Last updated August 22, 2018.
You’re behind on your mortgage payments. It happens – maybe you got sick, maybe you lost your job, maybe you just fell behind. Receiving a foreclosure notice can be overwhelming, but you should know that you have options. You may be able to defend against the foreclosure and keep your home.
What Happens Before Foreclosure?
Ohio, like many states, is a “judicial” foreclosure state. This means that foreclosures are handled in the court system like a lawsuit, with the foreclosure process commencing with the filing of a foreclosure summons and complaint. If you’re facing foreclosure, you need to find certain information:
- Look at the language in your mortgage contract to determine what notice the bank must provide you regarding your default. While Ohio does not have a statute governing notice, your mortgage agreement may very well impose a duty on the bank to notify you within a certain amount of time of your delinquency and in a specific manner prior to filing a foreclosure action.
- Your mortgage agreement may additionally specify a particular period of time within which you are allowed to pay any outstanding amount, or “cure the default” before foreclosure may be initiated.
- At this point, you should be keeping clear and complete records of the dates upon which you had any communication from the bank as well as any payments you might have made, any payments the bank may have returned, and all other documents pertinent to your mortgage. Once a foreclosure case is filed, you will need to move quickly to defend your home and having this documentation organized and readily available will make your work much easier.
What To Do Once Foreclosure Begins
If you have been served with a copy of the foreclosure Complaint, the clock is ticking on the foreclosure process. In Ohio, you have twenty-eight days from the date you are served to file a response or “Answer” to the Complaint and assert any and all defenses to the foreclosure.
If you do not file an Answer, or don’t file it in time, the bank can take a default judgment against you. That means that you lose automatically and the bank can proceed with foreclosure without the necessity of a trial or any additional proof.
Accordingly, at this point, if you do not have an attorney involved in your case, it would be a very good idea to consult with one. Be sure to read the Complaint and any accompanying documents, such as the Note, the Security Agreement, and/or any Assignments of the loan that the bank may have attached as part of the Complaint in order to discern any possible defenses.
In your Answer, you’ll need to list all of your defenses for the foreclosure proceeding. If you don’t list something in your Answer, you can’t use it later in your case. That’s why it’s a good idea to consult with an experienced attorney – they’ll know all the ways to defend against a foreclosure in your particular case.
An attorney can also help you decide if you should file an Answer or if you should respond with a Motion to Dismiss. A Motion to Dismiss is a claim that the bank does not have a case against you and that the case should be dismissed without going any further. It’s a very technical issue and one that requires the attention of an attorney.
Choosing the Right Mortgage Foreclosure Defense Strategy
There are many potential defenses you can raise in a foreclosure proceeding, and you aren’t limited to just one. Here are some key defenses your lawyer will look for in your case:
Issues Involving the Note
- If applicable, you should assert in your answer or motion to dismiss that the bank has failed to produce the original Note to prove standing and ownership of the security interest. The Note is the official document used to record the original mortgage loan. Without it, the bank can’t prove that you actually owe it any money.
- Even if the bank produces a note, the Note must be property endorsed. If it’s not, you should raise that as a defense.
Debt Collection Issues
- You may also assert, if applicable, violation of the Federal Fair Debt Collections Protection Act (FDCPA), which governs notification and communication concerning debt. According to the United States Sixth Circuit Court of Appeals, the FDCPA covers mortgage foreclosures. Therefore, the bank must comply with the stringent requirements of the FDCPA governing notice as well as communications. That means they can’t harass or threaten you, among other things.
Military Service Issues
- If you or your spouse is a member of the military, you have additional protections under the Servicemember’s Civil Relief Act (SCRA) that could prohibit or postpone certain actions taken by the bank with regard to your mortgage.
Federal Law Issues
- The bank or lender may have failed to comply with the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), or the Home Ownership and Equity Protection Act (HOEPA). Each of these federal laws entitles you to specific protections. If the bank has violated these acts, you may not only be able to stop the foreclosure action, but you might be entitled to recover damages. Your attorney can help you determine if the bank has violated any of these laws.
- If your loan is a HUD-secured FHA loan, then prior to the initiating a foreclosure, the bank and/or its servicer must discuss possible loss mitigation solutions, such as loan modification or forbearance, with you. If this was not done, you can assert it as a defense to the foreclosure or as the basis of a motion to dismiss.
- In some cases, you may be able to defend against a foreclosure based on the terms of the loan. The loan may be “unconscionable,” or so unfair as to be unenforceable at law. Unconscionability is an issue of “equity,” or overall fairness, rather than an issue related to a specific law. For example, in one case a mortgage loan was found to be unconscionable where the defendant spoke no English and could not possibly understand or afford the terms of the loan.
- Do the math! Has the bank asserted a delinquent amount that is incorrect? Has it overcharged late fees, or included other charges that are not allowable under the terms of the Note? If so, raise this miscalculation as a defense.
Chapter 13 Bankruptcy Is An Alternative
What do you do if the court denies your motion to dismiss or does not agree with your defenses? If your defenses have not been successful, you still have an alternative to simply letting your house go. You can file for a Chapter 13 Bankruptcy.
The filing of a bankruptcy action immediately puts an “automatic stay” on any other pending proceedings. The automatic stay stops all collection actions against you. That means the foreclosure is stopped pending the outcome of your bankruptcy.
In a Chapter 13 bankruptcy, you submit a proposed payment plan to the Bankruptcy Trustee itemizing all of your debt and your income. Typically, you or your bankruptcy attorney will negotiate with the attorney for the bank to add the arrearage (the past due amount), as well as the ongoing mortgage payment, to the bankruptcy plan to be paid on a monthly basis.
Then the Chapter 13 Trustee will determine if the total mortgage debt included in the plan can be paid off with the proposed plan payments, which typically last for five years. If the plan is confirmed and you make your payments, you will be considered compliant with the terms of your mortgage debt at that point.
In other words, you’ll pay off all your back payments and continue making regular payments through the plan. Your Chapter 13 plan payments are based on what you earn, not on what you owe, so the payments are manageable.
Your Chapter 13 plan will also include car payments, if you have them. The remainder of your monthly payment will go toward your unsecured debts. At the end of the plan, your remaining unsecured debts will be “discharged,” or forgiven. That means you’ll be free of credit card and medical debt, so it will be easier for you to make your mortgage payments after bankruptcy.
Note that if you fail to make your Chapter 13 payments, the creditor can file a motion to lift the automatic stay and proceed to foreclosure.
What Steps Should You Take?
Dealing with an impending foreclosure can be stressful and confusing. Make sure you keep all records, proof of payments, and any communications you might have with the bank during this period. It may benefit you in the long run. No one wants to lose their home and the more information you have to defend your position, the better your chances will be.
The foreclosure process is complicated and the defenses you raise may be governed by a complex set of laws. If you’re facing foreclosure, you should seriously consider consulting with an attorney to defend your home. Visit us today for a free consultation with an experienced bankruptcy attorney. We can help you decide how best to defend your home and we can help you determine if bankruptcy is a good option for you.