Foreclosure Defense Strategies

FAQ

The following is general legal information only and is not intended to be construed as legal advice or a substitute for obtaining legal advice

(We will be adding to this section – if you have a question about California or Arizona Foreclosure Defense, please email us at steve@vondranlaw.com)

(1) What strategies are being used by Attorneys as a means to foreclosure defense?

Some of the strategies that are being used to fight foreclosure by California and Arizona lawyers are: (1) filing truth in lending rescission lawsuits, (2) filing trial plan fraud lawsuits, (3) filing lawsuits for predatory option arm loans, (4) filing lawsuits for wrongful foreclosure (ex. Failing to comply with RESPA Qualified Written Requests, Failing to Comply with California Foreclosure Laws – ex. California Civil Code Section 2923.5-2924), and (5) filing lawsuits for failing to validate legal debts / produce the note defense (also discussed on this website).

The strength of these cases depends on a wide variety of factors, and typically a forensic loan audit and chain of title review is required to evaluate your case.

(2) Does SB 94 Change California Foreclosure Defense Laws?

Yes. SB 94 was signed by the California Governor on October 11, 2009. This law prohibits attorneys, law firms, brokers and foreclosure consultants from accepting advance fees for loan modification or foreclosure forbearance work. What this means is that many lawyers will no longer perform loan modification services because there is a serious likelihood of not getting paid for work performed. We have posted information about SB 94 on other blogs which you can find by searching google for “SB 94 Steve Vondran.”

Our law firm will perform loan modification services for California Homeowners for World Savings and Wachovia loans. If you have one of these two loans, contact us to discuss our no-money-up-front program. You pay nothing unless and until you sign a loan modification. In many cases, we have been getting principal loan balance reduction which we can document if requested.

As our firm is licensed to practice law in Arizona (as well as California) we will continue to serve our loan modification clients in Arizona, where accepting advance fees is not currently prohibited.

In all other circumstances, our firm will be limited to filing lawsuits where good faith grounds exist to seek either an injunction against foreclosure, and/or money damages for predatory loans, predatory loan servicing, and trial plan fraud.

(3) Should I represent myself in my foreclosure defense case?

You need to evaluate this. The legal theories that are often raised can be complex and not easy to articulate. If you have no means to pay for an attorney, then you really don’t have any options. Where you have the finances to hire an attorney to investigate potential legal claims that may exist under the legal theories discussed herein, that should be considered as the preferred route given the nature and complexity of the issues. Note that most foreclosure defense attorneys will not be able to take these types of cases on a contingency fee basis since there may not be significant damages that could be recovered, like, for example, in a personal injury case.(

(4) What is the Truth in Lending Rescission Defense to Foreclosure?

Under Federal Truth in Lending Law (TILA) the originating lender was required to provide you with accurate material disclosures (within permitted tolerance levels). For example, the finance charge and amount financed must be accurately, clearly and conspicuously disclosed or a material truth in lending violation will exist. In addition, each borrower and person with ownership interest in the property, in a refinance loan transaction, must receive TWO COPIES EACH OF THE NOTICE OF RIGHT TO CANCEL AND THE DATES MUST BE INSERTED AND ACCURATE. Failure to provide these, and other material disclosures, can trigger what’s known as a three year extended right to rescind (cancel) the original loan transaction.

Now, you should realize that under TILA, there is a three-step process that essentially must take place when seeking to exercise your rescission claim:

(a) The security instrument is removed by operation of law. This means, that the lender is supposed to cancel the security instrument (or file for declaratory judgment) within 20 days of the Borrower sending in their rescission letter. Note, to exercise rescission rights the Borrower/Homeowner is required to send in a letter exercising its rescission rights.

(b) The lender (which normally is some assisgnee of the loan assuming the loan was purchased on the secondary market) or some trustee of a trust (where you have a securitized loan) is required to “tender” back to the borrower/homeowner all payments, including interest payments, fees, and costs and other benefits they retained since the inception and closing of the loan, back to the borrower. THIS MEANS THAT AFTER REMOVING THE SECURITY INSTRUMENT (EX. THE DEED OF TRUST) THE SO-CALLED LENDER THEN NEEDS TO WRITE YOU A CHECK FOR ALL MONIES AND BENFITS THEY RECEIVED IN CONNECTION WITH THE LOAN.

