Like any other mortgage, falling behind on a Federal Housing Administration (“FHA”) mortgage creates the risk of losing one’s own property. Someone who has fallen behind their payments can usually contest the possible loss of their property via the right of redemption, which is the right to make good on back payments plus related expenses. The process of foreclosure, however, seeks to eliminate a person’s right of redemption. In response, property owners have some possible ways to address a foreclosure situation. The options include negotiation, various legal challenges and bankruptcy.
Simple Negotiation
Although such an answer may seem obvious, some foreclosure situations can be solved by negotiation, whether the talks are handled personally or by an experienced advocate. If the debtor has most, if not all, of the mortgage payment deficiency available for payment, that could be a useful bargaining chip.
Legal Challenges
If a negotiated solution is not possible, then a person facing a foreclosure on an FHA loan can mount a legal challenge. Because FHA loans are subject to government regulations, one particular challenge is to assert that the FHA loan lender failed to comply with certain guidelines and requirements set out by the United States Department of Housing and Urban Development. The failure of an FHA lender to engage in pre-closure review with the debtor (i.e., a face to face interview, or to consider all loss-mitigation measures (i.e. a loan readjustment) can provide an effective defense to foreclosure.
Bankruptcy Option
Depending on the circumstances, the filing of bankruptcy may be an option, albeit an option of last resort. Bankruptcy is an involved process, and begins with someone getting the required credit counseling prior to filing a bankruptcy case in a United States Bankruptcy Court. Once the case is filed, a stay is granted, thereby stopping all collection like activities against the filer. In a Chapter 7 bankruptcy case, known as a liquidation, all of the debtor’s assets are frozen and identified for possible sale. Although a person’s home is usually exempt from liquidation, the foreclosing party can often get the stay lifted, and proceed with the foreclosure. In a Chapter 13 bankruptcy, a debtor with regular annual income, can pay off their debts via a payment plan.
Getting Legal Help
If someone is facing possible foreclosure, there are ways to save their property. Nonetheless, the above discussion should not be construed as giving legal advice. Instead, given the stress associated with such a situation, and the relative complexity of some options, such as bankruptcy or mounting a legal challenge to the mortgage holder’s conduct, consulting with an attorney is recommended.
