If you are a small business owner or homeowner facing a financial hardship who is behind on monthly mortgage payments, you might want to consider a loan workout. No, this does not mean you or your loan will be spending any time together at the gym.

A loan workout is when you and your lender renegotiate some aspect of your loan. Every aspect of a mortgage's terms is eligible for renegotiation. You could attempt to modify the interest rate, the monthly payments, the payment schedule, or other terms of the loan.

When possible, it is always best to approach your lender for a loan modification prior to having to miss any mortgage payments. If you are already behind on your payments, do not let this keep you from still contacting your lender to try to work out a solution that will let you keep your home.

It is important to remember that this should be viewed as a tactic to buy a little more time for your business or to repair your financial situation. You should only consider this option if you will really be able to continue making any payments for the long term. If your financial situation is expected to keep deteriorating, you should consider looking into other options.

While thinking about approaching your lender to discuss a loan workout can be intimidating, most lenders are open to this idea and really do want to help. It is not good for you or them when someone has to foreclose. This is especially true in today’s economy.

The Mortgage Bankers Association (MBA) has been encouraging lenders to work with homeowners and small businesses ever since the number of foreclosures increased dramatically. During the Bush administration the HOPE NOW association was established to try to help small businesses refinance their loans and freeze interest rates.

However, you will want to do some work prior to meeting with your lender in order to make the process more smooth. The primary aspects of your personal financial situation the lender will be investigating during this process include the following.

1. The causes of the financial hardship are possibly the most important aspects of your situation the lender will want to examine. Most lenders will want an explanation of how the financial hardship was created and how those problems are going to be resolved.
2. You will need to be able to prove to your lender that you will be able to actually pay off your loan and stay in business after the loan reconstruction. To do this, you will need to provide proof of income for the short term (about 3-6 months) and for the remaining length of your loan. Lenders want to know that you are not going to have to go through this process again in a few years.
3. How much is actually still owed on the property is also important for lenders to determine how much to modify a loan. This is usually not counting the interest that has accrued from late payments. You will want to ensure that your figures match your lender’s.
4. What is the property currently worth? It is a good idea to have the property’s value assessed by a qualified appraiser before meeting with the lender. You could also use a Realtor who is not associated with either you or your lender for a price opinion.
5. What is the benefit for the lender? Remember, mortgage lenders are looking out for themselves. So be prepared to tell them why they should agree to a loan workout. The simple answer is because otherwise you will have to foreclose on the property.

When you allow your home to go into foreclosure, the bank or mortgage servicing company no longer receives your monthly payment and has to try to sell the property for what you owed. This most often results in a profit loss for them.

You should be prepared at this point to suggest possible solutions to the problem yourself. You could even draw up some potential short-term solutions including payment schedules for various repayment plans and show how they benefit both you and the lender.

Enlisting the aid of an auditor, accountant, or a loan consultant for this stage is an excellent idea. Many companies and law firms now offer these types of services to homeowners facing foreclosure. This will help ensure you are not suggesting anything that a lender would find outrageous.

Once you have contacted your lender to suggest a loan workout, they will often send in a workout team to assess the problem and determine the course of action that would be best for their company. In the best cases, what works out for the bank will also be in the interests of the borrowers in saving the home.

Remember, just because your financial condition is in trouble, you do not have to accept just any terms offered by the lender. You must be aware of exactly what you need in order to stay in in your home and prove this to your lender. It is always possible to negotiate for a better deal.

Make sure that any offers made by the lender and any changes agreed upon are put in writing prior to leaving the negotiations. This may mean that you will end up with completely new loan paperwork at the end of the process, depending on how heavy the modifications are to the original mortgage.

The bottom line is you do not necessarily have to close shop and move out of your home just because you are struggling to make your mortgage payments. A loan workout can be a viable solution that will stop foreclosure and is worth the effort required in negotiating with the mortgage company.

Beginning in 2009, President Obama agreed to legislation designed to provide mortgage help for millions of homeowners around the country. The government will provide about $75 billion dollars to help people hold onto their homes through a variety of different plans.

When the economy took a nose dive, many people found themselves out of work or having to take serious pay cuts. This meant that some people found it very difficult to keep up with their mortgages. For the first time since the Great Depression, Americans in such large numbers had to turn to foreclosure in order to take care of their families.

Now, with a new administration in the White House, there is another mortgage help program so that more people will be able to hang onto their precious homes. The new bailout program for homeowners is called the Homeowner Affordability and Stability Plan (HASP).

This plan is designed to help people refinance their homes and to provide incentives to lenders to provide mortgage modifications. While previous plans have failed to provide the kind of results politicians were looking for, maybe all that was needed to change the course of the economy was a focus on platitudes of hope and change.

There are, essentially, two populations who can take advantage of this program. The first group is people who have been able to maintain their mortgage payment but who are struggling as a result of economic conditions. The second population is those people who have fallen behind in their mortgage payments.

If you have been able to maintain your mortgage payments, you may qualify for assistance in the form of refinancing your home. Normally, in order to refinance a home, you have to have at least 20% equity in the home. Under the HASP you do not need to have any equity at all in your home. In fact, you could even have a slightly negative equity and still qualify.

You may also qualify for mortgage help if your home is no longer worth what you owe. This may help a significant percentage of the real estate market qualify for the new plan, as home values have fallen so dramatically. However, you cannot have more than a negative 5% equity or difference in the home’s value in order to qualify for assistance.

The amount owed on the mortgage is also a consideration for the new program. You cannot owe more than $417,000 on your home. Home loans over that amount are considered “jumbo” loans and do not qualify under the HASP.

If you have fallen behind in your mortgage payments, you could qualify for mortgage help in the form of a government-assisted loan modification. This means that your loan will be slightly modified in order to bring down your mortgage payments.

If you qualify for a mortgage modification, you must remember that this may be for a very specific time frame. At the end of the period, your mortgage payments will slowly go back up to the original amount. However, you will not owe any back payments, as long as you successfully complete the plan.

With this form of mortgage assistance, you must qualify as a high level debt borrower. This means that every month you pay more than 55% of your monthly income on bills. These bills include your mortgage payment, car payment, and any other bills you might have such as credit cards.

After your loan modification, your total monthly output for your mortgage bill should be less than 31% of your monthly income. Lenders and mortgage servicers must help reduce your payment to 38% of your income, while the government will subsidize the mortgage to reduce the payment down to the 31% required amount.

If you qualify as a high level borrower, you will be required to attend some debt counseling courses certified by the Department of Housing and Urban Development. Additionally, the amount you owe on your home without interest must be less than $279,750.

With mortgage help in any form from HASP, the home must be owner occupied. This is because this government help is meant for families, not for investors and speculators, even if they are providing housing to tenants who can not afford to purchase their own home.

All loans must be owned by either Fannie Mae or Freddie Mac. If you are not sure if your loan is owned by either company, you can ask your current mortgage servicer. Additionally, you can go to www.fanniemae.com, www.freddiemac.com, or www.FinancialStability.gov. There are links at all of these sites to help guide you through the process of applying for mortgage help.

Something else to keep in mind is that the Homeowner Affordability and Stability Plan is not going to be available forever. The plan is scheduled to terminate in December 2012. Homeowners who wish to examine their options should not wait until the last minute, even if it is three years off. The foreclosure process can take much longer than people expect.

The first step you must take in determining if you qualify for mortgage assistance is to contact your lender. There are a number of forms that have to be filled out, and it does take some time. Keeping on top of the application process is often the most difficult, as servicers are notorious for losing paperwork and forcing borrowers to start all over.

When you contact your mortgage lender, you will need to have a number of documents available: monthly mortgage statement; Homeowner’s Association statement; pay stubs; W2s; income tax return; car loan paperwork; student loan documents; credit card statements; any loan statements which are tied to the house such as a second mortgage, judgment lien, or home equity loan; and a profit and loss statement if you are self-employed.

You should have the most recent statements available before you contact your lender. Lenders can and will return your application if any of the paperwork is not the most recent available at the time you request help. In many cases, they will simply put your file on hold until you call and ask for a status update, at which point you will be told your paperwork was incomplete.

Although the process of obtaining a refinance or modification can be a huge project, getting mortgage help is definitely much preferable to facing foreclosure. Few homeowners really want to lose their homes if there are viable alternatives.

One question that every homeowner seems to have is, "How do you stop foreclosure?" Once the process is started, it is hard to put on the breaks. The best thing to do is to make every effort to prevent what can become a snowball rolling downhill.

So, how do you prevent a bank from foreclosing? The first step is to contact them. When you realize that you will be unable to make your regularly scheduled payment, call the bank or mortgage company and explain the situation to them.

If you have been laid off or hit with a large unexpected bill, tell them about your problem. Do not be afraid to let your lender know about the situation as soon as there is a change in your financial conditions. The bank may be able to help you out.

Once you have a new job, you may be able to qualify for a restructured or modified loan. In March, the government created a program that offers incentives to banks that offer refinancing or adjusted mortgages to their customers, as an alternative to foreclosing.

Although the results for government modification programs have been mixed so far, the Treasury Department says that 3% of customers that are 60 days behind on their mortgages have signed up for trial modifications. This means that means their payments have been reduced or other terms of their loan changed to make it more affordable.

In order to stop foreclosure, using loan modification, you will need to provide proof of employment, two recent paystubs and a copy of your last tax return. Basically, it’s the same paperwork that you should have provided when you signed up for your original mortgage.

The bank will still be concerned about whether or not you can afford a lower payment. According to the experts, lending practices over the last few years were somewhat predatory. People were qualified for mortgages that they could not afford. The idea of the new programs is to make mortgages more affordable, usually by lowering interest rates. But, hard as it may be to accept, it is possible that you have been living beyond your means.

It may still be possible to stop foreclosure by selling your house. Finding a buyer takes time, of course. But, some companies are willing to buy houses in any condition in order to speed up the process and help people get out of a financial bind.

There are also services that offer help with negotiating. Some of the services are free, while others charge a fee. You could sign up for credit counseling. This is a particularly good idea if you have a lot of unsecured debt that may be sold to predatory collection agencies in the future if it is not paid off.

If you qualify for refinancing, that may turn out to be your best option to stop foreclosure. The new government guidelines make it easier to qualify, in that the value of your home in relation to the loan amount is not a consideration. You will need to sign an affidavit of financial hardship, meaning that the cause of your financial problems has been a loan payment that was unaffordable.

If your interest rate is high, a loan modification could save you hundreds of dollars per month. Your lender should be able to tell you whether or not you qualify, what documents you have to provide to start the process, and give you an idea of how much lower your payment will be.

As the months go by, it becomes much more difficult to stop foreclosure. In some states, the lenders have the right to foreclose very quickly. Thus, in order to have the best chance of saving the home at the least cost, it is important to act fast.

If you have lost your job or become disabled, you may have insurance that will pay your payments until you find a job or become able to work again. In fact, some people sign up for this type of insurance without actually realizing it. But if they never make a claim, the insurance never pays out, and they lose their homes in the end.

So, in addition to contacting your lender, contact the company that insures your home. If you are able to refinance, consider adding that type of insurance to your policy, if you don’t already have it. It has prevented many people from losing their homes.

While it might take some work on your part to avoid foreclosure, you have more options than ever before. So, don’t give up. That’s the worst thing that you can do. Do not be afraid to ask for help. Contact friends, family members and your church. It is not unusual to feel overwhelmed or depressed.

Try to remember that lenders are more willing to work with their customers than they have been in the past. Many of them are trying to repair their reputations. So, they may be willing to halt foreclosure proceedings, if you take the time to ask.

If you need foreclosure help, the first step is to contact your lender and explain your situation. Letting them know that you are making an effort to resolve the situation, even if it is not through one of their programs, may delay the process.

If you do not stay in touch with your lender, you might only have a few months left in your home. The laws vary from state to state. It is important to find out what the law is where you live. In some states, such as Texas, lenders are allowed to begin the process after you miss a single payment.

On the other hand, the banks are not allowed to harass you. Once you have contacted them and explained your situation, you should not receive numerous harassing phone calls. As with other creditors, they are not allowed to call you at work.

When you do call your bank, make a note of the date, time and the person with whom you spoke. These notes could come in handy, if you need or want to file a complaint, or if you are defending against a foreclosure lawsuit and need to show how you have attempted to work with the lender for a solution.