(c) Step three: and here’s the catch, the borrower/homeowner must then “tender” back to the so-called lender (so-called lender is discussed in our produce the note website), the difference between the amount they are owed, and the remaining loan balance. This is required because loan rescission is designed to “put the parties back into the position they would have been in had they never met.” At least that was my law school definition of rescission. This is the hard part. Many homeowners are “upside-down” on their properties, and may not have the ability to refinance (pay off the loan which pays back the lender) or may not have additional properties or assets that can be used to fulfill the tender obligation. However, it is always possible that even a borrower seriously upside-down, or with no assets will come into money (ex. through an inheritance or winning the lotto – hey it happens) making the filing of a TILA rescission lawsuit a viable option. Under TILA, the lender must pay reasonable Attorney fees if the Court determines that a rescission right exists. If the lender has declared that you do not qualify for a loan modification, what other option do you have other than to exercise your legal rights and seek return of money they are not entitled to. Note: even assignees of a loan, or the holder in due course is bound by TILA rescission rights which makes rescission such a strong remedy.

Other rules apply, and these must be discussed with foreclosure defense legal counsel prior to filing any Truth in Lending Lawsuit.

(5) What is the Trial Plan Fraud Foreclosure Defense?

We have started a website at www.TrialPlanFraud.com that highlights this new problem we are seeing in foreclosure defense. The loan servicers are hard-up for cash. They cannot stand that payments are not coming into them for the benefit of their investors. So, it seems that they way they have decided to combat the problem of the “non-paying homeowner” is to send them what appears to be a loan modfiication agreement (words like “offer” and “if you accept”) are often used. These agreement lead a borrower to believe that they qualify for a loan modification program (often under the guise of President Obama’s Making Home Affordable program) and the agreement asks the homeowner to submit their financials (usually which they have already done) and make THREE (3) “trial plan payments.” Once these three payments are made, the agreement (which normally has a signature block for both the homeowner and the so-called lender), and assuming no material changes have happened since submitting the financials, the agreement states that the homeowner “will receive a loan modification.” Note that each contract is different so the scenario may differ. You need to have your trial plan offer reviewed by a foreclosure defense law firm to know for sure what you have.

At any rate, after the borrower makes the required three payments, we are learning that the major lenders, (you know who they are) are either (a) selling the house from underneath the owner or, (b) rejecting the mod offer claiming the borrower does not now qualify for some reason.

What this does is induces homeowner’s to make several more payments before the lender exercises its “right” to foreclose. If the lender knows all along that the borrower could not afford the property, did not qualify for a modification, or that the lender/investor simply chooses to foreclose on properties rather than to modifiy the loans, it would seem that the act of “sucking three or more payments” out of a homeowner was simply done out of greed. If a loan mod was not an option, the owner should simply be told this so they can save their money for an apartment or house rental. Seems only fair. The lenders are not playing fair.

While a lawsuit alleging fraud and/or breach of contract might be for money damages (which may not be good grounds to get an injunction against foreclosure since money damages have to be inadequate), there may be grounds to convince a judge that the contract should be enforced (called specific performance) and that the agreed upon trial plan payment should be honored. Again, this is a new theory emerging with the explosion of trial plan offers.

On our www.TrialPlanFraud.com website there is an article that quotes a Bank of America executive saying that only about 50% of these trial plans will ever go through. Seems this is a great tool being used by lenders to keep the cash flow coming and then to “time-release” foreclosures onto the marketplace (another act of self-interest) as they see fit. If they unleashed all the foreclosures at once; (a) people would be asking questions about the bailout money, (2) neighbors who are paying their mortgage would see values around them decreasing due to short sales and bank owned property sales, and (3) might want to stop making their payments as well. All this bodes negatively against the lender. This is just a theory that we are developing as we are seeing more and more of these types of cases.

