and taking the bankruptcy counseling sessions just in case they run out of time. It is better to be prepared for any possibility, since the foreclosure process can often be unpredictable, with various state and local rule variations, as well as the bank's own ability to move forward with the process quickly.

In certain states, homeowners have an extra period of time after the foreclosure auction in which they can save their homes. During this time, known as a redemption period, the bank can not start the eviction process or demand payment or try and force the owners out of the property in any other way. But when the owners run out of time and the redemption expires, there may be very few solutions remaining to stop the eviction.

Most states that have a redemption period after a foreclosure auction give homeowners extra time to stay in a property after the sale. The house is foreclosed on, then sold at a public auction, and then the homeowners have time afterwards in order to find a method to stop foreclosure, pay off the redemption amount, get a new loan, sell, or just save up money and move on. The eviction will not start until after the redemption has expired.

A small number of states (Illinois, for one) have a redemption period that lasts before the sheriff sale of the house. Once the foreclosure lawsuit has been completed and the bank granted a judgment, the homeowners will be able to use a period of time between the judgment and the sheriff sale to find a solution. This may be just a few weeks in some states to half a year in others, but if the owners are unable to pay back the loan, the house will be auctioned off.

Usually, when properties sell at the county sheriff sale, it is the foreclosing bank or a related bank that puts in the winning bid amount. From that point on, it will be this new owner that the homeowners would have to deal with in order to get the house back after the auction. In a very small number of cases, a third party individual or company will purchase the house, but the manner in dealing with this type of owner is not much different than if the bank buys the property back.

When the redemption period has expired on a property, the original owners have very few options left to save the house, and very little time in which to do it. Banks, while they may be willing to push back a sheriff sale or give homeowners an extra month to come up with missed payments, will not usually be open to extending the redemption period. Typically, the lender will begin with the eviction process right away as soon as the homeowners have run out of time.

This should not come as much of a surprise to homeowners, however. After all, mortgage companies may have to wait up to a year for a redemption period to expire, which is time they would not have had to wait in other states to take the house back. When the lender can finally begin to pursue the eviction, they usually do so aggressively, understanding that if the foreclosure victims could not work out a solution in the preceding months, it is unlikely they will be able to do so with even more time after the redemption.

So, the main option that is left for homeowners is usually to purchase their property back from the bank. Now that the redemption has ended, the bank is the legal owner of the house and the title is in the name of the lender now -- not the former owners. If the former owners wish to keep the property, they will have to find some way to get it back in their names and have the mortgage company transfer ownership back to them.

For homeowners with a lengthy redemption period who have the financial ability to save money every month, it may be possible to qualify for a mortgage after foreclosure within 6-12 months. A sizable down payment will be required, however, up to 35% of the purchase price. But people who were foreclosed on a year ago may be able to afford to buy back their former home at a substantially reduced price, due to declining property values nationwide.

Otherwise, the most effective way to stay in the property may be to have a friend or family member purchase the house and agree to lease it back to the owners. This private investor can buy the house and keep it in his name, and then lease it to the foreclosure victims until their credit has recovered and they have saved up enough to qualify for an outright purchase.

Unfortunately, due to the entire foreclosure process and transfer of the property out of the names of the original owners, most options are unavailable after the redemption period. Banks will not accept forbearance agreements or modify the loan, and simply refinancing a home that is no longer owned by the original family is out of the question, even through a foreclosure lender. For homeowners who want to save their house after the redemption has expired in their case, there is little to do other than attempt to purchase the property back from the lender.

How many times can a home go into foreclosure before the bank finally gives up and stops accepting any payments? For homeowners who have fallen behind more than once, or who own more than one property and are contemplating foreclosure on several houses, this is a serious issue. Thankfully, there is little real danger that a mortgage company will simply stop accepting any payments, even if the owners fall into foreclosure numerous times.

Homeowners can experience their house going into foreclosure as many times as they face a hardship and run out of money to pay the mortgage for a period of months. The bank will wait until the owners are usually 3-6 months behind, and then it will begin to file the foreclosure paperwork in the local courts. If the homeowners pay the arrears back before the property is auctioned off, then the foreclosure process has to stop for the time being. Of course, if they fall behind again, the process will start up from the beginning.

No matter how many times they fall behind during the life of the mortgage loan, though, it is unlikely that the bank would just stop taking any payments from the owners at all and call in the loan. After all, the original mortgage contract states that the borrowers have to pay a set amount of every month to keep the house or incur penalties and other charges if payments are missed or the house is foreclosed on. There is nothing in the loan documents that would allow the mortgage company to refuse to take the monthly payments any longer, except when the house is actually the subject of foreclosure proceedings.