Because of the new government guidelines and because home values are falling, many banks are offering foreclosure help to their customers. It makes more sense for them to keep you in your home than it does to foreclose. But, that does not mean that you have the upper hand.

The banks have been advised by the FDIC to thoroughly review each customer’s financial condition and creditworthiness, before approving a refinance or mortgage modification. The FDIC is concerned about all of the banks that have failed in recent months. The closures cost the FDIC billions of dollars.

It may be worth your while to investigate options, such as companies that offer foreclosure help. Some companies are willing to buy properties quickly. More than likely, your desire is to stay in your home, if at all possible, but if your mortgage is really unaffordable, you have to be realistic.

Some financial experts say that renting is a better option right now, anyway. That might not be something that you want to hear at the moment but keep it in mind as you are looking at your alternatives. They say renting is a better choice because home values are falling, while other investment options are still profitable.

If your bank does offer foreclosure help it is probably due to the Making Home Affordable program that was launched in March 2009. Under the plan, millions of homeowners are supposed to be able to get lower interest rates, a waiver of late fees and sometimes an adjustment in the principal portion of their mortgage.

In years past, refinancing to get a lower monthly payment was not always possible. Banks often required that a customer have thousands of dollars worth of equity in their homes. Loan modifications as they exist today were not available.

Not all banks are offering modifications. Estimates vary about how many banks are offering the option to their customers that need foreclosure help. 3-13% of mortgage companies’ delinquent customers are currently in a trial period for modification.

The 3% estimate comes from the US Treasury Department. The 13% comes from US bank, who says that the Treasury Department’s estimate is an error. Regardless of which estimate is correct, at least we know that some people are taking advantage of the loan modification program, which should reduce the number of foreclosures significantly.

If you do sign up for a modification, you can expect some red tape to get through during the process. Tens of thousands of customers are applying for refinancing or modification. As a result, there is something of a bottleneck in many banks.

But, if you need foreclosure help, you should not let a little red tape deter you. A foreclosure could destroy your credit rating, making it impossible for you to ever purchase another home. Unless you are a very young person, it could be close to impossible to restore it in a timely manner.

If dealing with your bank seems to be particularly difficult, there are some companies that will handle the negotiations for you. This includes making many of the phone calls and spending the hours on hold that it can take to contact a bank. It is a specialty that has been around for years, although it is not well known.

Despite the government’s foreclosure help programs, many people are rejected for refinancing or modification. But with the right help and advice, as well as an honest look at your current financial situation, you will be one of the lucky ones.

Obtaining a home loan modification could help you avoid foreclosure and stay in your house for the long term. The guidelines for the “Making Home Affordable” plan were released in March of 2009. Since then, tens of thousands of people have applied, but in the state of Florida, hundreds have complained.

The majority of the complaints filed with the state attorney general’s office have been against Bank of America, but other customers have complained about other lenders, as well, including JP Morgan Chase and Wells Fargo, which acquired Wachovia. It is in the bank’s as well as the consumer’s best interest to modify, rather than to foreclose. But, there still seems to be a lot of red tape involved.

Consumers have reported waiting months only to find out that they have been denied. In some cases, they are accepted into the “trial” program. One woman reported paying her mortgage payments up through January of 2010. But, she was still denied for refinancing by her bank.

Although it may be a hassle, it is still worth your while to apply for a home loan modification if you are having trouble paying your mortgage or your other bills. If you are using credit cards to pay your utility payments or buy groceries, then your mortgage payment is probably not affordable. Ideally, it should be no more than 30% of your total monthly income.

If there has been a change in your monthly income since you first obtained your mortgage, that’s a good reason to apply. If your mortgage is backed by Freddie Mac or Fannie Mae, that is a good reason to apply. Most HUD loans qualify, as well.

The government has offered incentives to banks if they are willing to offer a home mortgage modification as an alternative to foreclosure. Despite the new programs, there have been thousands of foreclosures this year.

According to government estimates, about a half million people are in the trial stage of the process. During the trial period, which normally lasts for three months, homeowners are allowed to make lower mortgage payments. If they make those payments on time, then the bank will usually qualify them for permanent refinancing.

Fees that can be rolled into the new balance include legal fees related to initiating a foreclosure, Homeowner’s Association fees and bills that could cause a lien to be placed on the property. In order to use the home loan modification option, lenders are required to waive any late charges that have accrued. That alone could amount to hundreds or even thousands of dollars in savings.

Typically, the bank is able to reduce the monthly payment by lowering the interest rate. Rates as low as 2% are being seen in some of the new loans. If you are interested in applying, you should contact your current lender and stay in contact with them throughout the process.

Be sure that they have accurate phone numbers. Some banks have stated that they could not reach the customers and denied the final acceptance because of their inability to reach homeowners with the contact information the banks have on file.

As well, homeowners could still be denied because of insufficient income. There is no guarantee that anyone will qualify, but the government seems to think that most people will, as long as all of the parties are willing to meet somewhere in the middle.

It is important for borrowers to think about whether or not the new payment offered is actually affordable. It is possible that a home loan modification is not the right choice in certain circumstances. It might not be the right choice for the bank, either.

The banks must follow the FDIC guidelines when they are making these modifications. The number of bank failures this year has hit the highest point since the savings and loan crisis of 1992. Those failures have cost the FDIC billions of dollars. So, they have a say in whether or not your bank can offer a home loan modification or not.

One of the FDIC guidelines that your bank will adhere to is making a full review of your financial situation. If it appears that you are unable to make the reduced payments or if you are not considered “credit worthy”, they can deny your loan without risk of being criticized by government regulators.

If the government’s home loan modification program does not work for you, there are other options to consider. Although modifying the terms of a loan has been the most popular option recently, it is certainly not the only one available for borrowers attempting to stop foreclosure.

If you are thinking about applying for a mortgage modification, your first step should be to contact your current lender. The new government sponsored refinancing programs are designed for people that are having trouble making their payments.

If you are not having trouble, but would like to take advantage of lower interest rates or you wish to finance for another reason, you might not qualify for the government programs. In order to qualify for those programs, you would be required to sign an affidavit of financial hardship.

The programs are not designed for investors. People that bought houses hoping to resell them for a profit or planning to rent them out do not qualify for refinancing under the plan. The plan was created strictly for owner occupied residences.

It has been estimated that as many as nine million homeowners will be able to obtain more affordable loans with the government’s help. If you are one of the four to five million homeowners with a Fannie Mae or a Freddie Mac loan, you qualify for refinancing, even if you have a “solid” payment history.

If you are currently in default, your bank may be willing to work with you to obtain a mortgage modification. Your new interest rate could be as low as 2%. Banks are more willing to work with their existing customers for several reasons.

At one time, foreclosing on a property was a good idea. The bank could auction off or resell the property for more than the balance owed. But, with home values falling and a lack of qualified buyers, it usually makes more sense for the bank to keep you in your home. In many cases, they are unable to get enough at auction to pay off the existing balance. They retain ownership of the property, but it could be years before they can sell it.

If you are able to obtain a mortgage modification, the terms that you originally agreed to will be changed permanently, but that doesn’t necessarily mean that your payments will stay the same for the life of the loan. Some banks are offering a reduced payment only for five years or so. Remember to think about it carefully, before you sign up for that deal.

One of the contributing factors to the high foreclosure rates seen over the last few years were loans that were written with the 5-10 year low monthly payment. After the 5-10 years passed, the homeowners were unable to pay the new higher payment.

In addition, the amount that they paid for those first few years was only enough to cover the monthly interest on the loan. So, the original principal was still the same at the end of the introductory period as it was when the loan was originated.

It would probably be in your best interest to try and get a permanent mortgage modification, with a fixed interest rate, not a variable rate. We all hope that we will be making more money in years to come. But, that is not always the case.

To qualify for the government programs, there is no minimum or maximum “loan to value” ratio. So, regardless of your home’s current value, you could qualify. That’s an important point, because bank refinancing guidelines normally require that there is equity in the home.

So, what’s the downside? The biggest complaints that people have had since the new guidelines were created has to do with the bottleneck created by the huge number of customers that are applying for mortgage modification.

Some people have waited for months only to find out that they do not qualify for refinancing. The best suggestion for anyone that is applying for a mortgage modification is to keep in contact with the bank.

Some of the customer complaints indicate that the bank did not contact them, but the banks say that they attempted to contact the customers. So, call them on a weekly basis. Make a note of the day and time that you called, as well as the person that you spoke with.

If you are not satisfied with the way that your deal is handled, you can file a complaint with your state’s attorney general. Filing a complaint won’t help you get your mortgage modification, but it might make you feel a little better.

Obtaining a loan modification is one way that a consumer can avoid foreclosure. Not everyone qualifies and not all banks are participating. But, if you are having trouble paying your mortgage, it is worth your while to call your lender and find out what programs they offer.

A loan modification can take several forms. It is a permanent change in the original agreement made between you and your bank.

The items that can be changed include the interest rate, the length of the mortgage, the amount of the monthly payments and the amount of the principal, but only in rare cases is the principal reduced. Usually, adjustments are made that increase the principal in order to cover any past due amount or other charges that could result in a lien being placed on the property.

Banks all have waiting periods. Some lenders seem to take longer than others to get back to their customers. Bank of America, for example, has been mentioned in hundreds of complaints to the Florida state attorney general for failure to act promptly when contacted by homeowners.

Typically, a bank will offer the customer a “trial period.” If you are offered a trial, you will be asked to make your payments on time for three months in a row. Some banks allow you to make the modified, lower payment. Others ask for your current payment, whatever that may be.

You may be asked to provide proof of income, as you did when you obtained the original loan. Whether or not things have changed with your income is one of the aspects of your current financial situation that the banks will look at.

In normal refinancing, a lender will usually deny applications when the home’s value has fallen below the loan amount. This is one of the things that the government was able to change. It was an important change, because home values have fallen across the country.

So, even if you have tried and failed to obtain refinancing in the past, you may qualify for a new loan modification. The government program is called the Home Affordable Modification Program. Some half a million mortgage holders are currently in the trial process for the program.

In order to qualify for the program, your original loan must have originated on or before January 1st, 2009. Two recent pay stubs and the most recent tax return must be submitted and you must sign an affidavit of financial hardship.

In addition to the loan modification, which will be available only until December of 2012, unless changes to the current program are made, there is a refinance program that ends in June 2010. There are other options that can help you avoid foreclosure, as well.

Several companies are offering to buy properties from homeowners that are facing foreclosure. That could save your credit rating from the damage that a foreclosure can do.

There are also foreclosure prevention services that help homeowners with the negotiations, which can sometimes be lengthy and confusing. The companies charge various fees for these services. So, it’s a good idea to do a little comparative shopping before you sign up for the service.

You might be wondering how much lower your payments will be with a loan modification. While that depends largely on the original interest rate, the principal and the length of the loan, some homeowners have had their monthly payment reduced by nearly $100.

Temporary modifications are another suggestion made by some banks. Instead of getting a fixed rate for the life of the loan, the bank could reduce your payment for a period of five years or more.

A temporary mortgage modification is a good idea for someone that expects their financial situation to improve over the next few years. If you or your spouse is currently unemployed, for example, you may be able to afford a higher payment in five years.

The goal is to get the payments down to around 30% of your monthly income. That is considered affordable by financial experts. If your income is not sufficient for even a reduced payment, then you will have to consider other alternatives, such as selling your home. But, with the loan modification and refinancing programs, as well as other available options, you should be able to avoid foreclosure.

One option for those homeowners having trouble making their mortgage payments is a foreclosure refinance. In the past two years, millions of people have had their mortgage payments sky rocket due to rising interest rates. Adjustable rate mortgages have a fixed rate for the first year or two and many people find they can easily afford the payments at this level for a short period of time.

But then the rate freeze ends. The mortgage rate begins to rise. And with it the payments also go up -- sometimes rising by hundreds of dollars a month. The once affordable payments now squeeze the household budget. And then the next rate hike goes into effect. A once comfortable budget is now bleeding red and there is no hope for it to stop. What can a home owner do to make the bleeding stop?

When a homeowner sees that they are not going to be able to make their next mortgage payment, they need to contact their lender right away. If it is a short term problem, many lenders will forebear the amount for a month or two until you can pay it back. Most people are willing to take on a second job for the short term to get out of a financial hole. But, with payments beyond the household’s budget, it is not that simple. Once rates adjust, they are not going to go back down any time soon.

