What is most amazing about the real estate downturn and economic depression is that government seems to keep on growing. In fact, government at all levels does not seem to have missed a beat, as they all seem to be growing. The only thing that has changed is the reason for continued government growth.

During strong economic times, government kept growing because it needed to provide more services to a rapidly changing world and rapidly growing communities. More police officers were hired to "protect" the community and collect revenue, and more social welfare programs were created to buy votes.

Now that the real estate boom has turned into a catastrophe of historic proportions, government needs to keep growing to meet the demands of a rapidly changing world and growing poverty. More police offers are hired to "protect" dangerous foreclosed neighborhoods, and more social welfare programs are created to buy votes.

The people in the middle who suffer the most are the working people in these communities who are still attempting to hold a job and pay their mortgages. These homeowners are seeing property taxes increase at a time when property values are falling by the day.

In fact, CNN is reporting today that home prices have fallen by 27% from their peak, but municipal tax collection has grown by 12% from 2006 to 2008. With fewer homeowners and rising civil unrest, governments across the nation have taken the exact wrong approach by preying on the men and women who are still working and paying their bills..

It seems that the culture of bailout has extended far beyond Wall Street and Washington, DC, as homeowners in all areas of the country are being stolen from in order to pay off anyone with a political connection. The billion dollar bailouts make the news, but many more companies and individuals have profited from government handouts.

The only jobs that have been created by the president's stimulus plan have been government jobs, all of which need to be funded through additional tax revenue or borrowing. These government jobs, furthermore, have done little else than take resources from the private sector and dump them into giant black holes of public works.

Driving through a large metropolitan area over the weekend, it seemed that there was highway or road construction every few miles, all of which had huge administration recovery plan signs littering the landscape. Some of these roads had been repaired and redone just a few years ago, but are now being repaired again. Some roads were not damaged in the first place.

Is everything the government does just for show? To provide an appearance that, without the central planners, we would all be crawling around in the dirt eating worms and working in caves digging rocks for $1 a day?

But this is not the case, and all of the money being taxed, borrowed, or printed into existence to allow the government to keep growing at the expense of communities will not solve the foreclosure crisis or the broader recession. All we are getting is a show of resources, a few more unnecessary government jobs, and higher property tax rates.

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.

At the end of the foreclosure process, once all of the notices have been sent and published and the lawsuit has ended, a public auction is held to dispose of the property. This typically called a sheriff sale or trustee sale, and is the event during foreclosure where borrowers' ownership interest is transferred to the buyer at auction. But sheriff sales do not always go smoothly, and homeowners may need to find out if their home was sold or not.

For instance, if the lender called off the scheduled sale for any reason, homeowners may believe that their property was sold out from under them when they are, in fact, still the owners. Banks cancel auctions for any number of reasons, from not having an inspection done, to waiting for an appraisal, to a response by a request for more time from the borrowers themselves.

Another factor that may cause a sheriff sale to be scheduled but not confirmed is if a third party bids on the home, wins the auction, but can not pay the purchase price. If this is the case, the property may have to be put up for auction again, in the hope of finding a more willing and able buyer. If this happens, though, homeowners may not even know the first auction did not count, as they assume the house was sold and paid for.

This is why, after a sheriff sale, it is important for homeowners to make sure that their home was actually sold and properly confirmed by the county. If the property was not sold, the borrowers may be able to keep living in their home until a valid auction is conducted. This may take an additional two or three months to schedule, conduct, and confirm, and all of this time can be used by the homeowners to save up more money.

There are a number of ways to find out if a property has been sold or if an auction has been confirmed. Possibly the easiest way is for homeowners to call the county recorder's office or the clerk's office and ask them to provide the information as to who currently owns the property, as well as any liens on the property right now. If the bank purchased it, there will most likely be no liens, but if a third party took out a loan to buy it, there may be a new mortgage affecting the deed.

This would be the easiest way to determine the status of the sheriff sale, since the county in which the property is located keeps all of the records affecting the property. If the foreclosure went through but there was a problem with the sale, they will be able to give the homeowners that information, while the court will be able to inform them if a new auction has been scheduled yet.

But if no documents have been recorded to show a transfer of ownership, then the house may have to be auctioned again at a later date. Especially if it is a few months after the scheduled auction and no documents to show a transfer of title have been filed, it may indicate that the sheriff sale was not valid. This may be due to any of the reasons listed above, but especially if the high bidder could not pay, the house may just be auctioned again.