It would also be difficult for the bank to prove to a court that they are entitled to anything besides the homeowners' monthly payments if they can make them on time and pay back any amount they have fallen behind. Just because they may have fallen behind in the past does not mean that the bank can just give up on the loan completely and stop accepting even on time payments -- as long as the homeowners made up the payments later on, the lender got everything it was due, plus a lot of accrued interest, late fees, court costs, and other charges.

In fact, if borrowers' houses are going into foreclosure or falling behind quite often, but they are able to pay back the arrears eventually, then these types of homeowners may be a great client from the bank's perspective. With all of the extra fees the lenders are charging to the loan when homeowners miss a payment, the effective interest rate may be much higher than the owners believe, which translates into higher profits on the frequently defaulted loan for the lender.

Of course, that might also be a good reason to try and keep up on the payments at all times, or just let one house go if it is not affordable. Selling or giving the bank a deed in lieu of foreclosure on one property might let the homeowners off the hook on one particular house, while allowing them to keep the other properties and make the payments a lot more consistently. It makes little sense to keep falling behind in mortgage payments just to keep one house out of foreclosure -- eventually, with all of the extra charges, it may just become too expensive to get back on top of a mortgage.

Instead of routinely falling behind on one mortgage and then falling behind on other bills to pay back the arrears on the house loan, it may be better for homeowners to find more permanent solutions that will help them stop foreclosure. Eventually, it will become too cost prohibitive to keep falling behind on the house loan, and the bank may take advantage of a sustained hardship to force a full foreclosure through the court system. For this reason, homeowners should consider better options and possibly finding solutions that will lower their bills so that they can keep at least one roof over their heads.

It is very common and quite easy for homeowners to become confused about various options to avoid foreclosure. With so many different methods available, it becomes difficult to keep the final goal of each straight. For example, homeowners may file bankruptcy to buy more time, but want to give their home back with a deed in lieu, but are also worried about being sued for a deficiency judgment afterwards.

There are a number of issues to this one group of methods to stop foreclosure. First the foreclosure lawsuit filed in the courts followed by the bankruptcy petition will have to be considered. Then the turning over of the house to the lender and the possibility of a deficiency judgment is an entirely separate aspect, although it will also relate to the bankruptcy filing and the dismissal of the case.

First of all, the foreclosure process that the bank initiated against the homeowners has been stopped by the bankruptcy filing, as long as it was a Chapter 13 bankruptcy and the mortgage was included. The foreclosure is stopped through the legal mechanism known as an "automatic stay," which puts any collection activities on hold while the courts consider the bankruptcy. Filing a Chapter 7 to liquidate debts, though, does not affect the status of the house loan or put the foreclosure on hold, since it is a secured loan and can not be discharged entirely through bankruptcy.

The automatic stay of any collection efforts in a Chapter 13, however, puts all foreclosure proceedings on hold until the bankruptcy is dismissed either by the homeowners or by the court. If the homeowners are able to complete the payment plan over 3-5 years, they will have paid back the arrears on the mortgage and reinstate the loan, and the lender will not be able to sue for foreclosure any longer. However, if the homeowners fall behind on the bankruptcy payments, the bank will most likely have the stay released and proceed with the foreclosure. At this point, the owners will not have the protection of bankruptcy to rely on to stop foreclosure again.

In terms of giving the house back to the bank through a deed in lieu of foreclosure, this can not be done while the house is still tied up in the bankruptcy courts. Homeowners can begin to negotiate a deed in lieu with the lender, but they will not be able to transfer ownership to the mortgage company without voluntarily dismissing the bankruptcy. For this reason, it is best to have the deed in lieu transfer fully negotiated with the lender before releasing the stay. Otherwise, if the deal falls through, the homeowners will not be able to go back into bankruptcy to protect themselves against the foreclosure.

For a bit of good news, once the deed is transferred back to the lender, there is no chance for a deficiency judgment against the homeowners. This is for a couple of reasons. First, the bank accepts the deed as payment in full of the mortgage loan, so there is no actual deficiency. The house is not auctioned off for less than the total amount owed -- the bank accepts ownership as payment in full instead of going through with the full foreclosure. Second, the deed in lieu is a direct transfer of the property with no real money involved -- there is no transaction where the bank could claim they are owed more money than they received from the deed transfer. Unless the homeowners agree to pay more (which they should not have to do), the bank has no real claim to anything extra.

