Survey Shows That 8 Out of 10 Foreclosures Can Be Avoided

In an unofficial survey of mortgage industry professionals we concluded that the vast majority of foreclosures are simply unnecessary. The consensus of professionals surveyed was two fold. The single biggest cause of foreclosure stems from a breakdown in communication between lender and borrower. The primary reason for the breakdown in communication is a resentment of the mortgage company by the borrower. In other words the borrower feels that there is no reasoning with the mortgage company and therefore no point in trying to work things out with them.  Once frustrated, many homeowners simply give up and wait for the inevitable.


What the homeowner often fails to realize is that there are a plethora of tools available to allow a struggling borrower to keep their home. By now most Americans have heard of the Forbearance/Loan Modification solutions available. As popular as these plans are, they are not the only option. In addition there is the ever so unpopular chapter 13 bankruptcy. While that option is both effective and readily available it is highly undesirable.


In resent years as a result of this foreclosure crisis several new home retention strategies have gained popularity. Chief among these are 2 legal maneuvers once only known to mortgage bankers and real estate attorneys. He first one has been nicknamed “Produce the Note”. It relies on the fact that most servicers of mortgage loans have no way of locating the actual signed mortgage note. The homeowner is challenging the validity of the mortgage company’s right to repossess the property.  It is widely accepted that this is a stall tactic at best. However, it does give the homeowner plenty of additional time to come up with a permanent solution to the problem. It also gives the borrower leverage that can be used to force the lender into negotiations. The end result is usually some sort of Loan Modification that gives the homeowner a fresh start in exchange for the signing of new documents.

The 2nd most popular strategy is the RESPA audit. RESPA stands for Real Estate Settlement Procedures Act. RESPA is a set of federally mandated guidelines that must be followed in connection with the sale and financing of real property. The gist of this strategy is to request and rummage through all the disclosures the borrower was required to sign. In all of that paperwork there is usually an error or omission. The borrower can then question the legality of the loan itself. This represents a juicy proposition for the home owner. In cases where an egregious error or omission exists, it may be possible for the borrower to sue the mortgage company for the balance of the loan. If successful, the homeowner simply walks away with the property free and clear.

There are a few other legal options available to the homeowner. These are more tricky maneuvers used by asset protection experts. Attorneys skilled at this level are usually too expensive for the average homeowner.

Thanks to the current economic climate banks are having trouble unloading the enormous inventory of houses that they already have.  Now local governments are now pressuring banks to maintain foreclosed properties. Given all these factors, the odds are clearly in the homeowner’s favor. The only reason that a borrower should consider walking away is a permanent lack of income. Barring that, there is almost always a way for the borrower to keep their home.

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