A mortgage lender is a financial institution or other business that lends money to customers to use for purchasing real estate. Most Americans probably purchase their homes with funds from a mortgage loan.
Experts report that 62% of American homeowners have a mortgage. This makes the topic of disputes with mortgage lenders a matter of great interest to many Americans.
Banks and credit unions routinely offer mortgage loans to their clientele. A mortgage broker is another player in the mortgage marketplace. Mortgage brokers are licensed professionals, regulated by Texas and federal laws. They provide a financial service for a fee. They work with a variety of banks and credit unions, so they can help an individual buyer who is in the market for a mortgage loan.
A legal consultation in Texas would help a person understand mortgage loans and how they work.
Instead of the home buyer going to a number of different banks or creditors and filling out multiple applications for mortgage loans, they can hire a mortgage broker to find the best possible loan for their particular circumstances. A broker can present a borrower with several loan options when the borrower is shopping for real estate.
Depending on an individual’s income and credit rating, hiring a broker can help streamline the search process and sometimes get the buyer a better deal on a mortgage loan than they might find on their own. A mortgage broker probably knows more about the mortgage marketplace than the average home buyer.
What Laws Regulate Mortgage Lenders in Texas?
The Texas Department of Savings and Mortgage Lending (TDSML) regulates the licensing of mortgage lenders under the Texas Secure and Fair Enforcement for Mortgage Licensing Act (Texas SAFE Act).
The Texas law aligns with the federal SAFE Act. People and entities who originate loans are required to obtain a license through the Nationwide Multistate Licensing System & Registry (NMLS). They have to complete pre-licensing education, pass an exam, and undergo background checks.
The Texas Finance Code requires lenders to give borrowers clear explanations of loan terms, including interest rates, repayment schedules, and origination and other fees. If a loan is classified as a high-cost loan, additional disclosures are mandated by the Texas Home Loan Protection Act (THLPA). Lenders that offer high-cost loans must issue written notices at least three days before closing.
Texas enforces a mandatory waiting period before mortgage loans can be made final. A homeowner who wants a home equity loan or cash-out refinance gets a 12-day cooling off period from the time they receive their initial loan disclosure states to back out of the loan.
Texas law also requires a 12-day cooling-off period from the time borrowers receive initial disclosures. Additionally, lenders must provide a final closing disclosure no less than 3 business days before consummation of a home mortgage loan. This is also required by the federal TILA-RESPA Integrated Disclosure (TRID) rule.
The mortgage industry is heavily regulated by both Texas and federal law. A Texas lawyer would be able to explain these laws.
What Legal Issues Can Arise When Dealing With Mortgage Lenders?
Given the number of laws that regulate every aspect of mortgage lending, mortgage lender disputes are not uncommon.
Examples of disputes are as follows:
- Contract Disagreements: Mortgage lender laws require every mortgage loan agreement to be in the form of a written contract. The borrower should have a copy of their mortgage loan documents showing that they have signed it. If a borrower does not have a written mortgage loan agreement, they have cause for complaint against their lender.
- Lender Discrimination: Lenders are prohibited from discriminating against borrowers on the basis of such characteristics as race, gender, national origin, and others.
- Specifically, the federal Fair Housing Act (“FHA”) prohibits discrimination in residential real estate transactions based on national origin, race, gender, religion, disability, and family status.
- In addition, the Equal Credit Opportunity Act (“ECOA”) prohibits discrimination in credit transactions based on national origin, race, gender, age, religion, marital status, and the fact that the borrower’s income comes from a public assistance program.
- A borrower who believes that they have been denied a loan or charged higher fees and interest
- Predatory Lending: Some fraudulent lenders may target first-time, young or elderly borrowers and offer them loans with unreasonably and unnecessarily high interest rates, because this favors the lender and increases their income from a loan.
- Of, they may use bait-and-switch tactics at the time of the loan closing, providing a loan on less favorable terms than the borrower expected to get;
- Mortgage Fraud: In addition to predatory lending, other types of mortgage fraud may arise, including the use of fake documents or the use of fraudulent tax information. As a borrower, you should be wary of committing mortgage loan fraud by misstating, misrepresenting, or omitting information when trying to obtain a loan.