When homeowners are trying to prevent foreclosure from taking their property, there may be numerous methods they will have to consider. Some of them will compliment each other, such as the deed in lieu precluding the possibility of a deficiency judgment, while others will counteract each other, such as the impossibility of transferring the house through a deed in lieu while in bankruptcy. Homeowners should try to research these related aspects of different solutions before taking the step of going through with any of them.

With the great number of real estate flippers and new investors that entered the housing market in the past years, many homeowners are finding out that their professional investing partner did not exhibit the highest ethical standards. When one partial owner finds out that a partner has been taking out loans simply to acquire money and then let the houses go into foreclosure, many issues of mortgage fraud and other criminal activities arise.

This type of activity may not be considered embezzlement, since, in many cases, both partial owners go in on a project together and one owner does not usually entrust his portion of the ownership of the house to the other owner. And since many investors purchased the properties for their own business activities, the two owners are not acting on any other person's behalf in their care of disposal of the property. Embezzlement is typically defined as when someone misappropriates assets that have been entrusted to them by another person.

However, this type of activity of taking out loans just to let the houses fall into foreclosure may be considered mortgage fraud, if one partial owner took out the mortgage without disclosing that he was only a partial owner of the property. Although the bank may have given a loan in such a situation, it would have required that both owners listed on the deed sign for the mortgage, because a partial owner usually can not agree to putting a new lien on the house without any other people having an ownership interest also agreeing to the new lien.

If every owner did sign for the mortgage, though, then it will probably be determined that there is not fraud going on between the owners, but there may be by both owners against the mortgage company itself. Taking out a loan just to take the money and let the collateral go into foreclosure is definitely not one of the options to select on a standard mortgage application for the purpose of the loan. But it would probably be the lending bank that could sue the homeowners for foreclosure or fraud -- not one owner against the other.

People who purchase a home and sign for a mortgage are assumed to understand why they are taking out a home loan in the first place. If a partial owner agrees to help take out a loan but did not understand what the loan would be used for or how it would be paid back, then it would be difficult to prove that this owner was actually defrauded of anything. Personal responsibility is still used in determining fault, in some cases, and no one should help another person take out a loan without knowing exactly what it will be used for and how it will be paid back.

Even receiving a house by gift or inheritance, where one owner takes out a mortgage just to steal money from a bank, may be dealt with in the same fashion. Owners who acquire title to a home should find out why another partial owner wants to take out a mortgage or refinance a house for cash out. If there is no real intent or ability to pay back the loan, then it may be assumed that the owners are simply trying to take the money and run. Unfortunately, the consequences of such actions usually come back to haunt the other owners, rather than the sociopath who defrauded the bank and took off with the money.

One objective that many homeowners have after facing foreclosure is to improve their credit score and make sure that they can qualify for a new mortgage or a better refinance as soon as possible. Even if they are able to save their homes, the terms of their workout program or foreclosure refinance may not be very competitive, which gives property owners a real incentive to begin working on credit repair as soon as the mortgage is taken care of.

Unfortunately, most homeowners are not even aware of what actions and conditions affect their credit score the most. While simply paying credit cards on time every month and not defaulting on loans are obvious examples of good credit habits, there are numerous other ways to raise or lower a score that many people are not even aware of.

This condition of general unawareness of how the credit report works is somewhat of a tragedy, as a credit score is often the most important piece of information lenders use in judging the future payment history of a potential borrower. As well, other industries, such as employers, insurance companies, and utility companies, are now using credit scores to determine what rates and terms to offer clients. Having a polished credit report, then, is vitally important to many homeowners.

As should be somewhat apparent, the borrower's consistent payment history is the most important factor on the credit report. Owing a lot of money on numerous accounts or simply having stable or good income is not enough to impact the score significantly -- but making payments on time every month shows responsibility and good borrowing habits. This is why paying debt on time every month is the most important part of a high credit score.

Stability is also important in the number of credit lines a particular borrower has open and how many more they have attempted to open. Applying for more loans when a borrower already has numerous open lines will drag down a credit score. However, many banks have determined that having at least three lines open is the minimum for accurately predicting a borrower's ability to repay a large loan, like auto financing or a mortgage.

Homeowners who have recently faced a financial hardship should also consider ordering their free credit report soon after becoming stable again. If they fell behind on numerous payments (not just the mortgage) or have had charge-offs, there may be many new inquiries or other inaccurate information listed on the report. These are some of the first areas that can be worked on, to eliminate old negative data and have unauthorized inquiries deleted.

