Wednesday, October 20, 2010


There has been much talk in the media regarding whether or not foreclosures should be halted. Accusations have been made that banks are illegally foreclosing on innocent homeowners. The accusations stem from the so-called “robo signers,” who signed foreclosure documents without verifying the accuracy of the documents—not a good idea. See, Daily Finance article here. Now that foreclosures are moving forward again, consumer advocates and attorneys general are questioning whether banks have sufficiently complied with the foreclosure laws. See, Rueters article here. I note, with few exceptions, that the accusation against the banks is that the foreclosures are procedurally wrong—the homeowners are still in default.

From a practical prospective, it is difficult to contest a foreclosure when the homeowner is in default on the mortgage. As someone who advises and represents parties in contested foreclosures, the best result a homeowner in default can expect is to prolong the foreclosure process. However, in some instances, prolonging the foreclosure process through judicial procedure is counter productive for the homeowner because the homeowner has a very real possibility of losing in court.

Judges are often not sympathetic when a homeowner in default contests the foreclosure with highly technical arguments such as “I never received the notice sent in the mail” or “The notice was never posted on my property.” Banks often deny problems in the foreclosure process and often have some proof that the legal procedures were followed. Furthermore, these arguments typically fail because the homeowner had to receive some sort of notice otherwise the homeowner would not know to file suit to stop the foreclosure. Moreover, it’s easy for the court to disbelieve the homeowner who is months behind on the mortgage and does not have the ability or intention of bringing the mortgage current. In these situations, Courts view the efforts to stop the foreclosure as gamesmanship by the homeowner.

Furthermore, let’s say that the homeowner convinces the court to stop the foreclosure because of a technical problem with the foreclosure process. The homeowner in default does not keep the home free and clear of the mortgage. The bank will simply restart the foreclosure process, which only takes 90 days in Arizona. Therefore, in most instances contesting the foreclosure is only prolonging the inevitable. Furthermore, unless the homeowner is highly sophisticated in the law, so as to represent him or herself, it will cost thousands in attorneys’ fees for the homeowner to fight the process.

Notwithstanding the above, there are some instances when the foreclosure process has been wrongly initiated and/or legally defective and it makes sense for the homeowner to fight the foreclosure. These situations typically arise when the homeowner (1) is current on the mortgage, (2) can become current on the mortgage, and/or (3) has equity in the home. In these cases, fighting the foreclosure makes sense. A homeowner with one or more of these factors is a highly sympathetic plaintiff and can expect to do well in court. However, if the homeowner is not current on the mortgage, cannot become current on the mortgage, and has no equity in the home, fighting the foreclosure will be difficult to justify.

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