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Legal Alternatives To Home Foreclosure

 

With the home foreclosure rate skyrocketing, federal government officials knew that they had to come up with some legal alternatives before the black market took over.

While predatory lenders and scam artists still proliferate, the Obama administration has instituted a homeowner relief program to make lesser mortgage payments affordable to lenders and borrowers alike. The program concerns only primary residences that are occupied by the owner. The program also targets median-class mortgage holders. Those with principal balances above the $729,750 mark are not eligible.

What if your loan numbers exceed the limit or you are otherwise ineligible? Privately adjusted loans are a possibility. Court-mandated provisions are another. If your current home mortgage contains illegal statements or incorrect formats, you may be able to sue the lender for violating the Truth in Lending Act (TILA) or Real Estate Settlement Procedures Act (RESPA).

New Federal “Making Home Affordable” Program

The federal government’s Making Home Affordable Program offers restructured and refinanced loans to distressed homeowners, as well as other incentives and adjustments. It seeks to cap monthly home loan bills at 31% of the mortgagee’s income, which may be substantially less than current loan payment demands.

The key to reducing mortgage payments so consumers can afford to stave off foreclosure is in making the federal program attractive to lenders. That’s easy to do with cash. Incentives of $1,000 will be paid annually to participating lenders, and the same amount deducted from loan holders’ principals, for a period of several years.

Some of the eligibility criteria are:
  • Occupant-owned residence
  • Owner demonstrates financial hardship
  • Owner demonstrates intent to remain on the property, not refinance and sell
Ways in which owners can meet the criteria are built into the plan. Verification of occupancy and signed statements of financial hardship are required. Mortgagees and lenders won’t get incentive monies until a pattern of repayment has been established over three months.

There are many more facets to the federal plan to help homeowners avoid bank foreclosure, including cash incentives to counteract sharp drops in home values. Your lender or foreclosure attorney can tell you more about your eligibility. You should always get legal advice before making any changes in your existing mortgage or switching to a newly financed loan.

Attorney-Assisted Loan Modification

Real estate lawyers use state and federal property law to gain their clients more amenable loan terms. They are also aware of the current relationship between a high foreclosure rate and a lender’s need to reduce the number of foreclosed properties that are returned to its real estate-owned list. They know what kind of concessions other homeowners are getting either from their lenders or at the decree of the courts, and they know what to ask for in your behalf.

Some law firms have their own loan modification programs that are open to any mortgagee. Others take on only foreclosure cases. In any event, with or without the leverage of a lawsuit, they can change the trajectory of your principal balance pay-off by making it easier for you to accommodate monthly payments. This can be done by increasing the loan term, changing interest rates from variable to fixed, and relaxing late-payment penalties.

Another way out of foreclosure is to evaluate your current loan language for breaches of TILA and RESPA obligations. If your real estate attorney finds violations, you can prove mortgage fraud in court. This will allow you to renegotiate or rescind the terms of your loan and start fresh while avoiding foreclosure.

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