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Mortgage Lien Disputes

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What Is a Mortgage Lien?

A mortgage lien is a type of legal claim initiated by a lender against a borrower’s property in the event that the homeowner is unable to keep up with mortgage payments. If valid, a lien allows the mortgagor (usually a bank or mortgage lending institution) to take legal possession of the title to the person’s residential property. 

Mortgage liens are sometimes called real estate liens or property liens. Some liens are imposed by the court rather than the mortgage company; these are called “judicial liens” and may be difficult to challenge.   

What Are Some Common Factors with Mortgage Lien Disputes?

Mortgage lien disputes typically arise in situations where the property has changed ownership several times, or if multiple mortgages are involved. This can cause some confusion on the part of both the borrower and the lender. Also, multiple mortgages may entail that the borrower is already experiencing financial troubles and is having difficulty meeting monthly payments. Liens may also be connected with foreclosure alternatives.

The borrower may often have a legal dispute with the lender over the lien itself. For example, some factors in a mortgage lien dispute may include:

  • Whether the parties agreed that a lien would be an option in the event of loan default
  • Whether the lien agreement was signed and in writing or simply an oral agreement mentioned in passing
  • Whether the a different the original mortgage terms were actually violated

Other mortgage lien disputes can involve different creditors and other parties who are trying to impose a lien claim against the same property. An example of this is where a lien has been imposed by both a mortgagor and a construction company.

Is It Possible to Contest or Remove a Lien From Property?

There may be several different steps that the mortgage borrower can take to contest or remove a lien from their property. These can include:

  • Writing a letter to the mortgage company: sometimes the mortgage company may be willing to negotiate, especially if you’ve been a valued client for some time. For instance, you may be able to work out a different repayment plan
  • Bankruptcy: Filing for bankruptcy can sometimes delay or suspend legal proceedings involving a lien
  • Filing a Lawsuit: The borrower can sometimes contest a lien by proving that the lien is actually invalid or is in violation of contract terms
  • Negotiate with Lender: Lender and borrower can work out specific terms in the mortgage contract which specify whether a lien can be imposed, and under which conditions
  • Lien Waiver: Waiver basically prevents the mortgage company from being able to file a lien against the property (the lender gives up their right to do so). Instead, the company would have to find alternative measures for collecting the debt. Lien waivers may not be available in all situations, as the mortgage provider would have to agree to such an arrangement. 

Can I Sell My Property with a Mortgage Lien Existing on Property?

The law does not require that liens must be removed from the property prior to the sale of the property. However, the type of title you are providing the buyer will control whether you will have to remove the lien prior to the sale of the property. If you are providing the buyer with perfect title which generally comes under a general warranty deed, then you would need to remove the lien in order to deliver perfect title. If the property is sold or transferred without the lien being paid off or removed from the property, the lien will remain on the transferred property.

Do I Need a Lawyer If I’ve Been Involved in a Mortgage Lien Dispute?

Mortgage lien disputes are very serious matters and generally require the assistance of a qualified real estate attorney. With a lien claim, there is the possibility that the borrower may lose title to their property. However, working with a real estate attorney can help you understand your various options in terms of the mortgage and your home. An experienced lawyer can assist you during court proceedings and may be able to help you with negotiations. 

Photo of page author Kourosh Akhbari

, LegalMatch Legal Writer

Last Modified: 02-17-2015 02:07 PM PST

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