Borrowers present many different ways of dealing with financial distress and foreclosure. Some seek legal guidance before the foreclosure process begins, some seek help only when the foreclosure sale is imminent, and others do not seek assistance until after the foreclosure sale has been completed. Some borrowers have detailed records, including loan documents, evidence of payments, and notes of telephone conversations with the servicer. Others may have little information regarding the loan transaction and foreclosure beyond a jumble of bills, collection notices and unopened mail. Some homeowners have little or no understanding of the terms of their mortgage loan. Others may be confused by the loan modification or foreclosure process.
The most common reason for foreclosure is the failure to make payments when due. However, the causes of nonpayment vary widely from unemployment, divorce, or medical issues to rate resets, loan recasts, or loans that were simply unaffordable from the outset. More recently, the COVID-19 pandemic has challenged consumer advocates and the industry to develop specialized responses to financial consequences of the crisis.
Regardless of the unique circumstances of each borrower, there are general methods for analyzing foreclosure cases that will provide a quick preliminary evaluation of the case. When more time permits, a thorough analysis can be performed. This section outlines the first steps that an advocate should consider when a client is facing foreclosure. It provides an overview of claims and defenses that might be available to homeowners and highlights important questions to consider. The claims and defenses are discussed in more detail in later chapters.