The home owner needs to take the initiative and speak with their lender. When the loan gets in arrears, the lender becomes more receptive to listening but they also get more nervous about seeing the money get paid back. A foreclosure refinance to a fixed rate loan may be the answer to both of their troubles. But many lenders are shy about refinancing on a property so near foreclosure. You may need to look for a broker to help you.

Shopping for a foreclosure refinance can be tricky. If you use a broker to try to get a refinance, you may just be racking up fees instead of actually getting yourself out of foreclosure. Many brokers use the same lenders. You may put your application in with three mortgage brokers and all three of them may use the same lender. If you are rejected by the lender once, you will be rejected by that lender again and again.

The first question to ask the broker is which mortgage lenders they are going to be submitting your application to. If you know that ABC Mortgage Company has already rejected you, then ask the mortgage broker to submit your application to another company or find another broker. Another option is to submit your application to lenders directly. But this can be tricky since mortgage brokering is not for the beginner.

Even if you have been rejected left and right, do not lose hope. There are non-traditional lenders, such as hard money lenders and private institutions that specialize in foreclosure loans, that may be able to help you refinance your property before it is actually foreclosed on by the current bank. Their requirements are usually more lenient than the usual mortgage companies, involving no credit check.

Keep researching your options to make sure that you have taken every opportunity to avoid losing your home to foreclosure. Even with credit problems due to being out of work for a long time, there are still lenders out there who may work with you, and this may be one important and appropriate solution to foreclosure that many homeowners do not even consider.

A loan workout sounds like a cross between a yoga routine and a mortgage broker. In reality, a loan workout is what happens when a borrower and a lender agree to modify the terms of a mortgage in order to prevent a foreclosure. Basically, they are changing certain terms in order to make them more affordable for the homeowners, while still creating a profit incentive for the lender and investors, all while avoiding foreclosure.

Now, not every lender is willing to go through this routine with just anyone. The circumstances must be right for certain types of workout agreements to be in all parties best interests. And while the borrower may feel the need to know what the right combination is in order for this to work, it may be impossible to know what will work for the bank and its investors until the borrowers begin negotiating.

What needs to be in place for a lender to consider this option? First of all, the borrower must be in a position where foreclosure is a real possibility. With millions being laid off and jobs scarce, this is not a hard situation to fall into. The borrower is likely behind on their payments by several months. And it usually means that the lender cannot expect to see the payments caught up anytime soon unless something changes to make the situation more affordable.

However, the borrower must also be in a position where they can make some sort of reasonable payments. If someone has lost a job and has not found one yet, a lender is going to be very reluctant to modify loan terms because repayment is not likely to happen. The lender needs reassurance that their efforts to negotiate a solution will pay off before they are willing to do a loan workout with the borrower.

The lender is going to also look at the current situation regarding the amount owed on the house and the home's current market value. With home prices falling all over the country, many people find themselves owing more on a house than the property is actually worth now. These people bought their homes when prices were at their peak a couple of years ago and have witnessed them dramatically decline in value.

Now, some people owe more than 20% over their property's current value. A lender is going to be very reluctant to work with anyone in this situation. For a lender to be willing to do a mortgage modification with a borrower, the amount owed on the property needs to be favorable to the lender. Equity is the magic word for this. If the home is valued higher than the amount due, then there is equity. With equity, the borrower may see the prospects of a loan workout growing.

Do not be foolish to think that the lender is going to be nice to the borrower. In all of this, the lender is going to look out for its interests first. Foreclosure costs are one major aspect of the case that they look at, including how much it would cost to foreclosure and resell the property on the open market. Would it be cheaper just to foreclose on the property and try to resell it?

Be aware that foreclosure costs average over $50,000 per house. But if a property’s value is so far below the amount owed on the mortgage, that amount of money may be smaller than the bank's loss. For lenders, the only thing that really matters is the bottom line, and banks have their bottom line guaranteed by the government more and more these days. But a smart borrower will be armed with the knowledge of what the mortgage company is going to be looking at before they request a loan workout.

What is a foreclosure loan and how can it help you keep your home? A foreclosure loan is any type of loan that will replace your current mortgage. It is the type of borrowing that many homeowners seek to qualify for when they are unable to deal with their current lender, either due to higher resetting payments or a financial hardship.

The new lender that provides your foreclosure loan will pay off the current mortgage on the property. You will then make payments to the new lender as stated in the terms of the loan documents. For those facing possible foreclosure by their current mortgage lender, this is an option that is well worth exploring, especially with various government lending programs now available.

The first option every home owner should explore is working with their current lender. If you have a good payment history, your lender may receptive to working out a plan to help you catch your payments up. This may involve a repayment plan or a total loan modification, but you can not wait forever to ask for their help. The further behind you are, the less willing the bank will be to work out a solution to foreclosure.

Foreclosure is an expensive undertaking for any mortgage company. But if they do not see any sign that the borrower wants to work on the problem, they will begin taking action to foreclose on the home. For lenders, it all boils down to how they can make the most money or avoiding losing any. For the borrowers facing the loss of their property, a foreclosure loan may be what can help them save their homes.

The place to start looking for a foreclosure loan is to ask your current mortgage broker for referrals. In the past couple of years, lenders and brokers have been dealing with millions of defaulted mortgages. As stated before, foreclosures are expensive. It is in the banks' best interest to avoid them, and they may be willing to work out deals with homeowners and other lenders offering to provide funding.

These lenders have often built working relationships with brokers that specialize in foreclosure loans. By getting their delinquent borrowers in touch with such a broker, they may see the mortgage being paid off through refinancing instead of foreclosure. Another way to find a foreclosure loan broker is to talk to neighbors and friends who might have the same problem.

Internet searches are also an option, but take care that you do not link up with a scam artist. Foreclosures provide a healthy harvest for the professional scammer. People are at their most vulnerable and these cons swoop in and take advantage, and many of them will market directly to borrowers through direct mail or by calling them out of the blue offering solutions that sound too good to be true.

Be wary of any one that claims they have the magic answer to all of your problems. Often they involve legal shenanigans that can lead you into deeper trouble while they skate away with your hard earned money. If they ask for high upfront fees or for you to make your payments directly to them, run in the other direction. If they ask you to sign your house over to them in exchange for rent payments, report them to the authorities. All of these schemes are focused on them making money and you paying it to them. Your mortgage company is going to foreclose anyway.

Foreclosure loans can provide the borrower with an extended period of time to pay off their mortgage as well as lower their payments over the long term. This often provides the right amount of breathing room to allow a struggling family to get back on its feet and save their house, while avoiding paying thousands of dollars in legal fees and foreclosure charges.

Did you know that many lenders are making efforts towards mortgage modification for some home owners that are experiencing troubles? Mortgage modification is a term used when a lender changes the terms of a loan in order to help the home owner make their payments.

The types of modifications being made are unique to each situation though. And each home owner will need to find out what their options are. What kinds of modifications can be made on a mortgage to help the struggling home owner?

Adjustable rate mortgages were at one time seen as a good way for many people to get into owning their own homes. It was great while the interest rates remained low. But when rates began to rise, the payments went with them. A typical adjustable rate mortgage starts out with a low rate that is guaranteed for a year or two.

Then after the freeze time is over, the payments begin marching up. For each percent rise in the rate of the mortgage, home owners could see their monthly payments grow by $200 or more. This puts even the most generous of budgets under great strain. One mortgage modification that is very common is making an adjustable rate fixed. This helps the home owner to budget their payments and keep them current.

With the economy in trouble, millions of people have been laid off from work. Some are lucky enough to have a cushion to fall back on until they get a new job. Some do not have a cushion to fall on and even if they do, the cushion will run out at some point. Mortgage payments get behind when providing food becomes the number one priority.

A few are lucky enough to find a job after a few months, but find themselves in a hole with their mortgage lenders. They are making enough to start making their mortgage payments again, but they are behind on their monthly payments. And the lenders are adding penalties on to the amount they owe.

What do they do? Another type of mortgage modification is when the amount that they are behind is absorbed back into the loan. That way, with a steady job, the home owner can make their payments and keep their homes.

In some areas, the value of homes has dropped significantly in the past couple of years. For anyone that bought their home when prices were at their highest, they often owe more than their house is worth. That is called being upside down on their loan.

If they find themselves without a job, they are stuck between a rock and a hard place. When they try to sell their homes, they cannot get enough out of the sale to pay off their mortgage. And the lenders want the money back that they lent for the purchase of the home.

One mortgage modification that can be used, although it is rare, is when the amount owed on a home's principal balance is reduced. It is rare because the lender is going to lose a significant amount of money. But it has happened, and it may be another option for borrowers.

In the past couple of years, a lot of homeowners have found themselves in need of some mortgage help. With high rates of unemployment and stagnant wages, more people are finding making their payments harder each month. Priorities have to be set and the first one needs to be food for the family. And lenders don’t seem to be real sympathetic to the people in trouble. Let’s take a look at what kind of help is out there.

For the lucky ones that are not living in the areas with home values falling like rocks, refinancing might be the answer to their troubles. If a home owner bought their home when mortgage rates were high, then they might be able to refinance their loan at a lower rate. This would bring the payments down and for some this is just what they need.

But lenders are very squeamish to refinance anyone who has been laid off in the recent past. Even with a new steady job, their credit rating may have been affected by past due payments. But there is one point of good news. The federal government has released billions of dollars in aid to help these banks get over their nerves and to provide mortgage help to those that need it.

Then there are the unlucky ones. Millions of people live in houses that are located in areas where home values have plummeted like rocks off a cliff. In some areas values have fallen over 20% in the last two years. For those people who bought when prices were high, the luck ran out. Many of them owe more on their mortgage than what the house itself is now worth.

And then there is a pesky bit of business with mortgage lenders. They usually want to get all of their money back with interest. If one of the unlucky home owners falls behind in their payments, they have few options. Selling their home won’t bring in enough money to pay off the lender. For them, mortgage help needs to come in the way of mortgage modification. This is when the lender changes the terms of the loan to help the home owner.

What other types of mortgage help are out there? Well, if the home owner can find someone willing to buy their home, but not at a price that will pay the lender, they might be able to negotiate a short sale. A short sale is when a lender agrees to forgive any amount of money still owed on a mortgage once a home sale is final. Most lenders will not agree to this unless they have few other options. But the costs of eviction and foreclosure can be a good way to argue for it. And there are consequences to the home owner. Taxes can be due to the IRS for the amount forgiven by the bank. Another option might be to see if they can rent the home out for an amount that will cover their mortgage and taxes. But that can be tricky since many people don’t know the first thing about being a landlord.

Loan modification may be just what many home owners are looking for. A lot of people are behind on their mortgage payments. Some may only be behind 30 days. But 30 days can become 60 days or 90 days very quickly.

And then the lender starts sending the dreaded notices that if the payments are not brought up to date, they will begin foreclosure proceedings. The home owner begins feeling trapped and has no clue where to go or what to do. Let’s see what loan modification is and how do you start.

What is loan or mortgage modification? Loan modification means that the home loan is going to be changed so that the home owner can afford the payments better. This can involve adjusting the interest rate, the duration of the loan or other factors. Circumstances around each mortgage modification determine what changes to the loan can be made.

If the rate of a mortgage has jumped because it is adjustable, then one option would be to make the rate fixed. If the home owner has been out of work for a long time but now has a job, then the amount that is past due may be absorbed back into the loan.

Now how do you start? The first factor of how to start is when. With the current government programs, it is often best for the home owners to contact their mortgage lender as soon as there is trouble. Some lenders will wait until you are 30 days behind before they want to talk. But it never hurts to try sooner.

Another thing you need to do is find out who actually holds the mortgage on your home. Just because you make your checks out to ABC Company does not mean they actually own the loan. They may only be the mortgage servicer. Call the company and ask for paperwork on who actually owns the loan.

Once you know this, you know who you need to be working with. Be honest with the person you are working with. They will ask for a bunch of paperwork to show your current financial circumstances. Lying or exaggerating can get you into hot water and will end your chances of actually getting a modification of your loan terms.

How do you bring your personal situation home with the mortgage lender? Write a letter explaining how you actually got to this point. Again, be honest. In a brief concise letter, explain the full chain of events that has led you to this point.