- Default and Foreclosure: When a borrower fails to make their mortgage payment on time as required by their loan agreement, the lender or servicer has the right to foreclose on the mortgage.
- This means that after certain legal steps are taken, the lender or servicer can take possession of the property that secures the mortgage loan and sell it. They then use the proceeds of the sale to pay off the mortgage loan. In some instances, if the proceeds of a foreclosure sale do not pay off the loan in full, the lender or servicer may still seek to collect the remaining unpaid balance from the borrower.
As can be seen, a borrower should carefully review a mortgage loan agreement before signing them. During negotiations, it is important that the buyer raise any questions or concerns they may have regarding the loan and the property involved. A borrower may want to have a lawyer review a mortgage loan agreement and help them understand all of its terms.
Lenders and servicers do mishandle loans and make mistakes in the accounting of payments. In addition to mistakes in accounting, they may send notices claiming false amounts are owed on a loan, and even failing to notify the borrower when the loan itself has been sold to another mortgage lender or servicer.
The selling of loans to mortgage servicers is a common practice, but a borrower should make sure that the servicer is working with the same loan agreement that the borrower concluded with the loan originator.
In 2015, the United States Supreme Court ruled that borrowers are allowed to rescind a mortgage for up to three years after it is taken out, if the lender does not properly notify them of various details about the loan, such as finance charges and interest rates.
Another player in the mortgage loan business is an individual’s real estate agent. Real estate agent liability may arise in various ways in connection with mortgage loans and real estate purchases, e.g., if a mortgage lender pays a kickback to an agent who refers potential borrowers to the lender.
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What Should I Do if I Have a Dispute With a Mortgage Lender in Texas?
If an individual comes into conflict with a mortgage lender in Texas, they want to consult a Texas mortgage lawyer. Their lawyer can analyze the facts of their situation and tell if they have been harmed by a mortgage lender.
They would be able to identify the individual’s claim as something that should be alleged as breach of contract or possibly fraud or misrepresentation. Or, they might be able to detect discrimination that violates the FHA or the ECOA. They can guide a person to the appropriate state or federal agency to file a complaint if that is an option.
Given the number of Texas and federal laws that apply to the mortgage lending industry, an individual wants to consult a lawyer if they have a dispute.
Can You Sue a Mortgage Lender for Negligence?
A mortgage borrower who experiences a dispute with a mortgage lender, servicer, or broker would be hard-pressed to make a case against the lender for ordinary negligence. Usually, a borrower has a mortgage loan contract with a lender, servicer, or broker.
Their relationship is defined by this contract. It says what each party to the contract must do to fulfill their contractual obligation. If they fail to perform as required in the contract, they may be liable for breach of contract. The damages that a borrower could recover in a lawsuit would be breach of contract damages.
Depending on the facts, a borrower might sue a lender, servicer, or broker for negligent or intentional misrepresentation. In general, misrepresentation happens when one individual makes a false statement, usually with the goal of inducing another person to enter into a deal of some kind. This results in the individual who relies on the statement experiencing harm.
Negligent misrepresentation is a type of fraud. An individual commits negligent misrepresentation when they make a false statement to another without knowing whether it is or is not true.
If an individual makes a false statement intentionally and while knowing full well that it is false, then they have committed fraud, or intentional misrepresentation. For example, a mortgage lender might represent to a prospective lender that they can get a mortgage loan with an interest rate of 4.5%.
The borrower takes on the loan and is then contacted by a mortgage servicer who tells them that they have purchased the loan, which has an interest rate of 6.5%, and that the monthly payment is quite a bit higher than the borrower had thought it would be. In fact, it might be unaffordable to the borrower who is now at risk of defaulting on the mortgage and losing their home.
This may be intentional misrepresentation and the borrower might have grounds for a lawsuit for fraud against the borrower.
Should I Hire an Attorney if I Have a Mortgage Lender Dispute?
If you have a dispute with a mortgage lender, servicer, or broker, you want to consult a Texas mortgage lawyer.
LegalMatch.com can connect you to a lawyer who knows Texas and federal mortgage law. Your lawyer will be qualified to review your situation with you and identify options you may have to get the remedy you need.