(6) What is the Produce the Note foreclosure defense strategy?

Please see other sections of this website to get more information on the Produce the Note strategy.

(7) What is the foreclosure defense strategy that deals with Option Arm Loans?

Option Arm Loans are the most unconscionable and predatory financial products ever created. In fact, California recently outlawed originating any more of these loans. Of course, this law comes after the fact, and protects literally noone facing foreclosure today. In addition, Countrywide and other lenders have been sued, and have settled with the Attorney General’s of many different states literally admitting to the toxicity of these types of loans.I

f these loans are truly that bad, and in most cases they are (sophisticated investors and financial people may not have the greatest defense), then why should lenders be permitted to foreclose on these types of loans, and potentially obtain default judgments against the borrower/homeowner. This is a totally unfair result.

On our website www.OptionArmLawyer.com we present some of the defenses and legal arguments that can be made to seek money damages and/or an injunction against foreclosure on these types of loans. Some of the arguments that are being made by foreclosure defense lawyers are:

Loan was negotiated in a protected foreign language, but the contract was in English (violates California Civil Code Section 1632 and raises rescission rights);
Unconscionable loan provisions and false assertions about goods and services under the California Legal Remedies Act:
Rescinding the Loan where Truth in Lending Law violations provide an extended three year right to rescind;
Elder Abuse (Homeowner was over 65 years old and literally “socked away” into a predatory, toxic, and deceptive loan that resulted in stripping their equity in the golden years);
Produce the Note (discussed on this website and at www.ProduceTheNoteAttorney.com );
FALSE AND DECEPTIVE LOAN PRACTICES AND FALSE ADVERTISING (THIS IS THE SAME THING COUNTRYWIDE GOT SUED FOR BY THE CALIFORNIA ATTORNEY GENERAL. BUSINESS AAND PROFESSIONS CODE SECTION 17200 AND 17500)

Check our website at www.OptionArmLawyer.com for more information

(8) What is the Wrongful Foreclosure – foreclosure defense strategy?

Wrongful Foreclosure is basically a complaint that alleges foreclosure would be wrongful and unlawful. Some potential grounds to look at are:
Failure to comply with RESPA Qualified Written request to prove up amounts claimed owed (the bean-counters should be required to prove the actual amounts owed, including late charges, and clear up any billing disputes/issues before being permitted to foreclose);
Trial Plan Fraud (default was cured through a loan modification agreement, but now the so-called lender or loan servicer refuses to honor the agreement);
Failure to comply with California Foreclosure Statutes (California Civil Code Section 2925.3-2924 et seq.), such as making false declarations of compliance and/or failing to follow foreclosure law requirements regarding the notice of default, notice of sale, etc.
Homeowner hired an attorney or “attorney backed” company, or other loan modification company in order to seek a loan modification but got scammed instead of a real attempt to ascertain whether they qualify for a loan modification. With loan mod scams on the rise (the reason for passage of SB 94) it seems only fair that the homeowner should be given a chance to be considered for a loan modification when a loan mod scammer wiped out their hopes.

Here are other arguments that can be explored depending upon the facts of the case. Contact legal counsel to discuss.

(9) When is a good time to contact a foreclosure defense attorney to discuss my case?

IMMEDIATELY. Time is of the essence in foreclosure litigation cases. Statutes of Limitations and Demand Letter time frames put the burden on homeowners to act fast to protect their legal rights. If you have received a notice of default you normally have 110 days before the lender can actually sell the house. DO NOT WAIT UNTIL THE LAST MINUTE TO CONTACT AN ATTORNEY AND SEE IF YOU HAVE A LITIGATION CASE. THE LENDERS HAVE LAWYERS ON THEIR SIDE READY TO POINT OUT YOUR FAILURE TO ACT IN A TIMELY MANNER. IF YOU THINK YOU ARE A VICTIM OF PREDATORY LENDING OR WRONGFUL FORECLOSURE, CONTACT A FORECLOSURE DEFENSE LAWYER TO REVIEW YOUR CASE.