There are numerous legal issues that may arise when dealing with mortgage lenders, commonly based on breaches of a loan agreement. Loan agreements are similar to other types of contracts. This means that all of the breach of contract remedies are available if one of the parties breaches the contract. Examples of legal issues that may arise when an individual is dealing with a mortgage lender may include but are not limited to the following:
- Foreclosures: The most common legal issue that arises between mortgagors and mortgagees is when a mortgagor, or homeowner, is behind on making payments on their mortgage, which leads to a foreclosure;
- Mortgage fraud: Mortgage fraud arises when false or incorrect information is provided on an individual’s loan application, which can be charged as a criminal offense;
- Mortgage lenders may also be charged with mortgage fraud, for example, if they forge a mortgage contract;
- Predatory lending: Mortgage lenders may target susceptible buyers, for example, first-time borrowers or elderly borrowers, and offer them loans at an abusively high interest rate or give them unreasonable loan terms; or
- Discrimination: Mortgage lenders are prohibited from discriminating against borrowers based on characteristics under the Fair Housing Act and Equal Credit Opportunity Act, including their:
- Race;
- Gender;
- Religion;
- National origin;
- Other federally protected characteristics.
It is important for an individual to carefully review their mortgage lending agreement before signing it. In addition, it can be helpful to have a California attorney review any California mortgage documents before signing, which can help prevent future disputes and issues from arising.
What Is a Mortgage Company?
A mortgage lender provides money to borrowers, called mortgagors, to purchase their home. A mortgage lender may be a group of individuals or a company.
Mortgage lenders are often financial institutions, such as banks or mortgage companies. There can be individual mortgage lenders.
In addition, there are government-sponsored mortgage lenders, for example the United States Department of Housing and Development’s (HUD) Federal Housing Administration (FHA) loans and the United States Department of Veteran Affairs (VA) loans. In exchange for the money that is borrowed, the borrower provides the purchased home as security for the loan, often in the form of a real estate lien.
The mortgagor then makes regular payments to the lender to satisfy the terms of the loan that was made in order to pay off the lien. Once all of the borrower’s loan obligations are fulfilled, the title of the home will be transferred to the borrower.
A mortgage broker may also play a role in the purchase of a home. In contrast to a lender who provides money for a loan, a mortgage broker is a third party who is hired by the borrower.
The broker assists the borrower by researching multiple loan options from different lenders and helping them find the best loan available. Another party that may be involved in a real estate transaction is a real estate agent who helps the borrower find a property to purchase as well as works with the mortgage lender and broker.
Buying a home is usually one of the largest investments that an individual makes in their lifetime. In some situations, however, there are errors that occur during the purchase process.
Who Regulates Mortgage Companies?
Mortgage lenders are federally regulated. This means that they have to follow rules that the United States federal government sets out.
These federal rules and laws require mortgage lenders to treat borrowers fairly and equitably. Generally, the federal government regulates the mortgage industry using a variety of federal agencies and congressional acts.
For example, the Truth in Lending Act (TILA) and Regulation Z are both acts of Congress that were passed in order to help protect consumers in their relationships with their lenders. Under these federal regulations, a lender is required to disclose information regarding their mortgages in a way that allows the consumer to make meaningful comparisons between one mortgage and another mortgage.
Other federal laws that regulate mortgage lenders are the Real Estate Settlement Procedures Act (RESPA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
What Should I Do if I Have a Dispute with a Mortgage Company?
An individual may have a dispute with their mortgage lender. In that case, it is important for them to review their original mortgage loan document to fully understand their rights under the mortgage contract. The original mortgage loan documents will contain relevant information, such as their rights and obligations under the contract and the duties and obligations of the mortgage lender.
An individual’s original mortgage loan documents will contain relevant information, such as their rights and obligations under the contract and the mortgage lender’s duties and obligations. An individual should gather any other documents that may be relevant to their mortgage contract and the same of their home, including:
- Sales contracts;
- Mortgage contracts;
- Communications between brokers, lenders, real estate agents, and the purchaser;
- Any other legal documents.
After an individual gathers all of the relevant documents and reviews their original mortgage agreement, they should contact their mortgage lender and see if they can resolve the dispute.
This is an important step because some contracts require that the homeowner exhaust all of their available administrative remedies before pursuing legal action against the mortgage lender. It is important to keep records of any and all communications that are made with the mortgage lender, such as any emails or letters that are sent.
If the individual is unable to resolve the dispute with their mortgage lender, they can consider taking legal action against them. Usually, the claim that will be filed against the mortgage lender will be based on a breach of contract theory, where the individual will seek to recover any economic losses that they may have suffered.
Breach of contract remedies may also include remedies in equity, such as:
- Canceling the mortgage contract;
- Rewriting the mortgage contract to better reflect the parties agreement;
- Ordering specific performance under the contract.
For example, if an accidental foreclosure occurred, the court may order that the foreclosure process and result be rescinded. If an individual has any questions regarding resolving a dispute with their mortgage lender, they should consult with a local California lawyer.
How to File a Lawsuit Against a Mortgage Company?
If an individual cannot resolve their dispute with their mortgage company, they may be able to file a civil lawsuit. If the mortgage lender has committed negligence, they can be sued.
For example, if the mortgage company negligently fails to include terms in the loan agreement that were agreed to by both of the parties or if they breached their fiduciary duties. An individual may also be able to succeed in suing a mortgage company if they or one of their officers negligently made false representations in order to induce the borrower into agreeing to an otherwise unreasonable loan.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you are having a dispute with your California mortgage lender, it is essential to consult with a California mortgage attorney. Your attorney can review your mortgage documents, advise you of the requirements and your rights under the contract, and help you resolve your dispute.
The real estate buying process can be complicated and can involve many different parties. Your attorney will be familiar with the parties involved and which ones may be liable for which issues.
Your attorney can help you throughout the home purchase process. This includes reviewing your loan documents before you sign them, assisting you in contract negotiations, and representing and filing a legal claim on your behalf against your mortgage lender should a dispute arise.
