You Can Beat An FHA Foreclosure Without The Crazy Cat Lady Style Antics Of Mark Stopa
In many ways, an FHA foreclosure is easier to beat than a conventional or subprime mortgage. The cool thing is that you don’t have to behave like a crazy cat lady to get your way like Mark Stopa.
My way will make the judge think you know your stuff. It also won’t get you in trouble with your state bar association like it did for Stopa.
What most people don’t know is that FHA loans have several unique rules. Subprime and conventional loans don’t have these stipulations when it comes time to foreclose. FHA lenders also have to comply with these rules or they cannot foreclose.
First of all, FHA loans have a unique stipulation that requires the lender to have a sit down meeting with you if you go into default.
This meeting has to take place within the first 61 days of default. The default begins on the first day you are late with your payment. Your mortgage should have a clause explaining this. However, if it’s not, don’t fret. It’s codified under federal law.
There is also another requirement that lenders have to comply with before commencing with an FHA foreclosure. The lender must notify all mortgagors on the mortgage and prove they did. Most of the time the lender only sends it to the primary borrower, not the co-borrower.
You can usually make this claim if you and your spouse divorced after consummating the mortgage. This is also codified under federal law.
The Proper Way To Do An FHA Foreclosure
Usually, a lender transfers the defaulted FHA loan to Ginnie Mae or HUD when the loan goes into default. This is for multiple reasons. First, so they can collect mortgage insurance. Secondly, they can make more money acting as servicer without the liability of ownership.
The former owner turned servicer commences with foreclosure on behalf of Ginnie Mae or HUD. That is assuming they did all the steps described in the previous section. Eventually, Ginnie Mae or HUD get ownership and evicts the homeowner. HUD or Ginnie Mae sell the property post-foreclosure using a “Special Warranty Deed.”
Only Ginnie Mae or HUD can issue a Special Warranty Deed.
However, there are cases where the lender won’t do this. Instead, they may elect to proceed with foreclosure in their name and not transfer the loan to Ginnie Mae or HUD.
It is very rare for a lender to commence on an FHA foreclosure without transferring the loan to Ginnie Mae or HUD.
An FHA foreclosure is usually not done this way for two reasons. If it is done this way it is because the lender dropped the ball or they are trying to pull a fast one.
First, FHA loans require borrowers to mortgage insurance (MIP) regardless of loan size. The lender is required to refund any MIP payments to the homeowner if the lender does not cash in the insurance.
Secondly, the lender can’t sell the property post-foreclosure without HUD approval nor can they sell the house with the homeowner still occupying it. This is also codified under federal law.
How To Stop An FHA Foreclosure
First, you need to remember that these are not affirmative defenses. Although the lender usually violates these laws hoping you or your attorney won’t know about them.
They are causes of action you can bring against them especially if the lender sells the property with the homeowner still occupying the property.
This means you have to sue or file a counter-complaint against your lender and Ginnie Mae or HUD.
Going on the offensive in an FHA foreclosure shows a lender you are serious. It also shows that you’re not going to put up with any of their crap.
In addition, filing a counter-complaint also drives up the litigation costs for the lender. Eventually, the case becomes cost-prohibitive for HUD that they will settle.
Contact MFI-Miami to learn more at 888.737.6344.