The road to complete financial recovery after foreclosure is often rough and longer than homeowners expect. Even with a substantial effort in credit repair, it may take over a year or two in order to be able to qualify for decent terms for a new mortgage. Knowing this, however, gives homeowners a completely fresh start along with a perfect opportunity to begin working on paying off their other debts and improving their credit score in general.

The best time to begin planning a solution to foreclosure is when the homeowners become aware that they will be unable to make the monthly payment, but have not yet missed the due date. Once they have fallen behind by even a few weeks, negative consequences will begin to emerge, many of which will build one upon the other to eliminate any chance of saving the home the longer the owners wait.

Being late by just a few weeks, however, is not long enough for the bank to begin reporting borrowers to the credit reporting agencies as late on the mortgage payment. It is typically once the homeowners are 30 days late that the bank will begin to report the missed payments, which will immediately begin to drag down the credit scores of the homeowners if they are unable to get back on track very quickly.

This 30-day period is the same length of time that most other types of creditors will use to begin reporting debtors as late on a monthly installment payment. For example, credit cards, car loans, personal loans, and mortgages all usually do not report the account as late until it is past 30 days. Although this grace period may be helpful for the credit scores of borrowers, missing any payment due date will have negative effects even if the account is paid to current within a month or two of falling behind.

These negative consequences are a result of the fact that almost every creditor will begin adding interest on to the missed payment as soon as it is missed, and late payment fees will also be added. If the extra fees and interest trigger other fees (over the limit and so on), it may cost even more for the homeowners to correct the situation. So it may cost the borrowers more money than just the regular payment to make sure their account is current after falling behind for even just a few weeks.

Typically, there is very little to worry about if the mortgage is only behind by less than a month, besides the interest and late fee charges. The extra interest, though, will usually amount to very little if the account is brought back to a current status the next month, and the late charge may not be added until after the a specified grace period has expired. But even then, it may be very simple for homeowners to get back in good standing this early.

Homeowners should always find out how much it will cost them to reinstate the mortgage payments once they have fallen behind a month. If they make the regular monthly payment, the bank may accept this, but will continue adding interest on the interest that was not paid on time, as well as interest on any late charges. Thus, borrowers may find out even later that, while they technically made all of the agreed payments, they are falling further and further behind per month. It is far wiser to make absolutely sure of any extra fees to be paid off before assuming that the mortgage loan is completely on time once again.

Most homeowners who experience foreclosure due to a medical disability often suffer from a physical accident or illness. While these are often serious and devastating, and can lead to permanent disabilities, finding out that the borrower is suffering from a mental problem can present even more unique challenges. But if a homeowner can be diagnosed as clinically insane, some family members may be tempted to try and have the original mortgage declared void now that it is in foreclosure.

It would be somewhat difficult for a homeowner to be declared insane and try to avoid foreclosure that way. Having been declared insane sometime after the original mortgage contract was signed, in fact, would typically have no effect on the mortgage company being able to declare foreclosure on the house. Insanity after the fact is not sufficient to have any kind of foreclosure proceedings dismissed, although the process may be drawn out or the family members taking care of the situation given more leeway by the courts to find a solution.

However, if the borrower was insane at the time of signing the original mortgage contract, then it may be possible to have it declared void, if the lender had cause to worry about the borrower's ability to enter into a contract in the first place. Having a legal and mental capacity to enter into a contract is a necessary element of signing for a mortgage. If the homeowner was mentally incapable of entering into a contract at the time the loan closed, then it may be possible to get out of the mortgage, although still somewhat unlikely.

Even this, though, would be somewhat difficult to prove in an actual court, even with expert witnesses. People who take out mortgages have to sign numerous disclosures indicating that they understand the documents they are signing and that they are legally able to enter into a contract. If the borrower had a good job with stable income and could produce income documents showing a decent financial position over a period of years, then it may be difficult to argue for that person's insanity at the time of signing for the mortgage.

In general, people who can be declared clinically insane and are manifesting the condition at the time they are applying for a mortgage are usually incapable of showing the stable economic conditions that would pass the guidelines for being loaned a significant amount of money. Proving later on, once the homeowner has fallen behind on the mortgage, that he was incapable of entering into the contract due to insanity may seem like a shaky case to the courts. The attorneys for the bank will, of course, do their very best to attack these arguments and move ahead with the foreclosure process and sheriff sale.

Such issues should be taken care of as soon as possible, preferably before the homeowner has fallen behind or at least before the bank has filed the foreclosure lawsuit in court. Family members who may be caring for the newly declared insane borrower should take the mental state of the person into consideration when trying to help stop foreclosure. But if they are unable to show that the borrower was suffering from the mental defect at the time of the original mortgage, then having the contract voided will most likely be impossible.

