James R. Balmforth: Do I Need A Lawyer For A Foreclosure?

Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

Formally, a mortgage lender (mortgagee), or other lien holder, obtains a termination of a mortgage borrower (mortgagor)’s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure).

Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can repossess the property.

Therefore, through the process of foreclosure, the lender seeks to immediately terminate the equitable right of redemption and take both legal and equitable title to the property in fee simple. Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue homeowner association dues or assessments.

Do I Need a Foreclosure Attorney?

If you’re a struggling homeowner facing foreclosure, you’ll need to decide not only if it’s worth your time to fight the foreclosure, but also if it’s worth paying an attorney to help you. In some cases—say you have a valid defense to the foreclosure and want to keep your home—you’ll need a lawyer to assist you. In other instances, such as if your goal is to stay in the home through the foreclosure process or just to gain some additional time before the bank completes the foreclosure, it often makes sense to go at it alone. (Read about when you might not need to hire a foreclosure attorney.)

When You Should Hire a Foreclosure Attorney

Below are some situations where you should consider hiring or at least consulting with, an attorney.

You Have a Defense and Want to Keep Your Home

If you believe you have a defense to the foreclosure, and you want to keep your home, you likely will need a skilled attorney to help. In most cases, you’ll have to raise the defense in court, either by filing your own lawsuit (if the foreclosure is no judicial) or responding to the lender’s lawsuit (if the foreclosure is judicial).

Each foreclosure case is different and has complicated nuances that can ultimately make or break the case. In view of this, it’s unlikely that a homeowner could mount a successful defense to foreclosure without an attorney. For example, some defenses that probably require the assistance of an attorney include:

• The foreclosing party didn’t follow proper foreclosure procedures. In a foreclosure, the foreclosing party must strictly follow state-specific procedures, with few exceptions. A foreclosure attorney familiar with your state’s particular foreclosure requirements can inform you if a procedural mistake is significant enough to warrant a dismissal of the case.

• The foreclosing party can’t prove it owns your loan. If the foreclosing party can’t prove it owns your loan, then it doesn’t have standing (the legal right) to foreclose. For example, if your mortgage loan was bundled and securitized, determining if the foreclosing party actually owns the loan can be a challenge to say the least. An attorney can help you figure out if you have a defense based on the fact that the foreclosing party can’t prove that it owns your loan. (Learn more about the securitization process.)

• Your loan servicer made a serious error with your account. Loan servicers—the companies that manage loan accounts—often make serious errors when it comes to managing homeowners’ accounts like misapplying funds, failing to credit payments to the account, or charging unreasonable and no allowable fees. An attorney who is familiar with reviewing servicer payment histories, which can be difficult to interpret, can help you figure out if the servicer made a serious error with your account that amounts to a foreclosure defense.

Military Foreclosure

Active military service members have some special protections against foreclosure and have certain rights under the Service members Civil Relief Act (SCRA). Among other things, if you took out your mortgage before going on active duty, the servicer cannot foreclose unless it gets a court order or a waiver from you. (To learn more, see Foreclosure Protections & the Military: When a Service member gets a Mortgage before Active Duty.)
The SCRA is extensive and complex. If you’re on active duty and facing foreclosure, an attorney can inform you about all of your rights under the SCRA and help ensure that the servicer complies with this law. (See our article on Legal Protections for America’s Military: The Service members’ Civil Relief Act for more details.)
• You need help With a Loan Modification Because the Bank is Stalling or Dual Tracking

An attorney can help you with the loan modification process if the bank is stalling or “dual tracking” your loan (pursuing a foreclosure and a loan modification at the same time) in violation of federal and, in some cases, state laws. (Learn more about laws that prohibit dual tracking.)

Because it is very difficult to get your home back after a bank completes a foreclosure, you want to deal with this type of legal violation before the sale. Having an attorney on your side gives you a better chance of getting results before the sale takes place.

You Want To Learn about Foreclosure Laws in Your State and You’re Rights during the Foreclosure Process

It’s a good idea to learn each step in the foreclosure process so you aren’t caught off guard at any point. If you’ve done your homework on the topic, but still have questions, an attorney is a good resource. (Learn more about the general foreclosure laws and procedures in your state our Foreclosure laws area.)

Also, an attorney can tell you about about federal laws and state laws that can protect you while you’re in foreclosure.

How Can an Attorney Help?

The foreclosure process is difficult to understand and master, even for an attorney. For example, court procedures vary from state to state, and even from court to court. Also, no judicial foreclosure procedures are vastly different in different states.

If you want to fight the foreclosure, you’ll need to understand how to file documents with the court, rules of evidence, and more. An experienced and skilled foreclosure attorney can help you navigate the rules and advise you about your various options. For example, a lawyer can help you avoid foreclosure altogether by working out a “loss mitigation” option (like a loan modification), represent you during the foreclosure action, or help you save your home in a Chapter 13 bankruptcy.

An Attorney Can Work With Your Lender to Avoid Foreclosure

If given enough time, a lawyer might be able to work out a deal with the bank to avoid foreclosure. Here are examples of ways an attorney can help that don’t involve going to court.

Help you modify your loan. A loan modification is an agreement between the borrower and the lender that changes the original terms of the loan. An attorney can assist you in the loan modification process. Note that some states, like California, don’t allow an attorney to accept payment until after the attorney has fully performed each and every service related to a modification that he or she was contracted to perform or represented that he or she would perform. A modification might lower the interest rate or extend the amortization term. An attorney can also review the conditions of any modification that the lender offers you. He or she will examine the documents to make sure there are no illegal charges—like improper fees or advances—added to the total balance, and that the modification is in your best interest.

