How to STOP Foreclosure When Your Bank is Uncooperative
When Wall Street’s recklessness eventually crashed the mortgage bond market, the result was trillions in home equity lost and economic devastation for millions. The ripple effect seized up credit markets, stifled economics growth, killed jobs and resulted in millions of foreclosures.
As society slogs through the mess, additional improprieties have been discovered. It turns out that in their haste to originate, package, sell and re‐sell mortgages, many of the players in the lending food chain routinely violated laws intended to protect borrowers.
That’s the bad news.
If you happen to be one of the millions of people who are struggling to hold on to a property or need more time to find another place to live, there is a powerful tool available to help level the playing field against lenders who aren’t playing by the rules. It’s called a Foreclosure Audit.
A Foreclosure Audit is helps property owners analyze the legality of the foreclosure action taken against them by the lender/trustee company. This process entails the review of the foreclosure documents recorded on the title of the property and can be done any time after the original Notice of Default is filed.
A Foreclosure Audit should not be confused with a Forensic Loan Audit which only looks for RESPA, TILA and predatory lending violations. The loan audits are all but worthless because the statute of limitations is only three years. This means if the loan origination is more than three years old, the lender cannot be held accountable if any wrongdoing is uncovered.
It’s estimated that over the last few years, almost 95% of the big banks have not followed the detailed set of legal procedures necessary to rightfully foreclose. So even though the lender may use the statute of limitations to escape the consequences of violating fair lending laws, it is still possible to stop the foreclosure cold by uncovering violations of the foreclosure laws.
For this reason, a foreclosure audit is essential to finding any potential violations, fraud or discrepancies which can be used as leverage to halt or stall the foreclosure proceedings.
With the tumultuous banking crisis over the last 5 years, there have been a lot of major lenders acquired by other banks. This has led to many loans having an “imperfect chain of title” which can prevent a lender from having the actual legal right to foreclose.
So though it is imperative to the foreclosure process for a lender to possess have a proper chain of title, many lenders do not. And rather than fix the problem, many major lenders have committed outright fraud by falsely assigning the interest of the loan and manufacturing documents via a process called “robo‐signing.” There have been many reports and articles highlighting this problem.
Even though 49 states have settled with the big banks to relieve them of further liability to the government (criminal liability), the settlement does NOT take away individual property owner’s rights to litigate against their lender for these issues (civil liability). Exposure to such liability is often enough to cause the lender and/or the lender’s trustee to stop the foreclosure process until all the paperwork can be cleaned up.
In addition to a falsified chain of title, some other common violations include:
- Missing SB 2923.5 declaration
- Invalid Substitution of Trustee filings,
- Invalid Notice of Trustee Sale filings,
- Violation of Civil Code 2923.53(a)(3)(D)
- And many more various deficiencies/violations!
If these violations are identified through a Foreclosure Audit, the lender is put on notice that the property owner is aware that any foreclosure action is not lawful until the issues are resolved. Again, in some cases, this can take many months ‐ and even years!
In certain trustee states like California (as opposed to a judicial foreclosure state like Florida, the trustee company has the legal responsibility to ensure a proper and accurate foreclosure. So, not only can the lender be held civilly liable, but the trustee can be also be held accountable and may face severe penalties or sanctions if they proceed with the trustee sale after being notified.
Who will benefit from a Foreclosure Audit?
- Property owners who want to file litigation or Quiet Title Action
- Homeowners seeking leverage to negotiate better terms in a loan modification
- Real estate agents and property owners needing more time and leverage to complete a short sale
- Loan modification attorneys needing extra time and leverage to negotiate a loan modification
- Property owners whom have already been foreclosed on and need proper evidence to reverse the trustee sale
- Property owners who need to stop/delay an upcoming trustee sale for any reason
Once a Foreclosure Audit is completed, then what?
Property owners who have a Foreclosure Audit completed typically fall into one of the following categories:
1) The “Do‐it‐yourselfer”: deals directly with the lender and tries to obtain a loan modification. The audit can improve the chances of success by informing the lender of the audit and using the report’s findings as leverage in the negotiations. However, if the process has made it to the point where a sale date has been announced, it is best to have a legal professional handle the situation.
2) Attorney represented: Here, an attorney is handling the loan modification negotiations or is filing a lawsuit on behalf of the property owner. The Foreclosure Audit’s findings are generally more respected by the lender when there is an implicit or explicit threat of litigation. Banks don’t want their illegal activities exposed in court, so many times they will settle before trial. The attorney may also make an “offer and compromise” based on the audit results, requesting a very aggressive loan modification. In some cases, this can result in greater concessions by the lender, such as principal reductions.
3) Short sales: A real estate agent lists the property, but the bank still has a sale date scheduled. Most short sale transactions go through, but there are quite a few that experience critical problems such as an offer falling out, not enough time to submit a package due to an upcoming trustee sale, or the bank is just plain uncooperative. It would be prudent to have a back‐up plan if there is a sale date on the property, and an audit could be just the tool which would pressure the lender to not foreclose.
4) Property owner that just needs more time: There are many property owners who really do not want to keep their home for various reasons, but would like more time in order to relinquish possession on their own timeline. It is common to stall a sale from 3‐18 months. These extra months without a mortgage payment can provide a valuable opportunity to save up money and get organized.
Bottom line: The banks have broken the law and the government is not doing anything to help victimized property owners. A foreclosure audit levels the playing field and provides the property owner with powerful ammunition to slow or halt an unlawful foreclosure.
(Credit: This is an article written back in 2012 by Tyler Cohee, a consultant with Mortgage Crisis Remedies in Irvine, California. It’s worth reading at the very least for its educational & historic value.)
