Disclaimer: I’m a paralegal, not an attorney and cannot give you legal advice. Nothing on this website is meant to be legal advice, and there is no guarantee that the information on my blog will work for your individual situation. Please consult with an attorney if you have questions about your individual situation.
If this is your first visit to my website, welcome! My name is Christine Springer and I'm the founder of Desert Edge Legal Services and the author of the content on this site.
I got a call yesterday from someone who has been in stalled foreclosure proceedings for ten years.
I’m not judging anyone here. I went through this myself.
However, I believe the person in the property still does not have the money to pay the loan. The homeowner had someone else call on their behalf.
The homeowner had heard that if they got a securitization audit, that they could just go to court with the report, and because the report would show fraud, they’d get their house free.
I don’t want to spend the next ten years explaining this to homeowners again, so I’m going to say this early on:
THERE ARE NO FREE HOUSES IN FORECLOSURE DEFENSE.
THRE ARE NO FREE HOUSES IN FORECLOSURE DEFENSE.
THERE ARE NO FREE HOUSES IN FORECLOSURE DEFENSE.
Why? There are multiple reasons.
Securitization of Loans is Not Illegal
The process of bundling debt and selling it off to investors is not against the law. Securitization of debt has been around for a long time.
There are a lot of debt types that are securitized, like commercial real estate, car loans and student loans. It allows banks to free up their balance sheet and make more loans.
Securitizing residential mortgages is newer and the process was sloppy. The errors and mistakes during the multiple transfers of the loans means there are details overlooked, and this is where the homeowner gets most of their leverage.
Equity a/k/a Fairness
The legal principle of equity, generally understood by laypersons as fairness, is about not allowing people take unfair advantage of situations. Equity is about what is morally right, or fair.
The law is not going to allow you a free house just because the bank screwed up, intentional or not. You still borrowed money, and wiping out your debt is not fair to the person or entity you borrowed the money from.
The Banks Are a Powerful Lobby
Many government officials come from banks or hope to get a job with one after they are out of office. Government and the banks are enmeshed, and therefore banks have a lot of favor with the government and the court systems.
The Case Law Has Swung Very Far to the Right, in Favor of Corporations
The case law in the US has swung so far right, e.g., Citizens United and corporations have rights, making it much harder for Joe Average to persuade a judge to wipe off a lien.
A judge may stop a foreclosure but will probably stop short of wiping out the lien, which leaves the door open for the correct party to come forward and foreclose.
The Rule of Law
This is fundamental to a strong economy. It promotes fairness and equality, ensuring that all individuals and institutions are subject to the same laws and regulations. It also creates a stable and predictable environment that allows individuals and businesses to plan and operate with confidence.
Some other problems related to the 'free house' belief include:
Lawyers and Judges Won't Take Your Case Seriously
Don’t even bother making this argument pro se. You will be met with scorn. The judge will be pissed at you and think you are wasting his/her time. The argument that your loan was securitized and therefore fraudulent has probably been tried by many homeowners in the last recession and was probably unsuccessful.
If You Stop the Foreclosure, You Could Wind up in Limbo
Remember, there are two parts to a loan: the Note and the Deed/Mortgage.
If you convince a judge that the party foreclosing is not the proper party, the judge may prevent that party from foreclosing on you. This is entirely possible.
However, they will most likely stop short of wiping off the lien, also called quiet title.
You Could Be In Limbo for a Long, Long Time
Over the long term, if the bank can't figure out how to foreclose, it leaves the process in limbo.
This is not a good place to be, unless you like living with uncertainty related to your home. This creates a lot of stress and we all know stress takes it toll.
In the short term, stopping foreclosure may take the pressure off the homeowner.
I don't recommend you get stuck here. If you manage to stop the foreclosure, it's important that you work to get back on your feet and get out of default.
Taxes, Insurance, HOA Dues, Maintenance and Upkeep
If you can't afford your house payment, how will you keep the house in good condition?
You may also still be on the hook for HOA dues, property taxes and insurance.
Your lender may continue paying these, so you'll go further in debt.
You Come Across as Entitled
If you can't pay your bills, bankruptcy court is the place for you.
If you aren't prepared to go that route, expecting the court to wipe out your lien makes you look entitled. This does not help you.
The Solution: Get Out of Default ASAP
We are not in The Great Recession and it should be easier for people to manage their foreclosure problems. If you manage to fight off foreclosure, don't just sit there in limbo: do something about your problem.
Figure out what you want to do in your situation and take steps to make it happen.
If you need to BK, then do it. If you need help with strategy, get help. Talk to a lawyer about your options.
Don't sit in your home for a decade, broke and stuck in the victim mindset, while your house falls apart around you. Be proactive and get out of default.
Figure out how to improve your financial situation. Talk to a lawyer about your options. Get a plan together.