Have A High-Cost Mortgage? There May Be Special Protections Available To Help You Avoid Foreclosure

If the bank is threatening to take your home or has initiated the foreclosure process, one way to defend against this action is to invoke the special protections provided to people who have high-cost mortgages. These are loans that have higher than normal interest rates (among other qualifications) that may put borrowers at a greater risk of defaulting. Here's more information about this option and how it can benefit you.

High-Cost Mortgage Special Protections

To prevent banks and other lending institutions from taking advantage of customers, the Home Ownership and Equity Protection Act (HOEPA) was put in place to regulate the type of fees lenders can charge consumers, ensure debtors are notified about certain issues with these loans, and stop lenders from structuring the loans in harmful ways (e.g. requiring balloon payments).

In addition to these protections, some states have also put rules in place to help homeowners who may be facing down home foreclosures. These rules are designed to provide debtors with some assistance and advantages when it comes to working with lenders to reach a resolution that helps them remain in their homes.

In New York, for example, lenders must notify customers at least 90 days in advance that they are at risk of losing their homes before the companies can start foreclosure proceedings. New York also requires lenders to schedule settlement conferences with customers after they have invoked their rights.

These rules can be immensely helpful in keeping the bank from taking the home you've invested so much time and money into. For instance, the 90 day notice gives you time to get caught up on payments or refinance with another lender.

Alternative Defense Option

Unfortunately, not all states have high-cost mortgage protections beyond what is offered by HOEPA. However, another way to defend against foreclosure is to show the lender violated one or more of the program's rules. If the violation contributed to you falling behind or financially hurt you in other ways, the court may make adjustments in the amount you owe or force the lender to make concessions that let you keep your home.

For example, HOEPA prohibits lenders from charging late fees greater than 4 percent of your regular payments. If the lender consistently charged more and caused you to fall behind, the judge may force the lender to take off the excess fees and give you more time to get caught up on your payments.

There are other ways high-cost mortgage rules can help you avoid foreclosure. Contact an attorney for more information about this option.