And make sure who ever you are talking to is the right person. You need to be speaking with someone in loss mitigation, not collections. Collectors are there to hound people into paying. Loss mitigation is there to help reduce or prevent losses for the company. Be patient. What has taken you months to get into is not going to be reviewed and resolved in a day or two. Maintain contact with the person you are working with, but keep your cool.

And at the end of the day, be realistic. You are in a deep hole before you get to the point of loan modification. The hole may be deeper than the lender is willing to help you out of. But keep asking. If one person says no, another may say yes.

A smart home owner can use a little known fact to their advantage to try to stop foreclosure by their mortgage lender. Did you know that it is cheaper for mortgage companies to keep you in your home than actually go through with a foreclosure?

On average it costs the lender between $50,000 and $100,000 to foreclose on a property. In the long run, it would cost less for them to work with the home owner to find a solution to the problem than evict them from their home. Often, the home owner has to be the one to point this out to the mortgage company though. It can be a very effective negotiating tactic.

Why does it cost so much to foreclose? First there are the costs of going through the legal process of eviction. The lenders have to hire local attorneys that specialize in these types of procedures. Then there are fees associated with filing the lawsuits and eviction proceedings.

If the home owners fight back, then the lender’s legal fees begin to climb faster and faster. Once a foreclosure or eviction notice is final then the mortgage company has to pay the costs of evicting homeowners if they refuse to leave the dwelling voluntarily. A lender with any intelligence would want to work with a home owner to stop foreclosure.

After securing the property from the evicted home owner, the lender is then left to deal with the aftermath. Often, if a home owner doesn’t have the money to keep up their mortgage payments, they also did not have the money to maintain the property either. And some of them, in anger over what was going on, do damage to the property before they leave it. All of this now falls on the mortgage company to deal with.

Whether the property was damaged due to neglect or spite, the lender will usually not do anything about it. This makes the value of the property fall and the longer it is neglected the further the value falls. In the end, the lender will receive far less for the property than what they would have if they had worked with the owners to stop foreclosure before it began.

Even if the bank does not do anything to maintain the property, they still have to deal with the other costs in owning that home. Any taxes that are due on the property have to be paid by the lender. And, some level of home owner’s insurance will need to be maintained on the property to protect the lender from accidents to the property. And when they try to sell the property, the mortgage lender will need to use local real estate agents.

That means they will be paying commission fees to them when the property is ultimately sold. It just makes no sense for a mortgage lender to incur those costs when it would be more effective for them to work with the current home owners. This is just one piece of information that can help you to save your home from foreclosure.

If you are in foreclosure now or far enough behind in your payments to worry about it, getting foreclosure help needs to be your first priority. The worst thing you can do is avoid dealing with your financial problems. One of the biggest mistakes people make is refusing to speak with their lenders when they call.

It will be hard to face up to the fact that you are in financial distress. But, if you don’t speak, then they will foreclose all that much faster. Facing the problem may be difficult, but you will have more options to deal with it if you face it now instead of later.

Find help. The federal government (as well as many state governments) has counseling options available for those who are facing foreclosure. These counselors can point you to government lending options that may help you. They can also provide you with information on what laws are in place about the foreclosure process. Each state has unique processes and timeframes on how the process is supposed to run.

Review your mortgage documents as well. There is usually a section in those documents that point out what your rights are as a borrower. You may think that the lender holds all of the cards, but that may not be all of the truth. Knowing where you stand legally is the first step in getting foreclosure help.

Take an honest look at your finances. Is there anything you can sell that will help you catch your loan up? A second car or whole life insurance policies are a couple of options to look at. Keeping a roof over your head needs to be a priority in your life at this point. Prioritize what you spend your money on. The mortgage payment needs to be the first item on your list of bills. Credit card payments and other unsecured loans can be put off for awhile, but mortgages should not be.

Can you get a second job for awhile in order to catch your mortgage payments up? Cut out all non-essential spending. Cable TV and high speed internet are easy points to eliminate. All of these options need to be explored. Knowing where you stand financially is the next step in getting a plan together to avoid foreclosure for the long term.

Avoid scams. There are tons of foreclosure scams out there. One common type is the scammer that claims to be an official representative for government programs that help homeowners in distress. Another tactic scammers use is to act as a middle-man between you and your lender. They will say that will negotiate to lower your interest rates or amount to be paid. In exchange though, you will need to make your payments to them instead of the lender.

Other scams include telling you to file for bankruptcy to stop the foreclosure or to sign over your property to them and they will make the payments for you in exchange for rent. Knowing what is real and what is a scam is a large step in getting foreclosure help.

Well worth the watch. Very creative and funny.

For mortgage companies pursuing a foreclosure, the costs can run exorbitantly high. Mortgage giant Freddie Mac has estimated that the average cost to a lender of foreclosing on a property is close to $60,000, with other estimates placing the total cost to the homeowner, lender, surrounding community, and local government close to $80,000.

Homeowners can use this knowledge when the attempting to negotiate with a lender for a short sale, mortgage modification, or any other solution. The point of loss mitigation, supposedly, is to reduce the loss on a defaulted loan by working with the borrowers to prevent it from going into foreclosure. Knowing how much foreclosure costs the lender is a powerful piece of information for homeowners.

But there is a big difference between paper losses and out of pocket expenses for lenders. Some of the losses on a foreclosure fall into one category, while the remaining fall into the other. Obviously, mortgage companies are concerned about out of pocket costs much more than paper losses that do not represent true outflows of money for the bank. So what costs are involved in a foreclosure?

Foreclosure sale fees. To initiate a lawsuit or begin a nonjudicial foreclosure, it costs the bank money for filing fees or newspaper publication of the sheriff sale. Many states require a lender publish a notice of default or notice of sale for 3-4 consecutive weeks, which the lenders have to pay for out of pocket.

Legal fees. Lenders always hire local attorneys to pursue foreclosure on a home, and attorneys, as most of us know, are not cheap. If the homeowners defend against the process for as long as possible, legal fees for the bank can run into the tens of thousands of dollars. While these are added to the total amount the homeowners owe, if the house is not saved, the bank ends up having to pay the attorneys out of pocket.

Eviction costs. The eviction process after a foreclosure and sheriff sale typically involves the bank initiating another lawsuit or paying the attorneys more to have the former owners removed from the house. Any of these costs, including any more filing fees or legal fees, will have to come out of the bank’s pocket.

Damage to property during foreclosure. Unfortunately, once homeowners know they will be foreclosed on and that the bank will no longer work with them to resolve the situation, they may take out their frustration at the bank on the house itself. There are always new horror stories of properties being gutted, stripped, or vandalized by the former owners. Repairs will either need to be paid for out of the bank’s pockets or taken as lower proceeds from a sale.

Damage to property after foreclosure. When properties sit abandoned, the best that happens is it falls into disrepair. Old conditions worsen and new ones appear due to deterioration and the effects of the weather. In the worst case, the home becomes a target for squatters who damage the property or thieves who strip it of its pipes, siding, and anything else of value. The bank will need to pay for repairs out of pocket or accept a lower sales price to compensate.

Property taxes. If the bank does not keep up with the local property taxes, it risks losing the house itself to a tax foreclosure. While taxes may be lower for non-owner occupied houses like those owned by mortgage companies, any taxes will need to be paid for each day that the bank owns the property. Once the property tax bill comes due, the lender will have to pay it out of its own pocket.

Homeowners insurance. Although banks may receive a far better deal for property insurance than what it forces homeowners to pay for through mortgage servicing fraud and other tactics, homeowners insurance will still need to be paid. This will come out of the bank’s own pocket, although the lender may own another company that provides the insurance, keeping the cost in house.

Maintenance. Keeping the property cleaned and maintained is one cost that banks typically avoid. Instead, they will allow the house to fall into disrepair and simply take less in proceeds on a sale. Although this is a paper loss to the banks, the longer the house is empty and not taken care of, the more it will deteriorate and the further the sales price will need to be to motivate any buyer to purchase it.

Commissions on sale. When a bank ends up as the owner of a property after a sheriff sale, it will typically find a local real estate agent to list the property with. Once the house sells, the broker will have to be paid a commission, reducing the lender’s proceeds from the sale.

When homeowners are negotiating for some solution to foreclosure, pointing out the vast costs to the bank may be one way to force the bank’s hand and offer a plan instead of going through with foreclosure. Even a $20,000 loss on the loan due to a short sale could represent a savings of nearly $40,000 to the bank in the long run. Banks threaten the loss of the house to homeowners if they don’t stop foreclosure — why can’t homeowners threaten the loss of $60,000 to the banks?

As a result of government intervention in the housing market, fraud has become rampant in the mortgage lending industry, and homeowners may be able to raise this issue when defending against a foreclosure lawsuit. Fraud is defined as an intentional deception which results in injury to a person. There are a number of elements of a fraud case in order to consider it fraud. These include the following:

• The statement must be a false and material misrepresentation.
• The person making the fraudulent statement must know it is false or be ignorant of its truth.
• The person making the statement must intend for the person to whom it is made to rely upon the that statement and in a manner reasonably contemplated.
• The person to whom the statement is made must be ignorant that the statement is, in fact, false.
• The person to whom the statement is made must have a right to rely on that statment or be reasonably justified in doing so.
• The person to whom the statement is made must suffer injury.

Fraud can occur in many ways during a mortgage transaction, and may often occur in several steps of a corrupted process. Any party to the transaction, from the real estate agent to the title company to the mortgage servicer, may be engaged in fraudulent activity. Any misrepresentation, concealment, nondisclosure of material fact, or misleading conduct may be considered fraudulent, depending on the circumstances of the case.

If a lender or mortgage broker has used some ingenious method to take advantage of homeowners, mislead them, or trick them, then fraud may be involved. There are even a number of different types of fraud. For instance, contructive (legal) fraud does not have to have an evil intent to cheat a borrower. Fraud in fact (positive fraud) is fraud that does have an evil intent and is specifically used to take advantage of someone.

Homeowners who think they have been defrauded by a party to their mortgage transaction may attempt to bring that party into the lawsuit, even if it is not the company suing them or proceeding with the foreclosure in the first place. It will be important, however, to prove that all the elements of fraud have been met in the case. For this reason, consulting an attorney may be advisable for borrowers wishing to make this defense to foreclosure.

One of the most well-known types of fraud in relation to mortgages is that of mortgage servicing fraud, where a servicer uses fraudulent tactics to push homeowners into foreclosure. This may be done through a number of ways, many of which are detailed in our mortgage servicing abuse articles. But too many homeowners have suspected their servicer of fraud for it to be all that uncommon. In fact, most of the biggest servicers have been sued for fraud and been found guilty or have settled out of court for hundreds of millions of dollars.

When homeowners are sold a home or given a loan by unlicensed representatives, it may help their foreclosure lawsuit defense to raise these issues in court. Governments throughout the country have imposed so many requirements on any person attempting to do business in banking, real estate, and mortgage lending, that it is almost too easy to find licensing violations. This is the good part about licensing laws for homeowners defending against foreclosure.

The bad part is that, despite all this government regulation, criminals can and do find their way into the lending industry and defraud large numbers of homeowners. Now that the economy has collapsed, some states have purged hundreds or thousands of mortgage licensees from the rolls who either had shady backgrounds or did not keep up on the requirements to hold a license. And all of the costs of licensing are passed along to the end consumers who buy properties and take out loans to finance them.

Thus, simply being licensed is really no guarantee of legitimacy or good faith dealing. And governments are often not equipped to go after small companies that break licensing laws, because it will cost the state much more than they can ever recover by prosecuting individuals not operating a scam on a large scale. Small time crooks who sell a few predatory loans may cause individual families thousands of dollars of damage, but may be too small of white collar criminals for government regulators to dedicate many resources to catch and prosecute.

However, it is still a good idea for homeowners to make sure that every party they deal with during their mortgage transaction is properly licensed. If they find out that no license was in place, and the lender knew about this factor or should have known about it, it may have a difficult time proving its right to foreclose on a property. And it may be vastly easier for borrowers to show conspiracy or predatory lending if parties acted together to create a situation in which it was impossible to pay the loan.

Mortgage brokers and real estate agents are currently licensed at the state level. There has been some talk of creating new federal mortgage broker licensing regulations, but this has not been put into place yet, and it is unlikely that the federal government will take over this much power from the states. Various federal agencies, though, do investigate financial and white collar crimes and may have some jurisdiction over practices engaged in by a mortgage or foreclosure scam company. Appraisers are similarly licensed at the state level, if at all.

