4.2 The Cause of the Foreclosure

Once you have determined the client’s goals, the next step in defending a foreclosure lawsuit is to learn why the debtor fell behind on the note and to determine whether the debtor is or will soon be able to catch up on the missed payments and maintain all future payments that come due. Possible causes of default include:

Financial Irresponsibility. The client has the income and cash flow to pay the monthly note under its original terms but has chosen to spend the money on something else. Such clients may be living beyond their means and be overextended or suffer from poor money management and failure to prioritize their debt.

Temporary Hard Times. Determine if the problems have resolved themselves such that the client can now make payment on the note under its original terms. Possible causes of temporary inability to keep up with mortgage payments include (1) business closure, loss of hours, unemployment; (2) illness or health issues, medical expenses; (3) divorce or separation, family issues; or (4) other personal problems.

Permanent Hard Times. It may be that the client’s situation will never get better and payment of the note under its original terms is impossible. Possible causes may include (1) permanent functional disability; (2) terminal illness or an incurable condition; (3) advanced age; (4) lack of education or marketable skills; (5) loss of spousal income, including Social Security or other government benefits; (6) loss of dependent income, such as child support; and (7) monthly payments that have become unaffordable because an adjusted-rate mortgage has adjusted higher or the rising costs of homeowners or flood insurance.

Addiction. A true addiction must almost always be resolved or else satisfying the addiction will always come before saving the house. Addictions may be to substances (e.g., alcohol, drugs) or experiences (e.g., gambling, shopping).