Fighting Foreclosure to Protect Your Home and Family

Published January 2, 2021 by Bankruptcy Attorneys of Austin

If you are facing foreclosure, you should know that you have rights and that it is possible to fight to protect your home and family. You will need experienced foreclosure defense attorneys who can provide trusted advice and courtroom-tested advocacy. Fighting a foreclosure is often an uphill battle; but fighting is the best way to protect your rights. You may be able to defeat the foreclosure entirely, gain time to negotiate a compromise, or in some cases, bring a lawsuit for money damages based on breach of contract, wrongful foreclosure, or violation of fair debt collection practices.

Here are some of the most successful strategies for fighting a foreclosure. Which strategy might work best for you depends on the unique circumstances of your case.

Arguing Breach of Contract

Individuals buying a home generally sign two documents as part of the loan transaction — a promissory note and a deed of trust (often called a mortgage). The promissory note is the specific loan document that states the loan amount, the interest rate, the term, payments, and more. The deed of trust is an agreement that gives the lender security for repayment allowing, in general, the lender to seize and sell the property if the borrower fails to make the required payments on the note.

These documents are contracts binding on the lender. The lender's failure to honor all of its obligations under both the note and deed of trust can be a valid legal defense to a foreclosure. For example, in Texas, most deeds of trust require the lender to send what is generally called a "breach letter." Generally, these letters state that:

  • The borrower is in default for the stated reasons (such as non-payment)
  • The action or actions that the borrower can take to cure the default
  • A specific deadline for curing the default and
  • Failure to cure will allow the lender to accelerate the loan and foreclose

According to most deeds of trust, these breach letters MUST be sent before the lender can begin the process of foreclosure.

If the lender tries to accelerate and foreclose the loan before sending a breach letter, that is a violation of the deed of trust by the lender. Some judges will consider that grounds for preventing the bank from foreclosing. In the same manner, any other material breach of the loan documents by the bank can have the same result. A judge might stay a foreclosure proceeding and require the lender to “start over.”

Note that in some States, like Texas, foreclosures do not require the filing of a lawsuit by the lender. Thus, to legally assert that the lender has breached the note and/or deed of trust, the borrower must file a lawsuit asking the court to stop the foreclosure proceedings because of the lender's breach. In other states, lenders must file lawsuits in order to foreclose. In those jurisdictions, borrowers can raise contract defenses and others when they respond to the lender's lawsuit.

Arguing Unlawful Foreclosure Procedures

In addition to requirements that are set out in the loan documents, there are many federal and state laws that govern home loans and the process by which a lender can foreclose. If a lender violates these laws, then the lender has potentially committed wrongful foreclosure. As an example, under the Texas Property Code, § 51.002.b1, when a borrower is in default, a lender must send a written notice to the borrower stating they are in default for failing to make payments AND that the whole amount of the loan is due. This is called an "acceleration letter" and it must be sent to the borrower via certified US mail. In addition, a copy of the letter must be posted at the county courthouse where the property is located and where the sale will take place. The letter must give the borrower 20 days to pay the loan. After the 20-day cure period expires, then the lender must send another written notice called a “Notice of Foreclosure Sale.” This states the date, time and location for the foreclosure sale. This notice must also be sent via US certified mail, filed with the county clerk and posted at the courthouse. A sale can be scheduled 21 days after the 20-day cure period expires.

If a lender fails to follow these procedures exactly, then the lender has potentially committed unlawful or wrongful foreclosure. A judge may prevent the foreclosure from going forward if it can be shown that the lender has committed violations of this Texas statutory provision or of other state and/or federal laws. Because Texas does not require lenders to file suit to foreclose, borrowers must sue the lender in order to raise these statutory defences.

Borrowers should be aware that the "produce the note" defense is not effective. It is popularly assumed by borrowers that a lender must have the original promissory note to foreclose on a deed of trust or mortgage. However, courts in most jurisdictions have eliminated this defense by allowing lenders to use other evidence to prove the validity of the loan and the mortgage documents. Often, the documentation is as simple as an Affidavit of Lost Note. The "produce the note" defense is not effective in Texas. See Edwards v. Fannie Mae, 545 S.W.3d 169 (Tex.App.-El Paso 2017).

Arguing Unfair Debt Collection Practices

There are also a number of federal and state laws that govern unfair and fraudulent debt collection practices. Essentially, creditors, including lenders, cannot use improper methods when attempting to collect debts. Improper methods include using misleading and false statements and engaging in harassing, coercive and intimidating collection behavior. Examples include using abusive language over the phone, making false or misleading statements in notice letters and contacting a borrower's employer and/or family members to discuss the borrower's non-payment.

In addition, statutes give borrowers and debtors certain rights that must be honored by lenders. For example, under the federal Fair Debt Collection Practices Act -- 15 USC 1962, et seq. -- debt collectors must tell borrowers certain information up front, including that they are attempting to collect a debt, the debt amount, the current holder of the debt, the borrower’s right to dispute the debt, and other information. Borrowers generally have 30 days to dispute a debt and request verification and the lender must respond in writing. Failure of a lender to provide this information can subject a lender to civil and statutory penalties. Such might even be sufficiently egregious to allow a judge to stay foreclosure proceedings.

As noted, whether a borrower has a cause of action for unfair debt collection practices depends on the unique circumstances of the case. Some of the factual questions are whether the employees of the original lender engaged in the abusive collection practices, whether the note was assigned and whether the note was turned over to a collection agency.

Filing for Bankruptcy

Foreclosures can be prevented, at least temporarily, by filing for bankruptcy. When a bankruptcy is filed, pursuant to the "automatic stay" that is embedded in the Bankruptcy Code, all efforts to collect debts must stop. These efforts include foreclosures.

However, generally, bankruptcies do not protect collateral that is used to secure debts. In general, bankruptcy courts will allow creditors to seize such collateral. Home loans are examples of such secured loans -- the promissory note is secured by the home or land. As such, lenders can petition the bankruptcy court to "lift the stay." Bankruptcy courts routinely grant such petitions. This means that a bankruptcy filing will only temporarily prevent a foreclosure. However, a bankruptcy filing may be the best solution. An experienced debt relief attorney can help explain your options and how a bankruptcy might impact your home and life.

Fighting as a Method of Negotiating a Compromise

Despite the large array of strategies that can be used to fight, defeating a foreclosure is not easy. Lenders have teams of skilled attorneys and professionals that are generally careful about following the contractual and statutory procedures. That being said, even if you cannot prevent a foreclosure or win money damages, fighting is often the most effective method of negotiating a compromise with your lender. Such compromises might include:

  • Forbearance
  • Loan modification agreements that reduce your interest rate or extend the term of the loan
  • Additional time to negotiate a sale of the property to a third party (including a possible short sale)
  • Agreements by the lender to waive any claims related to deficiency
  • Transfers of the property to the lender without foreclosure which can potentially protect credit ratings and history
  • And more

The best way to protect yourself, your home, and your family is to seek professional help from foreclosure defense and debt relief attorneys.

Contact Our Skilled Attorneys Today

For more information about fighting a foreclosure or negotiating with your lender, contact our attorneys today for a free consultation.