Discovering that a family member or close associate is suffering from a clinically-diagnosable mental disability can be one of the most challenging experiences of one's life. Helping the borrower through present financial difficulties will also present numerous unique challenges, including the loss of a house to foreclosure. Unfortunately, simply knowing that a homeowner has become insane since the time of entering into the mortgage does not guarantee that the contract can be voided now that the payments have fallen behind.

There is really no other way for homeowners to get out of foreclosure than to deal with the defaulted loan on their home. It is because they have a lien on their house and the property has been pledged as collateral for the mortgage that they face the loss of their home. In essence, all methods to avoid foreclosure involve eliminating the current lien. Homeowners have to pay off the mortgage or have the bank release this lien somehow for them to escape foreclosure. There are a few common ways to do this, and a few that are somewhat of an outside bet that the solution would ever work or not.

First of all, homeowners can just replace their current mortgage with another one through refinancing with a traditional or foreclosure lender. If they take out a loan with another mortgage company, the new loan will pay off the current lien on the house and the borrowers will have a fresh start with a new mortgage. The former bank will release its lien once it is paid off with the refinance loan. This is about the easiest way to pay off a mortgage to stop foreclosure, if the homeowners' credit is still good or they have significant equity in the property and can qualify to borrow.

Otherwise, the owners can try to sell the house on the open market or through a short sale. Selling means that the new buyers would have to pay off the current mortgage in order to own the house. Just transferring ownership of a property without paying off this lien does not work. Selling at a short sale would allow the owners to sell the house for less than the total amount due to the bank, and is used most often in foreclosure situations where the property value has fallen below the mortgage balance. Either type of sale would allow the foreclosure victims to have the lien paid off and released.

A deed in lieu of foreclosure would also work if selling or refinancing are not an option. This is where homeowners voluntarily give the deed to the property back to the bank in exchange for the lender not pursuing a foreclosure. The borrowers transfer the title into the lender's name, and the mortgage lien is then released. In effect, the homeowners are paying off the lien with the property itself and the bank can not go after them for any other payment, money, or additional assets. There is no danger of a deficiency judgment after giving the bank a deed in lieu.

These are the most common methods to stop foreclosure by eliminating the lien on the house before the legal process has been completed. A few other defensive legal tactics have been used recently, as well, that have resulted in the bank being unable to take the house through foreclosure, due to other circumstances. Some of these cases are not over yet, and the banks have simply been sent back to the drawing board to work on their evidence, but they are a positive sign for homeowners fighting back against predatory lending or gross misconduct by a bank.

In the first type of defense, a number of homeowners are beginning to challenge their foreclosure in court on the basis that the bank or servicing company suing them does not own the mortgage contract, and has no legal standing or right to sue for foreclosure. The company may be collecting the payments right now, but if they do not own the actual mortgage loan, they have no grounds on which to sue the homeowners. Such legal challenges have been successful in some cases because the banks chopped up and sold off many subprime and prime mortgages in the secondary market to hedge funds, pension funds, and other institutional investors, making it unclear who actually owns them.

Secondly, at least one case has resulted in the bank unable to pursue a foreclosure because it never loaned any money. Banks create the money out of thin air that homeowners borrow for the purchase of a house. This means that every single mortgage contract is essentially null and void, because the bank never put any consideration into the loan agreement. The money they "loaned" to the owners was created out of nothing -- they did not actually transfer any real assets that they own into the names of the owners.

Since consideration is an essential part of every contract, the fact that the bank did not put any consideration into the agreement meant that it lost the foreclosure lawsuit against a homeowner. The owners got to keep their property and the bank was unable to try and have the property auctioned off at a sheriff sale -- the jury decided that the bank never actually loaned any money and could not try to collect on the mortgage any further. This may turn out to be a serious blow to the entire banking industry, in which 99% of the money in the system was created out of nothing as loans to consumers or business owners.

Almost all solutions to foreclosure that do not involve working with the current mortgage company boil down to an effort to replace or eliminate the current lien on the house. Forbearance agreements, mortgage modification, and the legal payment plan of bankruptcy do not result in this type of transfer, but nearly every other method aims to pay off the current mortgage company's loan. Homeowners should keep this end goal in mind when examining various options to eliminate the problem, as saving their homes is always the end goal.

Renters who find out that the home they are living in may be involved in a foreclosure or bankruptcy are usually rightfully worried about what will happen to them. The bank could kick them out at any time or they may offer a cash for keys deal if the foreclosure has already gone through; when landlords keep tenants in the dark, everything is uncertain. But tenants need to find out what is the current status of the property in order to plan either for moving or staying put.

