Important additional protections against foreclosure Chapter 14 Important additional protections against foreclosure

Protections if you have a government-backed mortgage Many mortgages are backed by the U.S. Government: FHA/HUD insured mortgages, VA guaranteed loans, and Rural Housing Service (RHS) loans. The government provides you with special rights to obtain a loan modification or workout and also provides special protections against foreclosure. If you have an FHA/HUD mortgage, you are likely to be paying government insurance premiums with your mortgage payment. Get help from a HUD-approved counselor. Restrictions on lender’s rights to foreclose on a VA mortgage. Families with VA mortgages have certain protections against foreclosure. (see p. 294)

Foreclosure defense based on improper servicing of FHA/HUD loans A servicer’s failure to meet HUD’s servicing requirements can be a defense to foreclosure. Some of the servicing requirements include: 1) Servicers must give you notice of your default no later than the end of the 2nd month of your delinquency. 2) Lenders must make reasonable efforts to arrange face-to-face interviews with you before 3 full monthly installments are overdue. 3) Most importantly, the lender may not initiate foreclosure until it has considered whether you qualify for one of the FHA/HUD loss mitigation options.

Protections against Foreclosure for RHS Insured Loans The Rural Housing Service (RHS) guaranteed loan program operates through private lenders and servicers who must follow RHS guidelines when they foreclose. The Rural Housing Service (RHS) guaranteed loan program has loss mitigation options similar to those that apply to FHA/HUD-insured loans. Like FHA loans, homeowners can assert defense to foreclosure based on the private servicer’s failure to consider RHS loss mitigation options before foreclosing.

Protections for active duty military You have special protections from foreclosure under the Service Members Civil Relief Act. This Act applies to all loans. The key limitation is that these protections only apply if you entered into the loan before your current period of active duty. If you are on active duty, a lender must obtain a court order or your written permission to foreclose on your home.

Protections where mortgage default resulted from a home improvement scam Beware of home improvement scams. You pay for the improvement by signing up for very unfavorable financing and a mortgage on your home. If a contractor ripped you off (if the contractor never completes the work, the work is shoddy, or over priced), you may not have to repay the mortgage loan used to pay for this work. If the contractor never did any work, failed to complete required work, or did the work in an inadequate way, that should be sufficient to stop a foreclosure.

Protections for re-financings or where a mortgage is not used to purchase your home Truth in Lending Rescission provides powerful relief in certain circumstances (refinance or HELOC). Federal law provides you with an extraordinarily effective means of stopping a foreclosure in certain special situations. This federal remedy allows you to permanently cancel your mortgage and significantly reduce the amount of the debt you owe the lender. Once the mortgage is canceled, there can be no foreclosure. This is called Truth in Lending Rescission.

4 things you should know under Truth in Lending Rescission Does not apply to certain types of loans. The lender must have made one of a list of mistakes when providing information to you about your mortgage or when setting the terms of your mortgage. You will not be able to rescind in most cases if your loan is more than 3 years old. You must usually go to court to convince the lender to honor your Truth in Lending rescission rights. One more thing!!! When more than one person has the right to rescind a transaction (such as husband and wife or co-signers), any one of the individuals can exercise the right and cancel the transaction on behalf of all.

When does Truth in Lending Rescission not apply? If the mortgage loan was used to purchase or build a home. If the mortgage loan was for business or agricultural purposes. The lender was only involved in a few loans within the last year. If the mortgage was on a property that was not your primary residence at the time the loan was taken out. You no longer own the home the mortgage relates to. The mortgage is a refinancing of an existing loan where no new money is borrowed and the same property stays mortgaged. The mortgage is more than 3 years old.

When can you rescind a mortgage? There are three different situations where you can use TILA rescission to cancel your mortgage. You can rescind for any reason within 3 days of taking out a loan that uses your home as collateral (refinance/2nd mortgage). If you did not receive proper notice from the lender that you can rescind the loan and how to rescind. If the lender makes a mistake in its disclosure of certain important terms of the loan. http://www.consumerfinance.gov/askcfpb/187/how-long-do-i-have-to-rescind-when-does-the-right-of-rescission- start.html

Protections for re-financings or where a mortgage is not used to purchase your home Uncovering truth in lending errors. There may be errors on the disclosure form sufficient enough to allow you to cancel the loan. Errors are often made in important calculations, especially when there are a variety of costs and charges connected to the loan. How to cancel. Cancellation is straightforward if done within 3 business days of signing papers. After the three days have expired, rescission can be difficult. You should check with an experienced consumer lawyer. The effect of cancellation. Sending the rescission notice automatically voids the mortgage. As long as the rescission was proper, the lender no longer has the right to foreclose on your home.

Protections where lender’s actions are fraudulent or oppressive Conduct that may void your loan no matter who holds your mortgage. Look for the following ways that may eliminate your obligation to repay the loan, including: The lender misrepresented the nature of the document you signed. The interest rate exceeds the legal maximum. The lender is not licensed to do business in your state. The lender coerced you into signing the loan. The person who signed the mortgage was not the real owner of the mortgage property. The person who signed for the loan was not legally competent to do so.

Protections where lender’s actions are fraudulent or oppressive Figuring out if the same lender originated and now holds your loans. For other types of lender misconduct, you will have to deal with the problem of whether the lender who engage in this misconduct is the same lender that seeks to foreclose.

Protections where lender’s actions are fraudulent or oppressive Potential defenses, based on fraud and misconduct, can be grouped into three categories. “Conduct that may void your loan no matter who holds your mortgage.” Claims involving your servicer. Claims that you were deceived about the terms of your loan when you first took it out, or that the lender hid important information from you.

Protections Manufactured (Mobile) Homes Is a manufactured home considered real estate or personal property? It depends on how the loan was treated by the lender! Manufactured homeowners face some unique issues when dealing with a threatened foreclosure. If the home is treated as real estate, the lender who wants to foreclose will have to use real estate foreclosure procedures. If it is treated as personal property, the lender may be able to repossess it through a judicial procedure, commonly known as replevin, or through self-help repossession. Manufactured home lot rent -If you rent the land, failure to make your lot payments can result in eviction.

Special rights for manufactured homeowners? Manufactured homeowners may have certain rights not available to other homeowners. Federal protections apply to certain manufactured home loans. You may have 30 days to get caught up on a default after notice of the default is provided. A lender does not have to provide this federal protection, but the federal government offers certain incentives for lenders to do so.

Summary Certain protections apply if you have a government-backed mortgage. Certain protections apply where mortgage default resulted from a home improvement scam. The Truth in Lending Rescission applies only to refinances and second mortgages. If lender’s actions are fraudulent or oppressive, you may have claims against foreclosure. Manufactured (mobile) homes can be treated as either real estate or personal property. Which they are viewed as determines the foreclosure/repossession process.