In the meantime, the original owners might still have possession and legal ownership rights of the property, just as they had during the foreclosure process. According to many state foreclosure laws, it is the confirmation of the sale that finally transfer ownership to the high bidder at the auction -- if that has not been done in a particular case, the borrowers may still own the property for now.

From Washington Mutual to the local bank on the corner, the government has been busy since the financial crisis began shutting down banks almost every week. Many of these banks are becoming insolvent due to their exposure to the subprime mortgage market and other risky loans that they extended to consumers or invested in to take advantage of exorbitant profits. But with so many banks going out of business, homeowners with loans through these institutions need a plan for staying out of foreclosure.

Especially for homeowners facing foreclosure, when a bank is shut down by the government due to insolvency, the situation can become much more complicated. Typically, the assets of a failed bank are sold to another bank after the government has come in and run the bankrupt institution for a period of time. Loans are considered assets since they represent a potential stream of income. But foreclosed loans may be treated with a little less regard.

The big problem that homeowners in foreclosure will face is that they are already behind on their mortgage and it may be difficult to determine which company or agency to speak with regarding any loan modification, repayment plan, or short sale options. If the bank is out of business and not responding to calls, but has instructed its lawyers to move ahead with foreclosure, borrowers may find themselves in some sort of financial limbo.

The best response to this is for homeowners to begin keeping records of their attempts to stop foreclosure with the old lender, the government, or the new bank. They should keep documentation of their efforts to resolve the situation through the courts or outside the system. These records should note when they call, write, or send faxes to the bank and what information they are attempting to obtain, or what solution they are trying to negotiate with the bank.

If the bank is in bankruptcy right now, there is a good chance the homeowners' loan will be sold to a new bank in a period of time. That bank will only see that the borrowers are behind on monthly payments and in foreclosure. In some cases, they may send a letter or two offering assistance, but may just move directly ahead with foreclosure, taking up where the insolvent lender left off.

In this type of situation, the borrower's plan should be to save up as much money as possible during the period the bank is in receivership with the government. If they are able to, they should put away at least the amount of their normal monthly payment and put it in a separate bank account. These extra funds can be used to show a good faith effort to pay back the arrears or as a bargaining chip for a mortgage modification or other plan.

Once the new bank contacts the borrowers, whether it is to pursue foreclosure or not, they should start negotiating with the lender, using the documentation and money in the bank as bargaining chips. If the new bank does not work with the owners, then they should take the matter into court and show a judge how they have been saving up their money to pay down the mortgage and attempting to work out a plan but had never gotten a response.

Foreclosure is supposed to be used as a last resort, so if the bank is not responding to homeowners, they need to show that they have tried to fix the situation outside of the court. Even in situations where one bank goes out of business, is taken over by the federal government, and is then sold to another institution, homeowners can make a good case for stopping foreclosure just by saving up money and keep documentation of their efforts to negotiate with their lender.

Over the past months, foreclosure rates have kept going up, which points to the fact that the green shoots in the economy have not yet begun to help average people. Obviously, homeowners want to avoid foreclosure, as do the banks. Lenders do not want numerous, low-value foreclosed homes on their books, due to the growing risk of the bank failing. Homeowners usually do not want to lose their homes. This means if the two work together early enough, a solution should present itself.

Most of the foreclosures are due to bad lending practices at the start of the lending process. Not too long ago, people considering buying a home had to show a significant down payment, as well as one year of work pay stubs and other proof of income and asset. This proved that they did have financial resources, were good at money management, and would likely keep up with loan payments over the long term.

Equal opportunity in lending laws meant that banks began offering loans to people who could not afford to pay them back under the banner of diversity. At the same time, loan originators were getting paid large commissions, based on the size of the loan. So with those two factors combined, it was much easier to get a loan, as borrowers did not have to prove their financial situations and large loans were given out to people that could not afford them. These loans were commonly referred to as “liar loans.” Most of the bank failures today have come from banks leveraging mortgage driven securities that were run into the ground because of these bad loans.

Millions of new homeowners were not totally informed on what they were signing when getting their loans. They ended up getting adjustable rate mortgages, usually with interest only introductory periods, even though they were informed before the closing that they were going to be put into a fixed rate mortgage. When the rates adjusted or the interest only period ran out. their housing bill could triple and most homeowners could not keep up with the payments.