If someone renting a property suspects the house they are renting is involved in a foreclosure or bankruptcy, they need to find out as quickly as possible if this is true and which legal procedure it is involved in. The bank and the courts will treat occupants of a property differently in foreclosure and bankruptcy situations; planning for moving out or getting any money through a cash for keys deal is impossible if the tenants do not know what is the status of the property. The status can be found out through asking the landlord or, if the owners are not responsive, by calling the local district or bankruptcy court and request a search of their records.

In a foreclosure, the bank will attempt to sue the owners of the house and take possession of the property by having the local government auction the property to satisfy the defaulted mortgage loan. The bank is usually the buyer of foreclosed houses at county sheriff sales, so once it has become the owner, it will attempt to evict anyone still living in the foreclosed home. In order to facilitate a peaceful transfer of the property, the bank may offer any lingering occupants a cash for keys deal, but not all banks do this -- tenants may want to call and find out what the lender can offer in the way of money to move out.

But a house in bankruptcy proceedings is completely different. If the homeowners filed bankruptcy because they were behind on the mortgage, it means they are seeking protection in the courts to get a chance to repay the defaulted portion of the loan and get back on track. The foreclosure process is completely on hold at this point, and there is no danger of either the tenants of the original owners of having the house auctioned off, being evicted by the bank, or being offered a cash for keys deal. None of these actions may be taken if the mortgage is involved in a Chapter 13 bankruptcy.

Unless the homeowners fall behind on the bankruptcy payment plan, the mortgage company can not move forward with any aspect of their foreclosure lawsuit against the owners. Bankruptcy grants homeowners relief from any collection efforts, including foreclosure, for as long as their debts are tied up in court under the Chapter 13. If they manage to make it all the way through the payment plan, then they are out of bankruptcy and foreclosure. Tenants have to keep paying rent to stay in the property, since the original owners still have legal title.

So people renting a house who suspect their landlords have fallen behind in the mortgage have to find out if the house is involved in either foreclosure or bankruptcy proceedings to know what will happen next. A property can not be in both situations at once, since filing bankruptcy will immediately stop foreclosure and put a hold on the sheriff sale. Either the renters may be in danger of eviction but can ask for a cash for keys deal, or they have to keep paying rent to the owners in order to keep living in the house, regardless of any bankruptcy proceedings.

In some cases, homeowners who know they can not save their home from foreclosure wish to preserve their credit scores as much as possible. Although raising a score or keeping it at a high level is probably not likely, homeowners should be quite capable of making sure that they do not face the worst of the consequences of foreclosure, just by following a few tips and understanding the ramifications of some of their decisions when dealing with a foreclosure.

The best way to get out of a foreclosure with the least impact to a credit score is for homeowners to keep up on all their other bills and installment payments and just let the mortgage fall behind. Having late mortgage payments and a foreclosure will drag down the score by quite a bit, but keeping the rest of the debt payments on time or paying off credit lines completely will help insulate the credit score as much as possible. It is when homeowners fall behind on all of their debts that they can experience scores under 500, which makes it virtually impossible to get any new loans.

Of course, the property owners should also consider some other options to stop foreclosure before the bank's lawsuit has gone all the through the local court system. If they can get the house of the the process before it has been auctioned off and the sheriff has been given the eviction order, then the homeowners will have fewer late payments on their credit history and may be able to show something else on the record besides a full foreclosure.

This is the time to consider using either a short sale or a deed in lieu of foreclosure before the owners run out of time for any solution. In either of these cases, they can end the foreclosure a little sooner than it would have it it went all the way to a sheriff sale and eviction by selling the house or giving the deed back to the bank. The most positive aspect of these options is that it keeps a couple of late mortgage payments off of the credit history and prevents the score from dropping even further.

Also, it would be a mistake for the homeowners to close out any credit lines right now that they might want to utilize in the future. If they can pay off excessive debt and get rid of the highest-interest credit cards, that would help their score and long-term financial condition. However, if they close out and pay off all of their credit lines, obtaining new borrowing after foreclosure will be extremely difficult and expensive. Unless the owners have decided to make due with a life not based on credit, it might be wise to keep at least one or two lines open in case of emergency and to begin the process of improving their credit score over time.

If the homeowners want to purchase a new home now before the foreclosure, then they need to make sure they buy an affordable house and do it as quickly as possible. It is important that they keep up on the current mortgage payment for as long as they can until the new purchase closes, as well, since a bank will not loan them more money for a new mortgage if they are already falling behind on their current housing payment.