Banks may be licensed either by the state or the federal government, depending on how large the institution is, how many states it operates in, and if it decided to be a federal or state bank. Banks, though, will often be regulated at both levels to some degree. The largest banks will be regulated more at the federal level by the Federal Reserve and the Office of the Comptroller of the Currency, while smaller banks will be licensed and overseen by state banking departments.

Although filing complaints with the proper regulatory agencies may not help in a current foreclosure lawsuit, especially if the unlicensed party has left the business and left town to avoid prosecution, it may help prevent that person from taking advantage of others in similar businesses and situation. As well, if homeowners can show that they were given a loan or sold a home by someone without a license, it may help bolster the rest of their case as to why the foreclosure is invalid.

When there are other legal issues in addition to a foreclosure, the housing situation becomes even more complicated. Especially in situations of divorce, separation, or even domestic abuse, there is a greater tendency for families to be broken apart and the basic issue of survival of either party to be questioned. And even worse, cases of divorce and domestic violence have been found to increase during times of high foreclosure rates and economic recession.

In these cases, there may be both a foreclosure lawsuit and a domestic relations lawsuit going on at the same time. The domestic relations case involves an abuser and a survivor, while the home defense case involves both of the former parties against the mortgage company. And neither case may help resolve the other, unless there is a more united front in the home defense case. In fact, a domestic relations case may limit the options the homeowners have for saving the property.

Especially if the abuser has stopped paying the mortgage, the legal counsel for the survivor may have to go to court to obtain an order that continuing payments are made. However, if a period of time has passed between the last payment and the court order, the servicing company may require far greater than just the regular monthly payment to be sent in. And lenders and servicing companies are not bound by the terms of a domestic relations order.

Some attorneys will attempt to bring the mortgage company into the domestic relations case, but this is not always successful. The times where it can be worth trying is if a stay of foreclosure or acceleration of the mortgage is needed for only a short period of time. In these instances, the domestic relations court may grant an injunction against the mortgage company based on the terms of the order. But it may be important to prove that payments will be made on time soon (within a period of a few months, at most).

Injunctive relief against a mortgage company may also be sought if the servicer refuses to accept payments from a survivor whose name is on the mortgage and the note. If a party's name is on the note, the lender is unable to refuse payment, despite a domestic relations court proceeding. In fact, the refusal to accept payments from a party listed on the note may bar future foreclosure proceedings or extend a redemption period guaranteed by law, as well as being a breach of certain duties lenders have towards homeowners.

In cases where a survivor's name is on the mortgage, but not on the note, the situation is slightly more complicated. In these cases, it may be best to have ownership rights and obligations of the note transferred to the survivor through an order in the domestic relations court. However, there is a danger that the party listed on the note to begin with may agree to a loan modification or other agreement that makes the loan unaffordable for the other party. Owners who are on the mortgage but not the note, however, may be able to file a Chapter 13 bankruptcy and cure the default, if the situation is appropriate.

Thankfully, the issue of mortgage acceleration just due to the transfer of the ownership rights in a domestic relations case is not something to worry about. Contract law and federal law usually prohibit the lender from accelerating a loan when there is a transfer of interest from an abuser to a survivor. The Garn-St. Germain Depository Act of 1982 prohibits acceleration when ownership is transferred between spouses, and the Equal Credit Opportunity Act prohibits discrimination on the basis of marital status.

Selling a property that is involved in a domestic relations case may be an option, but it generally requires court approval to get the legal authority to move ahead with this option. All ownership rights might need to be transferred to the seller, or a power of attorney granting rights to negotiate a sale may be necessary. Any remaining equity or debt, if there is a short sale, will need to be apportioned between the parties.

In all cases where the ownership of a home may be transferred or is in dispute due to a domestic relations lawsuit, it may be best to file a lis pendens on the property. This can prevent against equity stripping, further encumbering of the property, or transfer of the property. There may also be a court order which forbids withdrawing any additional funds from a home equity line of credit (HELOC) or obtaining any additional mortgages on the home.

Finally, if there are few other options than letting the house go into foreclosure, survivors of domestic relations disputes may be able to obtain a cash for keys offer from the lender. Tenants or former owners are offered these deals as a way for the lender to entice people remaining in the property not to cause any damage and to move out amicably. They often offer several thousand dollars in exchange for a clean house and the keys. Servicing companies should have few objections to paying a domestic violence survivor to move out of a property to avoid eviction after foreclosure.

There are a whole range of issues affecting a property in foreclosure, and many of these issues can be exacerbated or added onto if there is also a domestic relations dispute. Homeowners should have adequate legal counsel for both the foreclosure help and the domestic relations case in order to sort out as many of the details as possible. Foreclosure is complicated and stressful enough without piling on additional messy disputes and lawsuits.

Damages for pain and suffering may be awarded to foreclosure victims who have been taken advantage of in predatory lending or servcing abuse cases. Pain and suffering is a type of damages that a party to a lawsuit may recover for physical or mental pain and suffering. These would result from the wrong done to that individual as a result of the other party's actions.

Judges and juries have often awarded parties to a lawsuit with vast sums of money if they have suffered pain and suffering. Numerous cases appear in the media with a corporation being penalized with these damages, which can run into the millions of hundreds of millions of dollars.

The financial ability of the party who must pay damages for pain and suffering will, of course, be taken into account. This means that, if homeowners have been severely and flagrantly taken advantage of by their lender, the lender may be forced to pay many thousands of dollars more to the owners of the property than the mortgage is even worth.

Although homeowners who are defending a foreclosure lawsuit or initiating one to stop a nonjudicial foreclosure will have to prove in other ways why the lawsuit is invalid and should not be allowed to continue, it may be in their best interests to ask for monetary damages for pain and suffering if they have been taken advantage of.

Especially if some sort of fraud, predatory lending, or servicing abuse has been committed, courts may look more favorably on a request for damages for pain and suffering. Claiming this because foreclosure notice requirements have not been complied with may be more difficult for borrowers to show.

In any case, it may be best for homeowners to consult with an attorney to find out more about how damages for pain and suffering may be included in their lawsuit, if applicable.

When it comes to identity theft, credit card numbers and bank account information stolen through electronic means is becoming more popular than the traditional check fraud schemes. It seems that there is a new press release every day indicating a corporation has had customers' financial information stolen. Check forgeries and alterations, however, are still a problem in the banking world and an issue that consumers should be aware of.

Especially in difficult economic times, the loss or theft and cashing of a single check can cause enormous financial difficulties for a family. Even if the money is eventually recredited back to the banking customers, the time period in which it takes to file a dispute can ensure that the consumers fall behind on other bills or monthly obligations. This is why homeowners facing foreclosure should be aware of the different types of check fraud, in case they become a victim.

The first type is when a thief forgers a consumer's signature on a check and then cashes is. In these cases, it is the bank that will be forced to take the loss. The general theory is that, because the bank making the payment has the customer's signature on file on a signature card, pointing out a forgery should not be difficult. Of course, in practice banks never scrutinize signatures.

A forged signature is considered ineffective and can not bind the banking customer. Banks are allowed to withdraw funds from a consumer's account only if the check is properly payable, and a check with a forged signature does not count as properly payable. And the bank is in the position of being able to examine the consumer's signature card to be able to spot potential forgeries.

Thieves that forge indorsements of checks are also a problem in the banking industry. This may happen in cases where the check is lost or stolen after the customer has signed it. As with a forged signature, however, a check with a forged indorsement is not properly payable. If the bank debits the checking account, it should later be recredited for the amount of the check.

A final type of check fraud is when a check is altered after it has been written. The most frequent alternation, not surprisingly, is when the amount is changed. For example, $5.00 becomes $500, and "five dollars" is changed to "five hundred dollars" written on the check. In cases where the alternation is made fraudulently, the consumers may have no obligation at all. However, in other cases, the banking customer may be debited for the original intended amount of the check. Of course, this makes it worthwhile for wrongdoers to alter checks, in the hopes of getting away with the larger amount.

Forged signatures, forged indorsements, and alterations of checks are the three prominent types of check fraud that consumers should be aware of. If there is any suspicion that any of these actions have occurred, the first action should be to begin disputing the account debits with the bank. Many of these issues can be resolved by working with the bank, but there are also strict statutes of limitations in which to begin the process.

Homeowners in foreclosure are often woefully uninformed about the aspects of the banking and payment systems that exist in the country, as well as the regulations which govern those transactions. Especially in the case of servicing companies that lose payments or collection agencies which draft money unauthorized out of a bank account, a lack of awareness of these issues can cost consumers thousands of dollars or their homes.

The following are a few terms used in consumer banking transactions that many homeowners have come across but may not have understood what the acronyms stood for:

• ACH refers to the Automated Clearing House, which is a network designed to process electronic money transfers.
• Check 21 is a federal law which helps facilitate the transportation of bank checks via electronic image; it is designed to eliminate the use of the paper check in transactions.
• ECC refers to electronic check conversion, which is when a merchant takes a customer's check as a source document in an electronic funds transfer. The check is not used as a check, but only as the source document of an electronic transfer. The original check is actually destroyed or returned canceled to the consumer. This is a growing practice among merchants.
• EBT stands for Electronic Benefit Transfer and refers to needs-based government transfers. A federal mandate required the states to provide food stamps and other benefits via electronic transfer. This system typically uses debit or smart cards to fund a welfare recipient's account.

In the world of consumer banking and payments, there is a vast number of different types of transaction, whether on paper, electronically, over a land line or cell phone, over the internet, or through the use of various types of cards. In many instances, different laws govern each type of transaction, with some types of payments being regulated by numerous federal statutes. Only a sampling of these are listed below:

• Uniform Commercial Code
• Check 21 Act
• Regulation CC
• FTC Telemarketing Rule
• Electronic Fund Transfer Act
• National Automated Clearinghouses Association
• Truth in Lending Act
• Electronic Benefit Transfer
• Social Security and Supplemental Security Income
• EFT 99 Act

The law that most directly governs check transactions is the Uniform Commercial Code, Articles 3 and 4. Although some variations exist by state, the UCC has been adopted by every state. The articles were written with the intention of facilitating bank transfers and processing of checks -- not to provide protections to consumers. Other sections of the law and other regulations are written to protect banking customers.

Article 3 of the Uniform Commercial Code deals with negotiable instruments, which includes checks. There are two types of negotiable instruments: notes and drafts. A note is a promise to pay a loan or installment sales contract and include the promissory note borrowers sign when purchasing a home. A draft, on the other hand, is an order by the consumer for the bank to pay and includes checks that are payable on demand and which draw on an account at a particular bank.

Despite the UCC's intention of facilitating the processing of checks by banks, the regulation does impose a duty on all parties to act in good faith. To meet this duty, there is a two-part test. First, a subjective test asks if the bank acted dishonestly. Then, an objective test questions if the bank followed reasonable commercial standards. This duty does provide a level of protection to consumers if the bank did breach its duty of good faith.

The typical parties to a check transaction are the drawer who writes the check; the drawee bank which is ordered to pay the check; the payor bank which is what the drawee bank is referred to once the check is deposited; the payee to whom the check is made out to; and the holder which is the person or institution that is in possession of the check.

Over the next few weeks, many more articles will be added relating to consumer banking and payments, including payments to mortgage companies and issues relating to negotiable instruments such as promissory notes on real estate transactions. There are a whole list of protections that are available to borrowers in instances where they are required to make payments either via check or electronic transfer, and knowing about the payment and clearing systems in use in the country can help them defend against foreclosure or mortgage fraud.

One of the types of scams that the government is attempting to crack down on is foreclosure consultants offering bogus loan modification services to homeowners facing the loss of their homes. While the government is providing its own modification programs, it is also going after a number of fraudulent schemes that have been used to trick borrowers.

There are a large number of scams that target foreclosure victims, but the loan modification one may be the easiest for the criminals to engage in. The general way it works is that borrowers pay hundreds or thousands of dollars for the services of a loss mitigation company. After signing the agreement and taking the payment, however, the company provides almost no services, resulting in the homeowners losing the property.

Many mortgage modification scams are almost entirely made up of borrowers paying money to a company which then sits on the cash, performs almost no services, and simply disappears or denies giving a refund after the house is auctioned. There are hundreds of complaints about such companies, and it seems as if the attorney general of one state or another shuts down a new one every week.

