Every step of the process of owning a home and being foreclosed, from applying for the financing to being served with an eviction notice, is heavily regulated by the federal and state governments. While all of these laws are ostensibly designed to protect consumers and homeowners from lenders, the large amount of paperwork these laws create serve mostly to confuse borrowers and allow fraudulent bankers to prey on them.

The foreclosure process itself is no different, although it is almost entirely determined by state laws. Homeowners find themselves thrown into a complex legal system just when they are most unable to afford adequate legal representation. The bank can easily pay several thousand dollars to a local law firm in order to pursue a foreclosure, while the actual victims may just be struggling to put food on their family's table or pay the electric bill.

But mortgage brokers, loan originators, real estate agents, appraisers, title companies, banks, credit reporting agencies, financial investment firms, and foreclosure attorneys are all responsible for following the rules of the real estate and mortgage process. It is inevitable that someone along this chain will miss a disclosure, fail to provide a document, change terms without the borrowers being made aware, or otherwise violate one of the federal or state laws governing these procedures.

And when the bank finally sues owners for a foreclosure, all of these violations can work against the lenders and in favor of homeowners. The Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) are two federal laws that can be used to defend a lawsuit and point out mistakes in the original mortgage, as they cover aspects of a loan from the interest rate, annual percentage rate (APR), disclosure rules, and prohibitions against kickbacks, among many others.

Even if homeowners believe that their loan was done perfectly in accordance with all of the applicable laws (not very likely), simply raising defenses in court based on these laws can drag out a foreclosure case in court for months or years. And if the court finds the lender has violated the TILA, for instance, the entire loan can be rescinded, meaning the borrowers get back every penny they have ever paid since the mortgage was originated and the bank is unable to pursue eviction. Getting back thousands of dollars in monthly payments all at once would certainly help a family in a financial hardship.

But other defenses, while not carrying the weight of a potential rescission, would also allow homeowners to postpone a sheriff sale or eviction, and may even result in monetary damages or an injunction against the bank. This may give borrowers a long period of time in which they can negotiate for a mortgage modification, sell the house, or simply save up money to repair their finances before finally moving out.

There are simply too many laws for the banks to follow to be able to originate and service a loan in accordance with every law out there. While most lenders are fairly strict about following such regulations, the subprime mortgage boom allowed fly-by-night companies to originate one junk loan after another and Wall Street investment firms could never get enough. Now with the collapse of hundreds of mortgage companies, homeowners can and should begin contesting every aspect of a foreclosure that they believe could have been done incorrectly. After all, the burden of proof is on the bank to show it owns a properly executed loan which is in default, a burden of proof that many banks may no longer be able to meet.