Depending on the state foreclosure law where the property is located, the original lender may be able to come after the homeowners for a deficiency judgment after foreclosure and put a lien on the new home. However, this is somewhat rare, as most banks know that people in foreclosure have little assets or means to pay off another lawsuit or judgment after foreclosure. It would simply not be worth the bank's time or resources to begin another lawsuit when they have not had much success collecting on their previous foreclosure lawsuit.

Unfortunately, homeowners who lose a home to foreclosure will have to deal with a lower credit score for at least several years following the experience. Most of the techniques listed here are more for damage control and preventing a total collapse of their borrowing ability, rather than actually boosting the score or keeping it at the pre-foreclosure level. However, even if they are going to lose a house, it is possible to maintain some creditworthiness, which can assist former homeowners in beginning the process of financial recovery after foreclosure.

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.

When a home is purchased by new owners, and they take out a mortgage, the bank that they borrow the money from takes an ownership interest in the property that is pledged as collateral. The document showing this interest is the mortgage or deed of trust, which details the terms of the mortgage, the lien on the house, and the amount originally borrowed. If the property owners fall behind, the lender will be able to take possession of the house through the foreclosure process.

The legal process of foreclosure, however, does not just automatically allow the mortgage holder to take possession and evict the owners right away. There are several stages to the legal action of taking back a property through foreclosure, and nearly all of the details of these stages are defined by the individual state foreclosure laws. In general, the foreclosure will allow the bank to regain the property since it is collateral for a now-defaulted mortgage loan, but the lender must follow specific steps.

The three most common stages of foreclosure are the pre-foreclosure stage, the lawsuit stage, and the sheriff sale of the property. When homeowners first begin to fall behind on their mortgage and are unable to get back on top within a month or two, the lender will put the loan into pre-foreclosure. In this step of the process, the lender will most likely be calling to collect or work out an arrangement, but the owners may not have recovered from their hardship yet. Interest and late fees are being added to the loan, however, which will make it more difficult to stop foreclosure later on.

In the second stage of taking a home back, the bank will file the foreclosure lawsuit or the Notice of Default with the county. Typically, the owners have a set period of time to answer the complaint and a hearing will be set at the local courthouse. Far too often, banks are able to get default judgments against homeowners who do not show up to contest the foreclosure or make an answer. This makes it very easy for lenders to proceed through this step of the process, although they may have acted improperly or even be engaging in predatory lending or mortgage fraud. But if the homeowners do not stand up for themselves at this point, the lender can score an easy victory in the courts.

The most common final step in the foreclosure process is when a house is auctioned off by the local government at a sheriff sale. Once the auction has been conducted, the new owner will get a sheriff's deed or other temporary proof of sale, which will allow them to take possession of the property once the sale has been confirmed. It is usually the original lender that purchases the house back, and once the confirmation of the auction, the eviction process begins. In most states, once the house is auctioned, the point of no return has been reached and the eviction of the homeowners is a foregone conclusion.

These are the three most common steps in the foreclosure process in most states. Some states, however, do not end the process after the public auction, and actually grant the owners more time to save the house during a redemption period. During this time, the bank can not begin evicting the people living there, and the family can use this time to find a solution to pay off the mortgage, sell the house, or just save up money to begin again after they move out. Not all states guarantee such a redemption period, though, so it is important that homeowners look up their state laws before planning their next move after foreclosure.

In order to put together any realistic plan to stop foreclosure, homeowners should have an understanding of how the process will work in their state and the time frames for each stage of foreclosure. The legal actions the bank takes must be in accordance with the laws of the state and the county rules; lenders and their attorneys often violate these rules numerous times, but it is up to the homeowners to defend themselves against such violations. Understanding the process will not guarantee they are able to save their homes, but it can mean the difference between having a plan of action and being caught completely unaware of important parts of foreclosure.

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.

We are proud to announce a new section will be added to this blog in the coming months. Our new "Success Stories" category will feature real stories of homeowners who faced foreclosure who were helped after contacting ForeclosureFish. Many of these stories are being put together right now and will be posted on this blog over the coming weeks and months. Stay tuned to learn how people in your exact situation used our website and resources to stop foreclosure and begin the process of financial recovery.

One common misconception that homeowners can have during a foreclosure situation is that they can somehow transfer ownership of a property and that this will stop the foreclosure in its tracks. Nothing could be further from the truth, however, and simply signing over the deed to the house to a third party will put the owners in a much more vulnerable situation than when their own names were on the title. Using a quitclaim deed or other transfer document will also do nothing to make the bank end its lawsuit to take the home.