However, there are some variations on the theme, as well. For instance, some loss mitigation companies will take homeowner money and obtain an unaffordable modification program, even if there is a chance to negotiate with the lender for a more beneficial arrangement. The company obtains the first, easiest modification possible, presents it to the borrowers, and declares its work done. Unfortunately, though, an unaffordable plan will not help homeowners remain in their houses.

Another variation on the scheme is simply to charge homeowners to attend loan modification seminars. This may be as part of a larger program to help them negotiate for better loan terms, although the seminars can cost upwards of several thousand dollars. If the borrowers do not attend the seminar, they will not receive help from the foreclosure scam company, which will blame the failure on the homeowners.

A final scam related to loan modifications that is being discovered more often is companies charging for loan audits that are performed by someone other than an attorney. Information provided in these audits is also often useless, as the claims that the homeowners are encouraged to raise are barred by the expiration of the statute of limitations for that particular argument. For thousands of dollars, borrowers are told what will not work in defending their properties.

Unfortunately, many homeowners are taken in by these and similar scams every day. States are most often behind in prosecuting and shutting down these companies because there are simply so many of them, and the dollar amounts they steal from borrowers are relatively small. Thus, it is up to the homeowners themselves to make sure they are dealing with a trustworthy company or individual who is offering them foreclosure help or negotiation services in the pursuit of a loan modification or other workout option.

In some states, land installment contracts are treated by the courts as mortgages. If this is the case, the homeowners must be given the same rights for reinstatement and redemption that would be allowed if the agreement was an actual mortgage and not just a land contract. This affords homeowners in these states additional protections against the stricter forfeiture process used in other jurisdictions.

If a lender forgives any part of the debt owed on a mortgage, there may be taxable income to the former homeowners. This includes waiving a potential deficiency judgment that may have been pursued after the foreclosure auction was completed.

In a small number of cases, borrowers may be liable for capital gains and forgiveness of debt income. This can happen if the house sells at auction for more than the homeowners' cost basis, but less than the total amount owed on the loan. The sales price higher than the basis will result in a capital gain, while forgiveness of debt on the amount over what the house was auctioned for can result in taxable income to the homeowners.

When homeowners are attempting to prove that they do not owe taxes on any income from forgiven debt, it may be a good idea to produce evidence of a lower fair market value for the property. If the owners have an appraisal or valuation done as of the date of the auction, there may be less of a deficiency that the IRS may treat as forgiven debt and taxable.

However, deficiencies for the majority of families suffering foreclosure may be a moot point for 2007 through 2009. Up to $2 million may be excluded from income for discharged acquisition indebtedness. This may be due to a decline of the property's value or the homeowners' financial circumstances. Furthermore, acquisition indebtedness is defined to include loans used to purchase, construct, or substantially improve a principal residence.

If homeowners dispute the amount of a discharged debt, it may be worth sending a formal dispute letter to the bank. Moreover, a bank may be convinced not to file a 1099-C with the IRS if the homeowners can prove there has been no discharge of debt that is not exempt. The penalty if a bank makes a mistake in this regard is minuscule, only $50. And the IRS does not even impose this fee if the reason for not reporting was due to "reasonable cause and not willful neglect."

The following are some miscellaneous legal issues that may affect a foreclosure case. These include the issue of putting a case into federal court from state court, as well as diversity jurisdiction. Finally, if homeowners win a case against a bank, and the case is appealed by the lender, the borrowers may be able to require the bank post a bond in order to move ahead.

Although some issues relating to a foreclosure lawsuit defense may involve federal laws, such as the Truth in Lending Act or Real Estate Settlement Procedures Act, many times federal courts do not have jurisdiction over a foreclosure or eviction case. These are matters that deal almost exclusively with state law and will more often be kept in state court.

However, some defendants to foreclosure may seek removal of a case from the federal court to the state court based on TIL or RESPA claims. In some of these instances, the argument is that the case would have been brought into the federal courts in the first place as the court of original jurisdiction over the homeowner's claims.

There is also an issue of diversity jurisdiction. In these cases, the homeowners must prove a number of circumstances to make the argument of diversity jurisdiction. These include showing that the parties to the lawsuit have diverse citizenship, as well as that the controversy is for more than $75,000. The amount of the controversy is considered to be the value of the object of the lawsuit.

In cases where the homeowners win a case against a bank, there is a good chance the lender will appeal the decision. In such situations, homeowners are well within their rights to request the court to require the bank to post a bond. In several cases, lenders have been required to do so in order to move ahead with their motions to the appellate court. This is similar to a homeowner being required to post a bond to bring an action into court to enjoin a nonjudicial foreclosure sale.

These are a few issues that some homeowners may come up against when attempting to defend their home or bring an action against the bank. In reality, they can be much more complicated than the standard foreclosure defenses, as they involve the lender's or homeowners' use of different court systems. Unfortunately, foreclosure is never as simple as homeowners would like. While these issues may be uncommon, they are not unheard of when dealing with a bank. This is, of course, one more reason that homeowners may wish to request professional foreclosure help when attempting to save a property.

When attempting to get information from a lender or servicing company, homeowners can take advantage of their legal opportunities under the Real Estate Settlement Procedures Act to send a Qualified Written Request (QWR). A QWR is meant to help borrowers raise disputes with their mortgage servicer and have those issues resolved in a timely manner.

Homeowners, however, may not know what questions to ask of the lender, or why they are requesting certain documents or records relating to the loan and its servicing. Most questions revolve around various disputes that borrowers may have with a creditor, including amounts owed, dates when payments were made, and the nature of the relationship between the company collecting payments and the true owner of the loan.

For instance, borrowers may wish to request a complete payment history including the dates that payments were made, as well as the amount the lender claims it receives. Also requested could be a breakdown of how the payment was applied, whether to principal, interest, taxes, property insurance, late fees, suspense accounts, or any other charges.

For homeowners facing foreclosure, a breakdown of all charges and fees on the account could be disputed, for which a QWR may be appropriate. Borrowers could request that all of the arrears and charges relating to the foreclosure be itemized and justified by the servicing company. This can be an especially difficult request for the bank to fulfill, as many often just make numbers up for delinquent accounts.

Any change in the monthly payment should also be carefully scrutinized and disputed if the homeowners did not specifically agree to it. Even if they did, if the amount does not look correct, it may be worth disputing and having the servicer check into the account. Homeowners can request the mortgage company to explain how the new amount due was calculated and why it was increased.

When an account is delinquent, servicers may often receive payments from homeowners but not credit them to the payoff. Instead, they are placed in a separate suspense account that simply holds funds that may eventually be credited to the loan, but which are not helping the borrowers get current with the loan. Homeowners can request an itemization of the expense account in order to discover the current balance and why funds were placed into it.

As with any foreclosure situation, there will be a whole range of issues that are specific just to that particular case. Thus, the issues described above should not be taken as an exhaustive list of QWR questions at all. Homeowners will inevitably run into their own issues when attempting to stop foreclosure, and they will be able to craft their own Qualified Written Request letter to the servicing company in order to attempt to resolve any disputes.

One request that homeowners have a legal right to send to their lender is a Qualified Written Request (QWR). The Real Estate Settlement Procedures Act gives borrowers the right to dispute information contained in an account, request information from the servicer or lender, and have their issues answered by the company in a reasonable amount of time. Many times, the bank will not enjoy disclosing such information to the homeowners.

The main reason that banks do not like homeowners sending such requests is that there may be a significant problem answering the questions. Especially if the mortgage company has not kept adequate records, made material mistakes, or has engaged in a practice of fraudulent servicing, a QWR may shed light on these activities that can jeopardize the foreclosure case.

The following is an example of a Qualified Written Request. The list of requests made by the borrowers in this sample is not exclusive, and many more issues can be raised if there is a dispute. Homeowners should be aware, however, that they should only request information that is disputed, as courts may not look kindly on sending a QWR just for the sake of sending one.

[YOUR STREET ADDRESS]
[YOUR CITY, STATE ZIP CODE]

[YOUR LENDER]
[YOUR LENDER’S STREET ADDRESS]
[YOUR LENDER’S STREET ADDRESS 2]
[YOUR LENDER’S CITY, STATE ZIP CODE]

[TODAY’S DATE]

Re: [YOUR LOAN NUMBER]

To Whom It May Concern:

I hereby request information about the fees, costs, and escrow accounting of my loan. This letter is a qualified written request (QWR), pursuant to the Real Estate Settlement Procedures Act (RESPA).

The information I request as part of this QWR is as follows:

[Describe the issue or question you have and/or what action you believe the lender should take. Attach copies of any related written materials. Describe any conversations with customer service regarding the issue and to whom you spoke. Describe any previous steps you have taken or attempts to resolve the issue. List a day time telephone number in case a customer service representative wishes to contact you.]

[EXAMPLE REQUESTS – THIS IS NOT A COMPREHENSIVE LIST – CUSTOMIZE IT FOR YOUR SITUATION]

The current interest rate on this account.

The date your firm began servicing the loan.

The previous servicer of this loan.

A breakdown of the current escrow charges showing how it is calculated and the reasons for any increase within the last 24 months.

A statement indicating which covenants of the mortgage and/or note authorize each charge.

Please provide a copy of all trust agreements pertaining to this account.

If this account is registered with MERS, state its MIN number.

Please provide a copy of all manuals pertaining to the servicing of this account.

The total amount of principal paid on the account up to the date of this letter.

The payment dates, purposes of payment, and recipient of any and all foreclosure fees and costs that have been charged to my account.

Etc.

I hereby dispute all late fees, charges, inspection fees, property appraisal fees, forced placed insurance charges, legal fees, and corporate advances charged to this account.

Additionally, I believe my account is in error for the following reasons:

[LIST REASONS HERE.]

I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

[YOUR SIGNATURE]
[YOUR NAME]

Again, the questions presented here are simply examples, as there are literally dozens of issues that may be disputed in a single case of mortgage servicing. A future article will look at many more issues and how they relate to foreclosure. They will also be requests that force the bank to prove it has been acting in accordance with the law and that it has the legal right and standing to pursue foreclosure against a home.

Homeowners often request that they be shown examples of letters they can send to their lender to fight foreclosure. The following is a template of a form letter than homeowners can send to their lenders to request that the original promissory note be made available for inspection. Whether the lender or servicing company will be able to comply with this request may mean the difference between defending a foreclosure lawsuit or losing the home.

[YOUR STREET ADDRESS]
[YOUR CITY, STATE ZIP CODE]

[YOUR LENDER]
[YOUR LENDER’S STREET ADDRESS]
[YOUR LENDER’S STREET ADDRESS 2]
[YOUR LENDER’S CITY, STATE ZIP CODE]

[TODAY’S DATE]

Re: [YOUR LOAN NUMBER]

To Whom It May Concern:

Please accept this letter as my formal request for a copy of my Promissory Note.

I am the owner of the real estate property located at [YOUR STREET ADDRESS, CITY, STATE ZIP CODE]. This property is security for a loan made by [ORIGINAL LENDER’S NAME], and was made on [DATE OF LOAN].

Within thirty (30) days of the date of this letter, please send me the Promissory Note for this loan for my own personal inspection.

If you have any questions or concerns relating to this matter, you may contact me via regular mail at the address listed above. Thank you for your prompt attention to this request.

Sincerely,

[YOUR SIGNATURE]
[YOUR NAME]

With all of the confusion of promissory notes and original mortgage paperwork that has been occurring in the mortgage industry over the past few years, this may be the exact request that lenders do not wish to receive from borrowers. Especially if there are other issues, such as an incomplete chain of title or conflicting land records, the servicer may be unable to prove it has legal possession of the documents.

If the company suing the borrowers for foreclosure can not show proof of possession of the original note, there may be difficult legal hurdles to clear for the lawsuit to go through. A lender or servicer that can not show it owns the note can not prove it has a dispute about a loan it can not prove it even has an interest in. Numerous cases so far have been thrown out of state and federal courts because lenders did not keep records of ownership.

Of course, simply sending such a request to the lender is no guarantee against losing the home. However, homeowners defending a foreclosure need to have as much information as possible, and as many different arguments as they can find as to why the lender should not be allowed to move ahead with sheriff sale and eviction. Sending a letter requesting the production of the promissory note is one more tool that can be utilized by homeowners.