If you are a homeowner and find yourself in this situation a loan modification may be your best solution. A loan modification is a negotiation technique, were you can get various terms of your loan changed. Think of it as a refinance option through your current lender, where you can start affording the payments on your home again. As direct lending to consumers has dried up due to the recession, modifying existing loans is becoming more popular.

Most mortgage loans are built around two items -- the interest rate and the time period over which the loan has to be paid off. The interest rate is the percentage of the remaining balance that the bank takes as a profit on each payment. If a loan's interest rate is too high, homeowners will find that they end up paying much more to the bank than the house is worth. Most interest rates are compound interest, as well, and over the lifetime of most mortgages, that can add up to a very large amount.

Loan modifications will either help reduce the interest rate or extend the repayment period of the loan. To get a loan modification package, homeowners will have to prove to the bank that they have run into financial hardship and difficulties that have lowered their monthly income significantly. They will also have to show that this situation has prevented them from having the financial means to keep making their monthly payments.

Borrowers may want to get help from a loan modification specialist to do the negotiating with the lender or servicing company. Especially these days, when the banks are so overwhelmed with people calling in for help, they usually just tell victims that they are “working” on the file, or it is in “processing” and they are waiting for an answer. When homeowners are in foreclosure, if the lender does not help or answer questions immediately, it may be best to find help elsewhere as quickly as possible.

Working with a loan modification specialist can help speed up the process of getting a modification approved because these people work with the banks all the time and the bank employees know them and will speak to them and get a plan worked out more efficiently. In a foreclosure situation, homeowners do not want to be stuck sitting around waiting for the lender to “approve” a loan mod, while it is also actively working on selling the home through a sheriff sale. Having a professional negotiator is often the way to go, if the owners want to get a loan modification before their home sells at auction.

There is an amazing story in the August 2009 issue of the California Bar Journal about the growing number of complaints against lawyers and law firms offering mortgage help to homeowners. From investigating nine such complaints for all of 2008, the California State Bar is now investigating 391 complaints against 140 attorneys. What is causing this huge increase in the number of borrowers complaining about attorneys?

With the rise in the foreclosure rate over the past few years, it seems that many lawyers have gone into the foreclosure assistance business. Even in states like California, where loan mitigation companies are no longer allowed to charge an up-front fee from borrowers, attorneys can still charge a multiple-thousand dollar retainer fee before any work is done for a homeowner. This makes the foreclosure business very lucrative, and very attractive for the corrupt.

Also, what happened to all of the lawyers providing mortgage services during the boom for lenders, title companies, and home buyers? Many states require that borrowers and sellers both have an attorney at closing to represent them. With the falloff in new closings and refinances, these attorneys may have decided to enter the other side of the business -- helping homeowners escape the predatory loans the lawyers should have warned about in the first place.

Many homeowners were given loans that were either misrepresented to them or were simply not explained at all. Too many lawyers hired to make sure the borrowers understood the terms of the contracts did very little other than collect several hundred dollars at the closing table. The law requiring legal counsel before a real estate closing had more to do with injecting unnecessary legal fees into the housing market than creating educated borrowers.

Some of the complaints against these lawyers now providing loan modification services are the same ones homeowners routinely file against loss mitigation companies. Some of the complaints involve no service being provided, up-front fees that are collected but no work is done, no refunds even though no work is done, instructing homeowners to stop contacting their lenders, even attempting to transfer money directly out of a borrower's bank account.

This indicates that some lawyers have entered the loan modification business essentially just to steal money from desperate homeowners. Too many companies or law firms take payments from borrowers and then never provide any work -- it is one of the most common foreclosure scams around, and one that homeowners keep becoming victims of as they try to save their homes.

But none of this really explains the shocking rise in complaints against attorneys offering foreclosure help. From nine in 2008 to close to 400 in the first seven months of 2009, it seems that more factors than just legal industry corruption are involved. Or, have attorneys in large numbers made the move from other less lucrative practices into the foreclosure business, where they can prey off the huge numbers of people struggling to keep their properties?

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.

Identity theft is everywhere these days. No company or individual who has ever used a credit card online is safe from criminal hackers and social engineering thieves. And although large corporations may have the most information that identity thieves can target, smaller companies can still yield hundreds or thousands of credit card numbers.

One of the tactics these criminals use is to steal a huge list of credit card numbers and then begin making numerous small charges on each of them. Many consumers may not even recognize a series of charges for between $2 and $6 on their bank statement. But $30 worth of charges over a thousand credit cards is highly lucrative for thieves.