Transferring ownership of a house in foreclosure does not relieve the original borrowers of their obligation and responsibility to pay the mortgage that is secured by the property. When they purchased the house, they promised to pay back to the bank a set amount of money at a certain interest rate, and transferring the deed will not change the fact that the house is collateral for the mortgage loan. The owners may be able to transfer ownership of the house at a later date, but their original promise to pay the bank or face the loss of the property will not be altered.

There is also a danger that transferring the title into another party's name will activate a part of the mortgage called the "Due on Sale" clause. This means that, if the homeowners transfer ownership at any time before they have paid off the mortgage in full, the entire remaining amount of the loan will be due immediately. Because most deed documents state the consideration paid for the property, banks view this as a sale of the house, even if it is only for a nominal amount like $10. Such transfers will activate the Due on Sale clause and the homeowners will still have to find a way to pay back the loan, or the house will be foreclosed and auctioned off.

It is also important that homeowners be aware of the fact that many foreclosure scam artists rely on such transfers in order to steal homes from desperate families. They sell foreclosure victims on being able to stop the process just by transferring ownership of the house to a third party, into a land trust, land grant, or other "creative" entity. At that point, the homeowners typically agree to paying the scammers rent to continue living in the house, all the while ignorant of the fact that the bank is continuing the foreclosure process and will evict them after the sheriff sale. The homeowners are eventually evicted with severely damaged credit, while the bank takes the house, and the scam company steals money and gets away with no damage to their own credit.

Transferring ownership of a house while facing foreclosure is almost never a good idea unless a sale or refinance of the property is also taking place. The defaulted mortgage must be paid off in full or at an agreed price in order for the foreclosure to be ended. If the homeowners are simply executing a quitclaim deed in a misguided effort to save the house from foreclosure, they will quickly realize that this does nothing to affect the original mortgage, and will only leave them in a potentially much worse situation.

If title is transferred out of the homeowners' names and the mortgage is not paid off, there is a good chance that the situation will go from bad to worse. They will no longer have control over the property, and the Due on Sale clause may push up the time frame in which they need to pay off the mortgage. In any event, though, homeowners need to keep their eyes open for potential scams and make sure they understand that transferring title does not stop foreclosure unless the defaulted mortgage is also paid off.

Once they have found a solution that allows them to save their house from foreclosure, many homeowners would like to delete any mention of the proceedings from their credit or property record. Because the foreclosure was cured and the mortgage either reinstated or paid off, they should be able to get it off of their histories, right? Wrong. Too often, the fact that a house went into foreclosure will haunt the homeowners long into the future.

On the credit record, having a string of late mortgage payments leading up to the foreclosure will severely damage the owners' scores. Being able to solve the problem before losing the house completely may not impact the history or score in a significant way, since the negative payment history is often not far enough removed in time. It will take a number of months to begin repairing the credit if the homeowners were able to save their home, and it may take years to qualify for a new loan if they lost the house to the foreclosure.

Getting the foreclosure removed from the credit report is also extremely difficult. It can be done, but it is unlikely and would take much work on the part of the property owners. In essence, to remove a foreclosed loan from the credit history, the debtors would have to persuade the mortgage company to request that the credit reporting agencies no longer show it on their records. Banks are often unwilling to do this, of course. Otherwise, there is usually no way to get a foreclosure removed in order to boost a credit score.

County records are even more difficult to remove once they have been recorded. Because the county keeps all documents that ever affected a particular property, they will not be willing to delete any foreclosure or other lawsuit court documents from appearing in relation to the house. Counties even keep foreclosure, deed history, and mortgages from previous owners going back decades, so that anyone can perform a title search through public records and verify ownership and liens.

The fact that the county is most often the keeper of all these historic documents means that homeowners who faced foreclosure, even if they were able to save their house, will always have those documents in their name in regards to the house. Their ability to stop foreclosure does not negate the fact that the documents were filed in the first place. On the positive side, however, is the fact that, once a house is taken out of foreclosure, those documents will also be recorded and anyone searching the property will be able to see that the owners prevented the loss of the home.

Public records and credit agencies often keep documents for far longer than homeowners would prefer, especially if they are constant reminders of a financial hardship and prevent the owners from qualifying for other loans that they are able to pay back. The credit agencies only keep foreclosure records for 7-10 years, while county records are kept virtually forever. It is possible, but unlikely to remove a foreclosure from a credit report, but essentially impossible to get the county to hide away those documents. After all, they are only providing a history of a particular property, and foreclosure can play a role in the history of a house.