As mentioned in a previous article, it can be very difficult for homeowners facing foreclosure to raise certain claims in court when the bank holding their loan has failed and been taken over by the Federal Deposit Insurance Corporation. Case law and federal statute give the FDIC broad immunity against a number of claims that could be raised by borrowers in regards to loans held by the failed institution.

However, there are also a number of exemptions to the broad immunity the FDIC enjoys. Four of them are significant and worth examining here, as homeowners in foreclosure may be able to use them to bring claims against the FDIC or successor financial institutions.

The first is called fraud in the factum, and refers to any case when one party to a transaction reasonably relies on a misrepresentation by another party. The misrepresentation will be as to the character or essential terms of the contract. Examples include alteration of a document or forgery. The FDIC nor its successor institutions are immune to claims of fraud in the factum, so homeowners may be able to bring these issues into court.

Second, Truth in Lending rescission claims are still allowed despite the FDIC's immunity protection. In fact, the Truth in Lending Act states that a borrower's rescission rights continue regardless of assignment of the loan or to whom the loan is assigned. This means that, even if the lender fails and the note is taken over by the government, rescission may still be an option if the other requirements under the statute are met. FDIC receivership of the bank's assets will not affect the claim.

Also, the FDIC does not have immunity protection from any transaction that is void. The federal statute granting FDIC immunity is intended to protect the government's interests in assets is acquires from the failed banks. A void transaction, though, does not create an interest in an asset, and the immunity protection can not be extended to assets in which the FDIC has no valid interest. In cases such as fraud in the factum, the transaction may be declared void, for instance.

Finally, there is a rule called the FTC Holder Rule that was designed to protect credit consumers from holder-in-due-course immunity, such as the FDIC has been granted. For this rule to apply, though, an FTC Holder Notice must be included in the consumer credit contract. It will be included in many transactions relating to a sales transaction. This might be a home improvement contract or other similar agreement. If the notice is included in the contract, the FDIC's immunity may not apply.

While the above defenses to broad FDIC immunity have survived most course, other claims have survived in a smaller number of cases. These include such issues as breach of contract, failure of consideration, challenges to the validity of a lien, homestead issues, unreasonable foreclosure sale, and state statutes regarding Unfair and Deceptive Acts and Practices. Homeowners should do their own legal research to determine if their claims may survive, or consult with a competent foreclosure attorney.

When homeowners find that they have become a mortgage customer of the government, falling into foreclosure can become extremely complicated. While the FDIC has taken some steps to assist borrowers in stopping foreclosure, the agency is granted broad immunity from many claims that may have been used to defend against the loss of the home in the first place. Thus, borrowers should educate themselves in regard to the issues surrounding the FDIC's administration of mortgage loans and foreclosure.

With the significant increase in bank failures due to the financial collapse of 2008, more loans are being taken over by the Federal Deposit Insurance Commission. While the government stepping in may make the transition of loans from failed banks to solvent banks a little easier, in cases of default and foreclosure the situation can become more complicated.

In 1942, the Supreme Court decided that any secret or implied agreements would be precluded that had the effect of reducing or diminishing the FDIC's interests. This has come to be known as the D'Oench, Duhme doctrine, and has been further codified into the federal statutes.

In many cases, if a bank transfers its assets to another financial institution or corporation, homeowners will be able to bring claims against the original lender or the assignee of the mortgage and note. But when a bank fails, it is taken over by the FDIC, a government agency which is granted immunity in many cases.

Federal regulations give the FDIC immunity from a number of claims. Homeowners may be unable to bring any claims against the FDIC for assets of the failed bank unless the agreement is in writing and meets a number of other requirements. These requirements are the following:

No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 11, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the Corporation unless such agreement--

(A) is in writing,

(B) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution,

(C) was approved by the board of directors of the depository institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and

(D) has been, continuously, from the time of its execution, an official record of the depository institution.

There are also a number of additional common law doctrines that smaller courts have relied upon when granting the FDIC immunity from homeowner or debtor lawsuits. These are termed "super holder-in-due-course" or "federal holder-in-due-course" doctrines, and allow the FDIC to claim holder-in-due-course status even if it does not meet the requirements for such status under the Uniform Commercial Code.

This immunity also typically extends to any future financial institution that purchases the assets of the failed bank from the FDIC. In most cases, the government only temporarily takes over the bank, makes sure it can keep operating for the short term, and then sells the remaining assets to other banks. Companies that purchase mortgage loans or other debts will be given immunity from claims that the FDIC would be immune to, making it even more difficult for borrowers to hold anyone accountable for actions taken before the bank failed.

Thus, homeowners may have a very difficult time bringing claims against the FDIC for the actions of the failed bank. However, there are a number of exceptions to the broad grant of immunity. Although they may only apply in a small number of cases of foreclosure, it is worth the effort for homeowners to look into these exemptions and find out if their claims against the original lender or failed bank may survive the FDIC receiving the bank.

While reading about how the produce the note strategy is working in various states, I came across some descriptions of case law from Florida and decided to put together a short reference guide for anyone interested. While the foreclosure crisis continues, even more cases will be tried using this type of claim, and it is hopeful that foreclosing financial institutions will have to make stronger cases for having the legal right to sue.

As with all information relating to the law, researchers should make certain to determine if these cases are relevant to their own experience, are still current law, or have been reversed or overturned. New cases are decided everyday, changing and altering the law in numerous ways that it is virtually impossible to keep up with. But the following descriptions should be taken as informational in nature and purpose only.

Philogene v. ABN Amro Mortgage Group, Inc., 948 So. 2d 45, 45 (Fla. Dist. Ct. App. 2006) -- the current holder of the mortgage and note is, in a foreclosure case, always a party in interest.

State Street Bank and Trust Co. v. Lord, 851 So. 2d 790, 51 U.C.C. Rep. Serv. 2d 191 (Fla. Dist Ct. App. 2003) -- plaintiff could not enforce note or foreclose on mortgage because it never had actual or constructive possession of the original promissory note.

Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. Dist. Ct. App. Sept. 12, 1990) -- assignment of mortgage not made until four months after foreclosure was filed; therefore, plaintiff was required to file new legal action.

Harmony Homes v. United States ex rel. Small Bus. Admin., 936 F. Supp. 907 (M.D. Fla. 1996) -- a lender that assigned interest in a property was not the proper party to file the lawsuit to begin foreclosure on the property.

Laing v. Gainey Builders, Inc., 184 So. 2d 897 (Fla. Dist. Ct. App. 1996) -- assignee of note and mortgage is considered the real party in interest in foreclosure case.

Lawyers Title Ins. Co. v. Novastar Mortgage, Inc., 862 So. 2d 793 (Fla. Dist. Ct. App. 2003) -- assignor improperly retained possession of note after assigning; however, assignee was the proper party to foreclose as assignment constituted constructive assignment even though the note itself did not change hands.

Dasma Invs., L.L.C. v. Realty Assocs. Fund III, L.P., 459 F. Supp. 2d 1294 (S.D. Fla. 2006) -- the plaintiff had only a one-page addendum to note and could not show complete original promissory note; court decided it had no standing to complain for foreclosure.

Looking at this list of deficiencies in lawsuits that lenders bring into court, it is difficult to imagine a case where the bank has properly protected its interest in a mortgage and note. There are dozens more cases from other state courts as well as the federal court system, where mortgage companies often attempt to have cases moved in order to make the process of defending the home more difficult for borrowers.

With all of the new federal regulations and laws that are coming out to help people in foreclosure and save the mortgage lending industry from itself, it can be difficult both for lending professionals and consumers to keep up. The following is a short update of new rules and laws being put into place by lawmakers and various federal agencies.

In July 2008, the Federal Reserve created a new category of mortgage loans in response to the subprime meltdown. These new mortgages are termed "higher-priced loans," and describe characteristics of the type of lending product that had been referred to as subprime mortgages. These new regulations went into effect on October 1, 2009.

The new Federal Reserve regulations dealing with higher-priced loans include protections for borrowers from lenders who make loans without regard to the ability to pay back the money borrowed, as well as prepayment penalties lasting longer than two years, and mortgages without escrow accounts set up.

Also, lenders are prohibited from engaging in a pattern of making loans to homeowners without taking into consideration their ability to repay the mortgage. Obviously, the lenders knew that they would be covered by the federal government if they made loans that would never be paid back, and the Fed is now attempting to limit this practice after the banks have received their initial bailouts.

The Department of Housing and Urban Development (HUD) has also released new regulations regarding the Good Faith Estimate (GFE) and HUD-1 settlement statement that are used in almost all real estate transactions. The new rules are designed to give more accurate disclosures to borrowers and make the paperwork more uniform.

The Good Faith Estimate will now be a standardized form, and lenders or mortgage brokers will be required to disclose the actual costs of the loan to borrowers. Previously, estimates were allowed to be used, but were often low-balled to make the loan look less expensive than it really was. As it got time to close the loan, the estimated fees would dramatically increase.

The HUD-1 settlement statement will also be standardized so that line numbers on the Good Faith Estimate match line numbers on the HUD-1. Loan term information will also now be included on the HUD-1, as well as detailed disclosures of escrow account requirements. A final page of the settlement statement will show how costs have changed from the initial GFE to the final closing.

As the housing crisis continues to get worse, we can all expect more regulations will be released, requiring more paperwork and disclosures to homeowners. Unfortunately, too few borrowers read and understand these disclosures in the first place, and the cost of following such laws are simply passed from the lenders onto the borrowers. It will still be up to homeowners themselves to make absolutely certain they understand how their mortgage product will affect their financial lives.

Many homeowners are becoming more aware of the defense to foreclosure that has come to be known as the "produce the note" strategy. This involves challenging the foreclosing lender or servicing company on its legal right to sue the borrowers in the first place. Essentially, if the bank can not prove that it owns the note and mortgage or deed of trust, it does not have the right to bring a foreclosure action against the homeowners.

However, not every challenge to produce the original loan documents has been successful, typically due to procedural errors or other easily correctable mistakes on the part of the borrowers. Homeowners should be aware of certain actions that have been taken in successful cases, so they have a better chance of having their own foreclosure thrown out of court for the bank's inability to prove legal standing.

First, if the homeowners are being sued by the lender in a judicial foreclosure state, it is important to deny in the answer to the complaint that the plaintiffs own the note and mortgage in the first place. This real party in interest issue can be raised through an affirmative action claim or by filing a motion with the court. However, if the homeowners do not raise the issue, the court will assume the issue of standing is not debated.

It is also important for homeowners to do their homework in checking the local land records for the property being foreclosed on. If there are documents recorded with the county indicating a different chain of title than the one the bank is trying to show through the lawsuit, the discrepancies may be enough to have the case thrown out until the foreclosing company can show it owns the note.

Banks will often submit unsupported affidavits when it will be difficult or impossible to produce the original note. But these documents can be challenged by the homeowners in their answer to the lawsuit. Simply having an officer of the foreclosing company state that it owns the original paperwork is not sufficient if it can not produce the note upon the borrowers' request.

Especially if there are other documents indicating another company may be attempting to collect on the mortgage, the issue of standing and who owns the original note become vital. If the court allows the lawsuit to move ahead without proof of standing, the borrowers may be in danger of being sued again by the correct party. Thus, it is important to keep and obtain any documents showing any other company's interest in the debt.

Finally, homeowners can demand that the lender produce evidence to show how, when, and whether the original documents had been assigned to the foreclosing party. Courts will be likely to look on this type of request as reasonable, especially if there are other questions of which company owns the loan or if there is other evidence (such as documents filed with the county) showing an incomplete chain of title.

In light of all the securitization and chopping up of rights to mortgages, the produce the note strategy of challenging the bank's right to bring a lawsuit against borrowers is becoming a more wide-spread defense to foreclosure. While it may not solve every homeowner's mortgage problems, it can delay a foreclosure by a period of months or years while the lender attempts to locate the relevant paperwork, time that the owners can use to save up money for moving expenses or to get back on track with payments.

Doing legal research can see like a difficult task for the average person. The law is written in a semi-foreign language where words and terms have vastly different meanings than the ones used in everyday communication.

On top of that, legal cases are being decided and indexed all the time, and it can be very difficult to find out what the current law is at any one time. New collections of cases and references to cases are published throughout the year.

Thankfully, the internet has made searching for court cases much easier in recent years. The following websites can be used to look up references to cases, decisions, as well as actual court documents, all without having to take a trip to the local courthouse or college law library.