There is also almost zero risk in stealing credit cards from online merchants and using them. While much of this type of theft goes unreported, even the cases that are reported to the police end up going nowhere. A consumer in Ohio may purchase something from a website in California that is hacked by an individual in Tennessee who uses a credit card to initiate a fraudulent charge in New Jersey. Where do local authorities even begin to address this?

Federal and state regulatory agencies are also ill-equipped to deal with such instances of credit card fraud. For $30 in disputed charges per account, the federal government can not spend hundreds of dollars per case. While there may be a good chance of catching the thieves, much of the money may be gone, making tracking down small-time identity thieves a losing financial proposition for the government.

As well, disputing a whole list of charges to get them removed from a bank or credit card account is positively a waste of time for consumers. The companies that took the fraudulent charges will not answer phones, not return voice mails, or refuse to refund the charge without a police report or other evidence of fraud. This is a lot of work to get back $4.95, and many consumers will just not bother to pursue it.

While banks may accept disputes and refund money to consumers who are targets of these criminals, the banks most often recover nothing from the thieves. Instead, money is set aside in a reserve account to cover these losses. But the funds for the reserve show up in higher interest rates and fees for all banking customers, as the costs of identity theft are passed along to the consumers anyway.

Unfortunately, it seems that it is easier to make money through the drug trade, identity theft, and other black market endeavors. It is also just as risky as holding a normal job in these tough economic times. Being caught and facing monetary judgments or community service is not really all that worse than being laid off, foreclosed, and homeless. And while the costs of identity theft are passed along to consumers, the costs of foreclosure and job loss usually affect only local families and communities.

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.

Too often, when homeowners begin to feel a financial squeeze, their first instinct is to keep everything as much the same as possible and just hope for the best. In some cases, this lack of planning actually works out, but for the majority of borrowers, responding to a financial hardship by relying on hope may not end in the results they are hoping for.

For the most part, the one action that homeowners can take when they begin to fall behind on bills to just to evaluate their current situation and plan for the future. This means looking at sources of income, monthly expenses, and how to increase or decrease each of these. But too many homeowners avoid making tough decisions and end up paying for it.

Creating a current budget should be the first priority for any consumer facing a change in their financial situation due to the recession or any temporary hardship. The most important point is to use realistic figures -- not inflating income, counting income that is not there, and estimating current expenses. Once this is done, the borrowers can then decide on a reasonable budget they can live on and keep on top of their bills.

There are a number of ways to increase income during a hardship, if the consumers have access to any extra resources. Taking on a part time job is always an option, although even these are becoming scarce during the tough economic conditions facing the country. But just taking additional tax credits and deductions can help, as well as halting as many automatic payroll deductions as possible.

Reducing expenses may be an even easier process to accomplish than increasing income. Many bills can be eliminated, especially luxuries. Others can be reduced or negotiated down, as companies would rather retain a customer and lower the monthly expense for a period of time than lose the customer completely due to an expensive bill.

In fact, every expense should be carefully examined by consumers to discover any areas in which the monthly bill can be cut. Again, there may be tax credits or deductions that can be taken (such as weatherizing a house) which will help to reduce expenses even more further on down the road. Of course, the current cost should not overburden the homeowners.

Many companies that are considered indispensable, such as the mortgage and the utility companies, should be contacted at the first sign of trouble. While most of them will do nothing if the bills are not currently behind, they will be more willing to work with consumers who contact them as early as possible to report a reduction in income.

For homeowners already behind on their bills, utility companies can offer affordable budget plans or reductions of payments for a period of time. Mortgage companies can also provide forbearance agreements or loan modifications to help families avoid foreclosure. The key for borrowers is to work within the budget they created and begin negotiating with these companies as early as possible.

With the fall and winter coming up soon, getting some of these bills under control will become more vital with each passing day. At least with utility companies, homeowners may be able to obtain a monthly payment plan that lets them pay the same amount throughout the entire year. This can drastically reduce the shock of going from a $100 gas and electric payment to a $300 payment.

As always, consumers should prioritize bills as much as possible. Food, the mortgage, and keeping the lights and heat on are typically the most important, while credit cards and cable television may fall further down on the list. Any bills that help provide income (such as expenses for a home business) will be prioritized depending on the borrowers' situation through a cost-benefit analysis.

Going through a financial hardship is never easy, and is often frustrating, depressing, and has lasting consequences. With the current recession, more people than ever will be facing difficult times. But at least some consumers can take action to make the best of a bad situation, creating a realistic budget, negotiating down bills, and realizing that they are not alone.