Inform you about loss mitigation options. Certain types of loans, like Fair Housing Administration (FHA) loans, have special loss mitigation options that allow you to bring your balance into good standing. For example, you might qualify for a “partial claim,” which is a particular type of loan that will bring you current on the payments. However, not all lenders will let you know about every alternative that might be available to you. Your attorney can advise you about the available options.

Ensure that the lender follows the rules. Lenders aren’t always helpful when it comes to processing loan modification applications, even though federal law (and sometimes state law) has strict requirements that the lender must follow. An attorney can ensure that the lender follows all of the relevant laws and processes your application promptly. For example, under federal law, if you submit a complete loss mitigation application more than 37 days before a foreclosure sale, the servicer must consider the application and give you time to respond to a proposed option before it can ask the court for a foreclosure judgment or order of sale, or conduct a foreclosure sale. Your attorney will let you know if the lender violates any relevant laws, and can help you enforce your rights.

Represent you in foreclosure mediation. Some states offer foreclosure mediation, where the homeowner and the lender come together to try to work out an alternative to foreclosure. An attorney can represent you in the negotiation process to ensure that the bank treats you fairly.

Defenses a Lawyer Can Raise in Court

An attorney might be able to raise certain defenses or point out errors that the bank has made in the foreclosure process. Potential arguments include:

• the lender or mortgage servicer (on behalf of the lender) breached the loan contract by, for example, failing to accept your payment (read about common servicer errors)

• the foreclosing party can’t prove that it owns the mortgage debt

• you’re an active military member entitled to protection against foreclosure under the federal Service members Civil Relief Act, or

• The lender failed to follow proper foreclosure procedures under state law.

If your attorney raises a legitimate defense and the court agrees with the argument, the lender might consider a settlement or the court might dismiss the foreclosure.

When You Might Not Need a Foreclosure Attorney

You might not need to talk with an attorney if your goal is simply to live in the property throughout the foreclosure process. You legally own your home up until the new owner who buys it at the foreclosure sale gets title to the property. (Learn when you have to leave the property in a foreclosure.)

In some states, you might be able to stay in the home even longer if state law provides a post-sale redemption period and gives foreclosed borrowers the right to live there during this time. Or you might have the right to stay in the home until some other action, like ratification of the sale, happens. To find out exactly how long you can legally stay in the home, research your state’s laws. If you aren’t able to find the answer on your own, then you might want to consider talking to a foreclosure attorney. (To learn more about what happens following a foreclosure sale, see Your Options after the Foreclosure Sale.)

When You Might Need to Hire a Lawyer

While you probably don’t need a lawyer to help you stay in the property during the foreclosure, you might have to hire a lawyer if the bank or servicer prematurely changes the locks or removes your personal property from the home in the name of “property preservation.”

While you have the right to occupy the home during foreclosure, if you abandon the home before the process ends, most mortgages and deeds of trust give the bank the right to “preserve” the property. This means, for example, the servicer (on behalf of the bank) can change the locks or clean up items you’ve left behind. But servicers and their agents have been known to lock borrowers out and remove their belongings—even when the home is still occupied. If this happens to you, you’ll probably need an attorney’s help to get back into the property or retrieve your belongings. There are some Deceptive Foreclosure Practices: When Banks Treat Occupied Homes as Vacant that you can learn about from our office.

You Want to Get Some Extra Time to Live in the Home

If your primary goal is to get a little more time to live in the home before the servicer completes a foreclosure—perhaps so you can come up with the funds to reinstate the loan, refinance, or pay for a new place to live—you can submit a loss mitigation application to the servicer. Federal law and some state laws prevent the servicer from foreclosing on a borrower while a loss mitigation application is pending.

Not only will applying for loss mitigation generally you buy you some time, but the servicer might offer you a modification that lowers your monthly mortgage payment that makes your home more affordable. As a result, you might decide to stay in the home. Even if the servicer denies your application, in most cases, you’ll also get some time to appeal the decision.

Be aware that if the servicer already evaluated you for a loan modification or other loss mitigation option, you can’t submit another application just to stall the foreclosure. But under federal law, if you’ve brought your loan current at any time since submitting a complete loss mitigation application—and the servicer reviewed that application—the servicer has to perform another review if you apply for loss mitigation again. (12 C.F.R. § 1024.41(I).)

You Don’t Have Any Defenses to the Foreclosure

If you don’t have a valid defense to the foreclosure—say you stopped making your payments, have no intention of resuming them, and think your servicer has treated you fairly—then there’s probably no reason to hire or consult with an attorney.

You Can’t Afford Your Home and You Don’t Want to Keep It

Likewise, if you can’t afford your house payments and don’t want to keep your home, it might be a waste of time, effort, and money to fight or try to stall the foreclosure. In this situation, you don’t want to throw away money hiring a foreclosure attorney. Instead, you can put that money towards finding somewhere else to live.

When picking an attorney to represent you, you should speak to several different lawyers to get more than one perspective and learn about all of the options available to you. Below are a few questions you should ask an attorney you’re considering hiring.

• What course of action do you recommend?

• How much experience do you have representing homeowners facing a foreclosure in court (or in filing bankruptcy, or in getting a loan modification, etc.)?

• Have you taken any continuing legal education courses about laws and strategies in handling foreclosure matters?

• How much will it cost to hire you?