Findlaw.com - http://www.findlaw.com/
NOLO.com - http://www.nolo.com/

US Code - http://www.findlaw.com/casecode/uscodes/
Code of Federal Regulations - http://www.findlaw.com/casecode/cfr.html
State Regulations - http://www.findlaw.com/casecode/state.html
State Statutes - http://www.law.cornell.edu/states/listing.html
State Statutes by Topic - http://topics.law.cornell.edu/wex/state_statutes

Supreme Court Case Opinions - http://www.law.cornell.edu/supct/index.html
Federal Court Case Opinions - http://www.law.cornell.edu/federal/opinions.html
State Court Case Opinions - http://www.law.cornell.edu/opinions.html#state

Bankruptcy documents - http://www.uscourts.gov/bkforms/index.html

There are also a number of books that describe how to do legal research in a law library or online. The most helpful one, in our recommendation, is Legal Research: How to Find & Understand the Law, by Stephen Elias and published by NOLO.

The following are some facts and statistics about the real estate market and the government's efforts in putting together effective plans to address the foreclosure crisis. Despite the government's programs, starting in October 2007, and continuing with the latest plan released earlier this year, the foreclosure rate has kept up its dramatic increase.

According to the Mortgage Bankers Association, more than one in every subprime mortgage loan was in foreclosure as of the fourth quarter of 2008. This is 13.71 percent of subprime loans, compared to prime loans in foreclosure at a rate of only 1.88% as of the same time.

Furthermore, more than one third of all subprime adjustable rate loans, as of the final quarter of 2008, were in a state of serious delinquency. This is more than three times the rate of delinquency for prime adjustable rate mortgages.

Under a new incentive program, Fannie Mae has begun paying attorneys who are able to qualify delinquent borrowers for loan modifications, repayment plans, or similar workout solutions as an alternative to foreclosing.

Due to the high rate of foreclosure, most workout plans are taking at least thirty days to be processed by lenders and servicing companies. Homeowners and those working for them should be aware of this significant time lag, especially if a foreclosure sale is on the horizon. It may be best to obtain a delay of any sheriff sale in order to apply for assistance without the threat of losing the home in a short period of time.

As early as October and December 2007, the US Treasury Department was putting together plans to solve the rising foreclosure rates on an industry-wide, voluntary basis. Unfortunately, as the number of people seriously behind in their mortgages kept increasing, no more resources were dedicated to assisting these borrowers, and delays led to more foreclosures.

Thus far, there have been at least five different programs to help homeowners stop foreclosure. These have been the Making Home Affordable Modification Program (HAMP), Making Home Affordable Refinance Program, Hope for Homeowners (H4H), HOPE NOW also known as the American Securitization Forum Plan, and Project Lifeline. Thus far, all have failed to seriously affect the foreclosure rate.

As foreclosures keep rising, the cheap money policies of the Federal Reserve, combined with the poor to nonexistent lending standards of the banks have proven to have far more negative impacts on the economy than any bureaucrat or regulator anticipated. Unfortunately, more cheap money policies have been some of the only fixes proposed and provided by the government, which has caused further downward pressure on the economy.

Obtaining a loan modification is the latest magical solution to foreclosure. One new government program after another has been released to help borrowers modify the terms of their mortgages to make them more affordable, and thousands of private companies have begun to offer assistance in qualifying for a loan mod. Obviously, if everyone who can make a payment was given such a program, the foreclosure crisis would have been solved before it began.

Unfortunately, though, the real world has foiled many of the designs of the mortgage industry central planners and regulators. All of the government programs have failed for a variety of reasons, including voluntary participation, lack of clearly defined rules for compliance by the lenders, and unaccountability. Even for the few mandatory participants, the same problems keep creeping up.

Homeowners should expect to run into at least three major issues when attempting to qualify for a loan modification. These problems should be considered before the borrowers decide whether to apply for a modification or not, as they may not apply to other solutions to foreclosure. Of course, some of them will apply to alternative plans to save the house.

First, homeowners will have to deal with unresponsive mortgage lenders and servicing companies. Loss mitigation departments of these large financial institutions have not dedicated the resources necessary to assist all of the borrowers attempting to apply for various solutions. This means that collection departments may call owners tens times a day, but any call made back to the loss mitigation department will not be answered in a timely fashion, if at all. Faxes containing personal financial information and application documents are routinely lost, as well.

Second, the documents governing the securitization process for the mortgage may restrict the number of loan modifications that can be offered. The pooling and servicing agreements (PSAs) may only allow a certain percentage of loans in a pool to be modified. Even if the borrowers can show financial ability to pay a modification plan, they may have to be turned down by the servicing company, unless the loan is moved out of the securitization pool.

A final consideration homeowners should make before applying for a mortgage modification is if they would require a principal reduction. Many loan mods would not be affordable for the long term without decreasing the amount the borrowers owe in total. However, any reduction of principal may be considered by the IRS as taxable income to the owners. This may result in a large, unaffordable tax bill that will cause the modification to fail is the borrowers can not make the monthly mortgage payment and pay the taxes for the forgiven debt.

While loan mods can be a great way for homeowners to modify their mortgages so they are more in line with the borrowers' current financial situations and market conditions, there are also a number of drawbacks. If the servicer takes too long to respond, the foreclosure will proceed anyway. If the PSA does not allow for any more modifications, qualified borrowers may be turned away. And if there is a large tax bill due to the modification, it may be impossible to pay the mortgage and the taxes.

The government's programs to help stop the foreclosure crisis were probably started with the best of intention. Good intentions, however, can not cover for economic ignorance and an unwillingness to face the facts of the housing market. Prices are declining and more people are facing foreclosure due to the poor lending decisions created by cheap easy money and the erosion of lending standards.

As well, many of the government's programs suffer from the same problems. Unfortunately, with each failure, the programs are not canceled. Instead, they are further funded, grow bigger, change names, or a similar plan with only superficial changes is layered on top of the old one. The old plan loses steam, while the next one, almost identical to all previous ones, is announced with far greater optimism than is deserved.

But the problems are never solved. Voluntary participation, unaccountability, lack of responsibility to do anything by the lenders or servicing companies, lack of penalties for not complying with the regulations, and all the power given to the banks are just a few of these problems. They have been the same complaints from consumer advocates and homeowners from the very first plan put in place by the government.

Servicing companies and lenders, for instance, have almost all of the negotiating power that borrowers do not have. When lenders are given the choice of participating in the voluntary government programs, compliance is often lacking and few resources are dedicated to meaningful loss mitigation efforts. The lender decides how much to participate in the plan and has all of the financial power.

The government programs, mandatory or voluntary, also impose few rules for compliance. While servicers have some responsibilities to negotiate with homeowners, the level of participation is often very lacking. Borrowers who have ever tried to communicate with a bank know how frustrating it is when the bank loses faxes numerous times and never returns phone calls, all to be turned down at the last second.

Even if the bank does absolutely nothing to help the borrowers, whether required to or not, how can the lender be held accountable? Unfortunately, it is only in the courts that the consumers can state their claims, and many borrowers try to negotiate for a loan modification or other solution in order to avoid going to court. Especially in nonjudicial states, going to court to enforce a potential negotiation plan may not make sense.

Court-mandated negotiations have also failed to materialize as a widespread solution to foreclosure, as the banks have been able to block legislation that would allow bankruptcy judges to modify the terms of first mortgages or reduce balances. Some states and certain courts, however, have begun to scrutinize foreclosure cases more carefully, which may work out in homeowners' favor more often.

Unfortunately, the problems associated with the government's programs to avoid foreclosure have far outweighed any benefits to the small number of borrowers who have received assistance. Three hundred billion dollars to help one borrower, as was the case with the Hope for Homeowners program, probably helped create more foreclosures than the one it fixed. The only real question is if more regulation and legislation is what is needed to fix the programs.

When the government gets involved in a particular segment of the market, it often creates distortion and waste, as well as providing services that may not be needed or desired by the target markets. Also, since there is no incentive to maximize returns or keep costs down, the programs can cost far more than the benefits they bring to one group or another. And worst of all, funding such central planning schemes is always involuntary.

The government's programs over the past few years to stop the foreclosure crisis have all been excellent examples of bad ideas with overly optimistic promises that soon failed. Many of these programs were designed to assist borrowers in negotiating with their lenders for loan modification plans or other solutions. While no homeowner was given the choice to fund the plans or not, the programs encouraged only voluntary participation by lenders.

No wonder they all failed. Homeowners and consumers in general were forced to pay hundreds of millions or billions of dollars to fund programs to stop foreclosure, while the lenders and mortgage servicing companies did not have to participate in actually offering assistance. More resources were diverted from the people who were struggling with their bills in order to pay bureaucrats to encourage lenders not to take advantage of borrowers.

All the while, the banks were also taking hundreds of billions of dollars in free handouts as their reward for taking advantage of borrowers. Blackmail and threats to destroy the economy if they did not receive one bailout after another convinced lawmakers to reward the banking industry for its moral hazard and poor lending decisions. As a consolation prize, homeowners facing foreclosure got robbed more and were shown a few half-hearted modification programs.

HOPE NOW, Project Lifeline, Hope for Homeowners, bankruptcy cram-down provisions -- all have failed to affect the high foreclosure rates and falling home values in any meaningful way. And even if the programs had not existed at all or had been funded at twice the level they were, very little would have changed. The fact that so many players in the real estate industry took advantage of the cheap money from the Federal Reserve now means that a correction will have to happen.

Now the newest program is the Obama administration's Making Home Affordable Modification Program (HAMP). Although this latest plan requires participation by some lenders and servicing companies, it is still facing some of the other problems which plagued earlier plans. There is little oversight, no accountability, and evasion of obligations under the plan by the mortgage servicers.

Can one more government program, department, or regulatory agency really save the country from an economic crisis caused by too much government involvement? Or are all these programs just excuses to give the feds and the banks more control over the economy while pretending to solve problems? Do we keep spending trillions of dollars to rewards the banks and hundreds of millions to help homeowners?

Homeowners facing foreclosure often receive the lawsuit paperwork in the mail and take either of two actions which will not help them escape the situation. Some frantically begin calling the lender or servicing company, attempting to work out a solution so that they can keep the home. Others will simply put the paperwork aside, not even opening the envelope and just hope for the best.

While calling the bank to begin negotiating for a loan modification, repayment plan, or other solution to foreclosure is a good idea, it should not be done at the expense of answering the lawsuit. The bank will have no problem opening discussions with the borrowers, all the while proceeding with the legal action and having the house sold. If the negotiations fail, the homeowners can be swiftly evicted.

This can occur because, if the borrowers do not answer the lawsuit or mount any kind of legal defense, the bank will obtain a default judgment. At that point, the bank can request that the home be auctioned off by the county at a sheriff sale. Although the bank can also cancel any sheriff sale, it will be very difficult for the homeowners to reopen the case and begin defending the home after the judgment has been entered.

Thus, it the homeowners do not provide an answer to the foreclosure lawsuit, the bank will file a motion for default judgment against them. The judge will usually grant this, since the borrowers' failure to file an answer is treated as if they do not disagree with anything the bank has claimed in the complaint. While it is usually a case of the borrowers not being aware of how the court system really works, the judge will usually feel that the owners have been given their day in court and passed on the chance.

Homeowners are also worried about having to pay something to file an answer to a lawsuit. In almost all cases, they will not have to pay anything to the lender during the lawsuit, even if there is a judgment for foreclosure. The home will be scheduled for a sheriff sale, at which time the house will be sold to pay off the judgment and any other liens. Usually, though, homes do not sell for the total amount owed, as there are few buyers, but this is one of the risks lenders take when making loans.

After the sheriff sale will be the eviction process. If the former owners have already left the house, the eviction will not really affect them. But if they are trying to remain there for as long as possible after foreclosure, the borrowers should make sure to keep on top of the process so they know when to move out. Calling the county sheriff is usually the best idea to find out when a lock-out will be performed on a particular property.

In almost all cases, homeowners should respond to the foreclosure lawsuit or contact an attorney to help them do this. If only to delay the final order of judgment against the home for a few months, the rewards can be much greater than any risks. Showing the bank that a real defense will be mounted to foreclosure can also persuade the lender to begin negotiating for other solutions to help the borrowers save their home.