The Bankruptcy Code gives homeowners facing foreclosure the right to cure the default any time up until the foreclosure sale process is completed. The key word here is "process," and state law determines what the process is for a valid auction or sheriff sale. Until this has been completed, homeowners who file bankruptcy can use the federal laws for another chance to save their home and cure the default.

The Bankruptcy Code itself does not even determine when a house is considered "sold" for the purposes of a valid foreclosure sale. This means that state foreclosure laws will most likely be used in cases where borrowers attempt to pay off a loan through bankruptcy, even after a sheriff sale. Another aspect that works in favor of homeowners is that many states require an auction to be confirmed before it is valid.

This means that homeowners who file bankruptcy have rights during the foreclosure process that are safeguarded at least through the sale of the property. These rights may be guaranteed for even longer than that, depending on how the confirmation process of the auction works after the home has been sold by the courts. If there had been a bankruptcy, the lender may not just be able to sell the house and take it over right away.

Redemption rights may extend the rights of the borrowers even longer. In states that have a redemption period, the borrowers are given a set period of time in which to cure the default even after the home has been auctioned at a trustee sale. But for those homeowners in states where a redemption period is not available, filing for bankruptcy may create a pseudo-redemption period through the right to cure.

However, rulings by state courts on this issue may determine how long this extra right to cure lasts. Some courts have ruled that the foreclosure sale process is completed once the gavel falls at the auction. In these cases, filing bankruptcy will not extend the time to cure the default for any significant period of time. Once the auction has been conducted, the sale process is complete, and the right to cure has expired

Other courts, however, have ruled that the sale process is not completed until the appropriate company or government agent has executed a transfer deed after the sale, the purchase price of the auction has been paid in full, and the sale has been confirmed by the court. In these states, homeowners may be able to file bankruptcy and have the property listed as a part of the bankruptcy estate and turned over to the trustee.

If this happens, the lender and local government will not be able to move forward with any other collection activities or actions to transfer the property. The automatic stay is in effect, the homeowners have an interest in the house, and the property is now a part of the bankruptcy proceedings. If the sale is confirmed or the deed transferred after the filing, it may be reversed at a later date as a violation of the stay.

Filing bankruptcy in this situation may result in homeowners having several additional months to cure the default. While the automatic stay is in effect, the lender, new owner, or local government can perform no action to confirm the sale or remove the borrowers from the house. Even if a Chapter 13 is filed, the owners will be able to cure the default through a repayment plan -- even though their home was sold at auction.

There are a whole list of problems with filing bankruptcy to stop foreclosure, but for homeowners whose financial situations have recovered and who can cure their default, it may be a decent solution. Even after a sheriff sale, borrowers may be able to submit a plan that allows them to save the home. Sometimes, just filing bankruptcy is enough to set aside a sale and give the owners more time and one more chance.

When a home goes into foreclosure while there is an active lease agreement, the lease must be honored by both the homeowners and the tenants. This can be true even after the sheriff sale of the house for a minimum of ninety days during the confirmation process of the auction. This is a new law that came into effect this year, shortly after President Obama took office.

In some cases, the lender will get the home back at the public auction and the lease will go on as usual; the former renters will just be making payments to the bank that buys the house at the sale, rather than the former homeowner. Another option is to make an agreement with the landlord to end the lease and get a credit for the security deposit. This can be applied to the final month of rent if the landlord no longer has the cash to refund the security deposit to end the lease.

Unless the tenants get a written agreement with their landlord to end the lease, they will still be responsible for making the monthly payments, regardless of what legal problems the owner is facing. This definitely includes the case of foreclosure -- renters will need to keep paying until the owner's interest in the property is transferred through the auction.

The best advice for renters in this situation may be to make sure they keep updated on what is happening with the foreclosure process. They can do this by viewing the public record at the county courthouse. In the event the home is sold at a sheriff sale, the tenants should immediately contact the new owner and try to find out what their options are.

Many people will recommend attempting to purchase the home and take over payments. This may not be the best option, though, and will only be appropriate in a limited number of cases. In other situations, this is the worst advice anyone could give, especially without knowing anything about the condition of the property or the tenants' financial circumstances.

If the renters would really like to break the lease immediately and move on to a more stable situation, their best option is to work out a deal with the landlord. Most landlords are not familiar with the foreclosure process or any of the new laws that affect renters in the event of a foreclosure. This can work to the advantage of the tenants in negotiating a solution to avoid being evicted after a sheriff sale.

