When financing a real estate purchase with a mortgage, there is always a risk of default and the loss of the mortgaged property. The recent economic downturn has shown that sub-prime mortgages are particularly prone to such misfortune. But when a homeowner with a sub prime mortgage gets into trouble, there are potential options whether dealing with the mortgage itself, or the problems associated with a foreclosure. One of the first options that someone should consider is the possibility of talking to their lending institution in the hopes of adjusting a payment schedule and so on. Unfortunately, not all lenders are willing to work something out. In instances where negotiation is unsuccessful or not an option at all, there may be room the challenge the mortgage itself. For instance, because of a tendency for sub-prime lenders to charge higher fees and penalties, a homeowner may argue that such charges are onerous (burdensome) and may run afoul of a state’s usury laws. Moreover, many states have Unfair and Deceptive Acts and Practice (“UDAP”) statutes among their consumer protection laws. Sub-prime mortgages are also subject to the Truth in Lending Act. In turn, the Truth in Lending Act has been amended by the Home Ownership and Equity Protection Act (“HOEPA”). The purpose of HOEPA is to address high-rate home-equity loans, and it forbids certain abusive practices and requires additional disclosures from the lender to the debtor. The foreclosure process is also open to challenge. First, certain loans, such as federal Fair Housing Administration loans, require lenders to consider non-foreclosure options and at least discuss the problem with the borrower before a default situation has progressed to the foreclosure stage. Some states may have similar requirements.Options for Contesting a Sub-Prime Mortgage
Defending Against a Foreclosure
sMany states also give the debt holder a right of redemption, in which they can avoid the loss of their property by paying back their balance along with any foreclosure related costs. Nonetheless, such a right varies from state to state.
A debtor can also contest the foreclosure sale itself. For example, a foreclosure sale requires certain kinds of notification, and a reasonable foreclosure sale price. Irregularities with either can be a potential ground for having the foreclosure sale set aside.
Ultimately, the options available to a person will ultimately depend both on the facts of their situation and the laws of their state. Although the above information should not be considered as legal advice, someone experiencing trouble with a sub-prime mortgage or a foreclosure should consider consulting with an attorney. An experienced lawyer can evaluate the case and consider the various options available to their client.The Need For a Lawyer
