Mortgage claims refer to the legal proceedings surrounding the mortgage loan of a home or other residential property. They typically involve disputes between the homeowner and the lending company.
These disputes can often result in the homeowner losing their property while the mortgage lender loses, or has already lost, mortgage payments.
Due to their nature, mortgage claims can be contentious and complicated.
Mortgage lawsuits usually lead to the lender being granted a lien, allowing them to possess some of the borrower’s property to compensate for the unpaid payments. If a borrower fails to pay their mortgage or deed of trust, the lender can initiate foreclosure.
What Are Some Legal Issues Associated With Mortgage Claims?
Mortgage claims often involve various legal issues and disputes due to the complex nature of mortgages and the valuable properties involved.
Disputes With a Mortgage Lender
A borrower may encounter a situation where the mortgage lender violates specific legal restrictions or duties, leading to a dispute.
For instance, a mortgage lender may engage in predatory lending practices, such as charging excessive interest rates or imposing unfair loan terms that the borrower cannot reasonably meet.
In such cases, the borrower may take legal action against the lender for not adhering to the regulations that govern mortgage lending.
A successful lawsuit may result in the borrower receiving compensation for damages or the lender being required to modify the loan terms.
Mortgage Loan Fraud
An example of mortgage loan fraud could be a borrower who intentionally provides false information on their loan application, such as inflating their income or misrepresenting their employment status.
This misrepresentation can lead the lender to approve a loan that the borrower may not be able to afford.
Alternatively, mortgage loan fraud may involve a lender or mortgage broker who deceives the borrower about the terms and conditions of the loan, causing the borrower to enter into an unfavorable agreement.
In either case, the party that engaged in fraud may face legal consequences, including fines, penalties, or even imprisonment.
Mortgage Loan Documents Issues
A borrower and lender may dispute the interpretation or enforcement of certain provisions in the mortgage loan agreement.
For example, a borrower may believe that the lender is charging fees not specified in the contract or that the lender is not following the proper procedure for handling late payments.
In such cases, the borrower may seek legal action to resolve the dispute and ensure that the mortgage loan documents are being followed correctly.
The court may interpret the agreement and enforce the terms as written or require the parties to modify the agreement to resolve the dispute.
Subprime Mortgage Issues
A subprime mortgage is designed for borrowers with poor credit or a higher risk of default.
In some cases, these loans may involve fraud or predatory lending practices.
For example, a lender may target vulnerable borrowers with high-interest rates, excessive fees, or loan terms that the borrower is unlikely to meet.
In such cases, the borrower may struggle to make their mortgage payments and eventually face foreclosure.
If it can be proven that the lender engaged in fraudulent or predatory practices, the borrower may be able to pursue legal action against the lender. This could result in modifying the loan terms, compensation for damages, or even mortgage cancellation.
Liens
A lien is a legal claim against a borrower’s property, giving the lender the right to take possession of the property if the borrower defaults on their loan.
When a borrower consistently fails to make their mortgage payments, the lender may obtain a lien on the property to secure their investment. This could lead to the foreclosure and sale of the property to satisfy the debt.
In some cases, the borrower may dispute the lien, arguing that the lender did not follow proper procedures in obtaining the lien or that the amount claimed is incorrect.
If the court finds in favor of the borrower, the lien may be removed or modified, potentially allowing the borrower to retain their property.
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What Are Some Common Legal Remedies Involved in a Mortgage Claim?
The most frequent legal remedy for mortgage claims is a damage award to cover losses.
Generally, the borrower is ordered to pay the lender the amount owed in nonpayment.
If the borrower fails to pay their mortgage or deed of trust, the lender can initiate foreclosure. However, the borrower is granted a grace period to pay their missed payments.
If the mortgage remains unpaid after the grace period, the lender may report the borrower to the credit bureau, negatively impacting their credit score and history.
New Debt Arrangements
Parties can sometimes agree on a new debt arrangement, possibly avoiding wage garnishment. The mortgage agreement usually states if creating a new debt arrangement is possible.
John and Jane are a married couple who took out a mortgage on their home five years ago. Due to unforeseen financial hardships, such as job loss and medical expenses, they have fallen behind on their mortgage payments. Their lender has threatened wage garnishment as a way to recoup the missed payments.
However, John and Jane’s mortgage agreement allows for the creation of a new debt arrangement. They approach their lender and propose a loan modification plan, which includes extending the loan term, reducing the interest rate, or temporarily lowering the monthly payments.
The lender, recognizing that this arrangement may be more beneficial than wage garnishment, agrees to the proposal. John and Jane can now continue making their mortgage payments under the new terms, avoiding wage garnishment and the potential damage to their credit.
Injunctions
An injunction can also be a legal remedy in mortgage claims, such as requiring the borrower to sell their property to repay the lender.
Susan is a homeowner who borrowed substantial money from a private lender to invest in her business. Her home secured the loan, and she agreed to repay the loan within five years. Unfortunately, her business failed, and she could not repay the agreed-upon loan.
The lender, concerned about the possibility of not recovering the money, files a mortgage claim and seeks an injunction to force Susan to sell her property to repay the loan. The court agrees with the lender and grants the injunction, ordering Susan to sell her home within a specified time frame.
Once the property is sold, the proceeds will be used to repay the outstanding loan balance, thus resolving the mortgage claim.
Do I Need an Attorney for a Mortgage Claim?
Due to the complexity of mortgage claims, especially when multiple parties are involved, or the borrower faces foreclosure, it is highly recommended to consult a skilled and knowledgeable mortgage attorney in your area.
An experienced real estate attorney can help you understand your rights under your state’s laws and your mortgage agreement. They can also represent you in court, providing guidance and support.
LegalMatch is an online legal matching service connecting individuals and businesses with local attorneys who can handle their legal issues. If you need a mortgage attorney, you can submit your case details on LegalMatch’s website, and they will match you with attorneys in your area who have experience handling mortgage claims.
The process is simple and confidential. You can provide information about your case, and attorneys who are interested in taking your case will review your details and contact you directly.
Use LegalMatch to compare attorneys and choose the one who is the best fit for your needs.