Tenants can simply explain to the landlord that they need to break the lease because they are now aware that they will not be legally capable of living up to their part of the agreement as required by the lease. No renter wants to live week to week, not knowing when the sheriff is going to show up and evict them, giving them twenty minutes to remove their belongings. Some courts will also side with the renter, in this type of case, but it is probably not worth hiring an attorney and sue the landlord to get a small deposit back.

A final issue for renters to consider is that many people are able to save their home from foreclosure. Companies, foreclosure specialists, banks, and mortgage servicers help people find solutions to allow them to keep their homes every week, by using a loan modification, refinance, or other workout plan. It is entirely possible that the landlord will be able to keep the home and the foreclosure will not affect the lease whatsoever -- and in that situation, the worst action for tenants to take would be voluntarily not paying the lease.

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.

Often, when homeowners need a specific piece of information from their lender, the bank is suddenly unwilling to communicate. Despite numerous faxes or phone calls, the information never seems to make it from the homeowners to the bank back to the owners. There are some options and tactics that borrowers can use to get this information, however, before taking legal action.

First, the best idea may just be to call back the lender and keep trying. In many cases, it is usually best to make another phone call and talk with a new company representative until the owners find someone more cooperative.

Another method that foreclosure victims can use is to contact the court that handled the case and find out if what they are looking for is part of the public record of the case. For specific property documents, the county court may have records. For specific pieces of information about the mortgage company itself, other government regulatory agencies may have disclosures and other public documents.

Finally, homeowners can try to talk to the person who signed the applicable paperwork originally. In the case of many documents that are provided at closing or during the loan application process, the main signer on the loan may have kept a copy or could get a copy from the mortgage broker or closing agent.

Lenders and servicers have never been easy to work with. The representatives they hire for loss mitigation are severely overworked, undertrained, and underpaid. The representatives have to deal with angry customers all day long and they all stopped caring about any one homeowner a long time ago. This is why borrowers who are serious about making a case to keep their homes need to be persistent.

When dealing with lenders, homeowners and their advocates or family member helpers need to make sure they have authorization to discuss the loan account. They can make sure of this in two ways: the first is to fax is signature authorization from the main account holder to the lender; the second is to have have the main account holder call the lender and give them verbal authorization to speak with someone else. Most lenders will allow a 24 hour verbal authorization to speak with a third party.

Once a third party is actually authorized to speak with a lender, the homeowners and advocate need to leave their emotions completely out of the situation. They have to assume that the people working for the lender are not sympathetic and have already heard hundreds of sob stories each week. In fact, they should assume that the bank will mock them and make fun as soon as they are off the phone, if the conversation becomes too emotional. I personally experienced this with a client when the representative thought we had already hung up.

Another important mistake many people make is demanding the results they want. Homeowners have to remember that they are at the bank's mercy in some cases; they do not have to help, and they most likely will not if borrowers become too demanding. By acting politely and professionally, the owners will likely get what they are asking for.

When a lender does turns homeowners down, they might try asking if there are other solutions to avoid foreclosure. For example, instead of demanding or threatening litigation when the bank rejects a loan modification application, the owners could ask if they have any advice on how you could obtain the solution or paperwork that is being sought. Most people will be inclined to find a way to help, assuming the borrowers ask in a professional manner.

Another question you need to ask in this scenario is what their reason is for withholding some documentation or solution from the owners. It may be a simple matter of obtaining the correct authorization, it may be something that particular office does not have access to, or it may have a more sinister reason behind it. Either way, asking the right questions should help homeowners get to the bottom of their problems with getting documents from banks and servicing companies.

One of the great consequences of the recession has been the loss of respect for the dollar by investors, the government, and borrowers of credit. With so many trillions of dollars being destroyed through foreclosure and bankruptcy, or printed out of thin air by the Federal Reserve and spent by the Congress, it becomes clearer by the day that our money means almost nothing anymore.

The banks, during the real estate bubble, knew that money was just pouring into their vaults with artificially low interest rates and low or zero reserve requirements. So they handed out newly created money like it was going out of style. Once everyone who wanted a mortgage and was qualified got a loan, then it was time to start giving credit to people who wanted loans but were not qualified for them.

Once the bubble collapsed, the bank's moral bankruptcy was exposed in the subprime fiasco and the pumping of the real estate market. Prices came crashing down and are still declining, while more banks go out of business every week. But with the failure of the banking system and exposure of the corruption in financial markets, the government was "forced" to step in and start abusing the money themselves.

