When the housing market crashed in 2008, thousands of people lost their homes. The wave of foreclosures created a situation ripe for abuse. Unfortunate homeowners fell victim to practices that included false “mortgage assistance services,” fake documents, and illegal and inappropriate procedures undertaken by financial institutions. Collectively, these practices constitute foreclosure fraud, and they may lead to homeowners wrongfully losing their homes. To protect yourself from fraud by financial institutions or people seeking to take advantage of your vulnerability, you need to know how mortgage problems can arise and how to recognize fraud when you see it.
When Foreclosure Becomes a Possibility
When homeowners buy their homes, they assume they will be able to make the mortgage payments. Unfortunately, life is not static. Things change: people lose their jobs; people get sick; companies downsize or close altogether. Homeowners can end up unemployed and be unable to make mortgage payments for a host of reasons they never anticipated. If the unexpected occurs, you should not be forced to lose your home. There should be a failsafe that allows homeowners to reorganize their finances and obtain mortgage modifications so they can afford to continue to live in their homes with their families. In some circumstances, lenders may allow homeowners in need to extend the term of their loans or change the interest rate. A lender also may offer the homeowner a forbearance agreement that offers a temporary delay in payments or a structured repayment plan to cover delinquent payments. Unfortunately, lenders don’t always offer these measures. Hardworking, honest homeowners who experience financial difficulties may be subject to foreclosure lawsuits. The purpose of a foreclosure lawsuit is for the financial institution to take back the homeowners’ home, evict the homeowners, and sell the home to someone else so the bank can re-coup the monies owed to them.
Examples of Fraud
While the foreclosure process isn’t inherently fraudulent, an unscrupulous lender might try to pressure homeowners into making payments before those payments are due. Mortgage services also might promise the homeowner that they can delay the process in exchange for a substantial fee. Both promises are likely to be empty. Generally, the foreclosure process is subject to state law and cannot be accelerated or stalled unless a change in terms is negotiated by both parties in accordance with a formal agreement.
Another problematic practice involves reselling mortgages so frequently that it becomes almost impossible to tell if a particular lender had the right to foreclose. For example, a bank will make a loan to you and then assign the loan to another bank. The second bank assigns the loan to a third bank. The third bank claims they are the holder of your note and mortgage and begins foreclosure proceedings. But are they really entitled to foreclose on your home? For assignments from one financial institution to another to be correct, they have to be properly filed with county property records. The note must be transferred from one institution to another institution, with each assignment recorded. The original note must be in the hands of the institution suing you. If these procedures aren’t carefully followed, the bank might have no right to foreclose.
Attorney General Investigations
In recent years, the Attorney General of the United States and attorneys general in numerous states have raised several allegations that banks, financial institutions, and trustees of trusts that hold mortgages have been involved in illegal, unethical and inappropriate procedures regarding the foreclosure process. Investigations have uncovered examples of fraud like those practices outlined above, in addition to other fraudulent practices such as signing off on foreclosure without proper review or even falsifying a homeowner’s signature on foreclosure documents. The number and scope of these investigations show that foreclosure fraud is a serious, widespread problem.
Protection for Homeowners
While the threat of foreclosure fraud is alarming, homeowners are not without protections. There are a variety of federal and state laws that protect homeowners from fraudulent lawsuits, including truth-in-lending laws, banking laws, predatory lending laws, and court decisions which guard against inappropriate, illegal foreclosure proceedings.
Given the complexity of foreclosure proceedings and web of laws that apply to foreclosure, the best way to protect yourself and keep your family in the home is to hire an experienced foreclosure defense law firm to protect your interests. A foreclosure defense lawyer can interpret the terms of agreements, examine the accuracy of documents, and force the financial institution to turn over relevant documents to show if they are entitled to foreclose. Foreclosure can feel like a loss of control; don’t be afraid to take back control of your home and your future.
Elliot Schlissel is an attorney licensed to practice in the State of New York. His law firm, with offices in Nassau County, Suffolk County and Queens County, practices in family law & divorce, criminal law, personal injury matters, bankruptcy, wills & trusts, and foreclosure defense.