| Many homeowners are not quite clear on how the | | | | been barred by statute of limitations regulations. |
| foreclosure process works in their state, especially | | | | For instance, even if the statute of limitations for |
| due to differences between judicial and nonjudicial | | | | Truth in Lending Act violations has passed, |
| foreclosure proceedings. State law and federal | | | | borrowers may still raise these issues in a |
| lending law may also affect how the process | | | | defense of a foreclosure case. But if the |
| moves forward, as HUD-guaranteed loans or | | | | foreclosure is through nonjudicial procedures, |
| those insured by the FHA can complicate the | | | | these claims may not be allowed by the court. |
| matter even further. | | | | All states allow homeowners the right to redeem |
| For mortgages owned by HUD (not just insured | | | | their property by paying off the loan in full (plus |
| or guaranteed by the agency), a type of | | | | interest, costs, and other applicable fees) prior to |
| nonjudicial foreclosure may be pursued even if the | | | | the sale of the house. Nineteen states give |
| state in which the property is located requires | | | | borrowers the right to reinstate their mortgage |
| judicial foreclosure procedures to be used. The | | | | by curing the default and paying the amount past |
| statute is called "Single Family Mortgage | | | | due plus applicable costs and fees. This must be |
| Foreclosure" and it replaces applicable state law. | | | | done before the sheriff sale of the property in |
| Even if no power of sale clause is included in the | | | | order to be accepted by the lender. |
| mortgage contract, HUD may use the nonjudicial | | | | When homeowners file bankruptcy to stop |
| foreclosure process. | | | | foreclosure or delay a sale, they do not give up |
| This clause clearly seems to go against the right | | | | substantive or procedural defenses to the bank's |
| to contract, as it negates certain aspects of | | | | attempts to take their home. |
| mortgage contracts used by borrowers and | | | | In many cases, the mortgage company does not |
| lenders. There may also be unlawful taking issues | | | | strictly follow the pre-foreclosure procedures |
| when the federal government affects foreclosure | | | | dictated by state and local laws. In these cases, |
| laws and redemption rights. In addition, there is no | | | | courts have found that strict compliance is |
| required pre-foreclosure meeting or hearing for | | | | necessary for a foreclosure to go forward. |
| the borrowers. | | | | Foreclosure is such a harsh remedy to the |
| In order to sue homeowners for foreclosure and | | | | problem that these strict requirements are |
| obtain a judgment against them, the lender must | | | | necessary for lenders to follow. |
| prove three aspects of its case: | | | | If a lender accepts late payments from a |
| 1. There is a valid mortgage between the lender | | | | homeowner, it may be waiving its right to |
| and borrowers | | | | accelerate the mortgage later on in the case of |
| 2. The homeowners are in default of the | | | | default. Courts have found that allow late |
| mortgage contract | | | | payments and not insisting on future on-time |
| 3. Foreclosure procedures have been followed | | | | payments may be a waiver of the right to |
| according to the law | | | | accelerate. The state of Maine goes even further |
| If the bank does not follow the foreclosure | | | | than this and states that accepting a payment |
| procedures for notice or court requirements, | | | | after foreclosure procedures have been started |
| even a sheriff sale may later be voided. | | | | but before the right of redemption ends is |
| One positive aspect of the judicial foreclosure | | | | considered a waiver of the right to foreclose on |
| process is that homeowners can raise claims | | | | the home at all. |
| against the lender that would otherwise have | | | | |