So far, over $23 trillion has been set aside or directly pumped into the system in order to stimulate the economy. The government has bailed out all of their friends and helped prevent any banker from having to go without his or her bonus last year or this year. Average Americans have had their tax dollars taken from them during a recession in order to "save the economy" by a simple transfer of wealth from poor to rich.

But instead of saving the economy, the government has only encouraged more moral hazard. Banks have been handed hundreds of billions of dollars and have done little or nothing to help stop the bleeding in the real estate markets. Of course, there is nothing they can do anyway, but they also should not have been given these enormous sums of money when it was always clear the money could not solve the problem.

Homeowners facing foreclosure have simply been walking away from their homes. Instead of taking advantage of the government's loan modification programs which would not save their homes anyway, many have decided just to cut their losses, abandon the property, and let the banks foreclose on them. The houses are not worth anywhere near what they were originally purchased for, so walking away makes more economic sense.

However, in a country where taking out debt was a serious matter, and paying it back even more important, this trend of walking away may be significant. The government, through its bailouts of its crony banksters, has encouraged a culture where people who make poor financial decisions are rewarded at best, and only ignored at worst. Can an economy ever recover while such activities are being rewarded by government?

When homeowners or their legal advocates are doing research on a loan, there are numerous documents that may help inform their case against a lender. These can include mortgage documents, information available in the public record, and other information obtained through fighting a lawsuit in the courts. Thus, borrowers should be aware of these different types of documents and how they can help in defending a home.

The original mortgage documents are the most important in defending against a bank's foreclosure attempt. If there are any mistakes or fraudulent aspects discovered in these, the entire loan may be invalidated or a court-ordered loan modification plan may be put into place. Signs of abusive lending or clauses that may provide remedies to foreclosure should be searched for by the borrowers.

There are five documents that homeowners may wish to consider the most important when they are searching for the original paperwork. These are the following:

• HUD-1 Settlement Statement
• Truth in Lending disclosure and Rescission Notice
• Note for the loan
• Deed of Trust or Mortgage
• Appraisal

If a mortgage servicing company is involved in the collection of the payments on a monthly basis and responsible for the foreclosure process, homeowners should begin collecting documents related to the servicing. Servicer abuse is rampant, as the entire industry was set up from the beginning to prey upon homeowners and reward corrupt or fraudulent companies for pushing people into foreclosure.

There are several documents that homeowners should attempt to obtain from servicers and compare with their own copies of documents and calculations.

• Payoff Statement
• Complete payment history
• Contact history and notes on the account
• Disclosure of current owner of underlying loan
• Servicing transfer notice(s)
• Pooling and Servicing Agreement (PSA)

After obtaining the documents from the original lending transaction and relevant information from the servicing company, homeowners should begin to look into public records. The bank, its attorneys, and any potential bidders will examine public records to find out as much as possible about the owners and the property. Borrowers should do the same to research the lender, servicer, and owner of the loan.

Searching public records can present endless sources of information for homeowners in researching mortgage companies. Just a few ideas are listed here:

• Land records from the county recorder
• Securities and Exchange Commission documents
• Complaints against companies with regulatory agencies
• Record of company through Better Business Bureau and other advocacy groups
• Records of other lawsuits the bank has been involved in
• General internet searches
• Corporate documents and accounting statements

Before going into court, these documents can help homeowners begin to build a decent case for why a foreclosure should not allowed to go through. There are also numerous other documents that can be obtained in the discovery process in court, which will be covered in a later article. The types of documents and the purposes for each in the defense of the home present vast potential for homeowners trying to stop foreclosure.

Just like lenders examine borrowers' records to decide if they will qualify for a loan, homeowners should go through the exact same process to determine if a bank has a legitimate right to foreclose or not. In many cases, they may discover enough irregularities in the loan to force the bank into a mortgage modification or, if that is not offered or appropriate, have the entire foreclosure process thrown out of court.

The most recent news of the Obama administration's Home Affordable Modification Program (HAMP) has not been good. Although more modifications are being accomplished on a cumulative basis, less than 10% of the homeowners who qualify for a workout solution under the terms of the program are offered one by the mortgage servicers and lenders. While this seems like a poor performance, it should have been expected.

One big roadblock for any loan modification plan is the pooling and servicing agreement (PSA). This is the agreement that dictates terms regarding how mortgages are pooled, securitized, sold to investors, and then serviced by other companies. And one of the terms many of these agreements contains makes it almost impossible for certain homeowners to be offered a modification.

In fact, some pooling and servicing agreements state that no more than 5% or 10% of the mortgages contained in the pool can be offered loan modifications in the case of default. So the US Treasury Department, in reporting that 9% of homeowners who qualify for plans have been given modifications, is simply reporting information that could have been estimated just by examining the structure of the mortgage industry.

These PSAs set a limit to how many mortgage modifications can be offered by servicers, and these companies may face liability from the trusts or investors that own the underlying loans if they offer too many workout plans to borrowers. They may find themselves in breach of the servicing terms they agreed to, even if it would allow more homeowners to avoid foreclosure, and they are not willing to take this risk.

This is one of the problems of the government getting involved in the mortgage markets. While it can appropriate $75 billion to effect more modifications, it has not changed or interfered directly in the PSAs that limit the number of such programs that can be offered to defaulted borrowers. Thus, the government is encouraging lenders to offer more plans than the legal, agreed-upon limit in the PSA.

If the lender has hit the limit in the number of loans it is allowed to modify, the mortgage may have to be removed from the pool in order to assist the borrowers. If this is the case, the owners may have to get a copy of the pooling and servicing agreement to find out what the servicing company is instructed to do for loss mitigation and how the mortgage security is constructed.

Especially in cases where the borrowers are having difficulty negotiating a loan modification or other solution to foreclosure, it may be helpful to examine the PSA. These agreements sometimes outline how companies are supposed to proceed in cases of default and where loss mitigation efforts would allow the borrowers to keep their homes. Having a competent attorney review the PSA could be extremely effective.

For securities that have been sold publicly, as many have, the PSA will be available through the Securities and Exchange Commission. Searching the SEC's website can provide the actual language of the PSA for homeowners to examine. What the borrowers must find out is the name of the trust in which their mortgage loan is located. This information may be found by submitting a request to the mortgage servicer.

When these limits are placed on servicing companies, both homeowners and investors in mortgage securities suffer. Of course, not every loan will be modified and not every modification will be successful, but it makes little sense for borrowers to be shut out of the process just because other homeowners defaulted first and the limit imposed by the PSA has already been reached.

One of the complaints of many homeowners that face foreclosure but whose houses have significant equity is that their home sells for far less than its true value at the sheriff sale. In most cases, there is no one else bidding on the property besides the bank, and the bank only bids enough to cover the balance due on the mortgage or deed of trust. For homeowners in this situation, though, there may be another option.

Courts in the past have ruled that, because foreclosure is such a harsh remedy to a default of a contract, the use of the court and forfeiture of property should be a last resort. Especially in cases where there may be enough equity to pay off the loan in full as well as give the owners back some amount of money, selling on the open market may present a more equitable solution.

Thus, borrowers may be able to have their foreclosure enjoined for a reasonable length of time in which to list and sell their home. If there is enough equity to pay off the mortgage and receive some sort of gain on the sale, foreclosure should not be used unless there are no potential buyers. As well, open market sales present no risk to the lenders, who will be paid in full if the sale goes through.

The main issue holding this solution back is often the homeowners themselves, who are unable to use the courts with the same skill as the lender's attorneys. They may not know how to file motions to enjoin the sale, or not even respond to any of the legal paperwork the mortgage company sends them. When the borrowers do not respond to the foreclosure, then there is little the courts can do to help them.

Lenders also have a duty to the homeowners to obtain the highest price possible for a property even at a sheriff sale. Allowing the owners to list the house for sale on the open market can be an effective way to show that the bank has made efforts to retain their equity and avoid foreclosure. The lender must meet its fiduciary duty to the homeowners to get the highest price for a property, even if state laws allow a faster process.

Despite this duty, some lenders may be unwilling to stop foreclosure for long enough to sell the house. In these cases, homeowners may be able to file bankruptcy in order to take advantage of the automatic stay and then list the house on the open market. Filing Chapter 13 may allow the borrowers to move forward with an orderly sale in order to liquidate the property and avoid a sheriff sale.

In order to sell the house, take advantage of the equity, and avoid a foreclosure auction, homeowners may wish to consult an attorney about getting an injunction against the sheriff sale. Especially if there is a reasonable chance of retaining some equity, courts may understand that there is little risk to the lender of allowing the borrowers to go forward with a sale.

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.