Mortgage Lien Disputes

Where You Need a Lawyer:

(This may not be the same place you live)

At No Cost! 

 What Is a Mortgage Lien?

Before defining what a mortgage lien is, it is helpful to first understand what exactly a mortgage is, and how it works. A mortgage is a specific type of security interest, which is attached to a property as a form of collateral. This is used for the repayment when someone borrows a loan from a bank or other lending institution, in order to pay for the property.

The most common example of this would be how many people take out a loan in order to buy a home. They generally do not have enough money to purchase the home outright, so a bank or other mortgage lender provides the money for the purchase. The mortgage is then placed on the property so that the borrower defaults on their loan, the lender has the right to take possession of the property in question.

A mortgage transaction consists of a promissory note and the mortgage, which may also be referred to as a “deed of trust.” A promissory note is a type of legal contract, the terms of which usually state that the borrower promises to repay a specific amount of money to the lender in a given time frame. The promissory note is what holds the borrower responsible for repaying the loan, even if the borrower sells the property.

A mortgage or deed of trust document acts as a lien on the property. What this means is that if the borrower does not repay the loan, the lender is allowed to force them to repay it by selling the property. The mortgage document is what guarantees that a financial institution will get their money back, even if it is not the actual borrower who makes the repayments.

There are many reasons why a homeowner may fall behind on their loan payments; as such, mortgage lawsuits between lenders and homeowners are relatively common. Generally speaking, mortgage lawsuits result in the homeowner losing their home, while the mortgage lender loses the mortgage and interest payments from the homeowner.

Homeowners lose their property because mortgage lawsuits result in the lender being granted a mortgage lien on the property. This mortgage lien then allows the lender to take the homeowner’s property in order to satisfy the terms of the loan, as previously mentioned.

It is important to note that mortgage liens can also be referred to as real estate liens, or property liens. In addition to the lender imposing a lien on a borrower’s property, the court may also impose its own lien on the property. This type of lien is known as a “judicial lien,” and is generally difficult to challenge. Two examples of judicial real estate liens would be construction liens, and tax liens.

What Is the Difference Between Voluntary and Involuntary Real Estate Liens?

As previously mentioned, a mortgage lien is a legal right or interest against a piece of property that is held by a lender. Under property law, the two main types of real estate liens are voluntary and involuntary. Mortgage liens would be considered as voluntary real estate liens. These are liens that are created voluntarily by a contract between a lender and a borrower. Mortgage loans are the most common type of voluntary lien. This is because the borrower executes a contract which gives the lender a legal right in the property that they are borrowing money to purchase.

The lender retains true ownership of the real property that is purchased with a mortgage loan, until the borrower pays off the loan. Once the borrower has paid off the loan, they gain full ownership rights to the property as the mortgage lien is removed by the lender.

An involuntary lien, or judicial lien, may be imposed on the homeowner by a federal, state, or local court. Although most judicial liens involve a lender enforcing their mortgage lien, other common judicial liens include tax liens and construction liens. They can also be referred to as non consensual liens. Tax liens are imposed on a homeowner’s property when they fail to pay federal taxes, or more commonly, property taxes.

Construction liens are also known as a mechanic’s lien, and occur when a borrower fails to pay for the renovations or improvements done on their property. The contractor may file a lien on the property until the payments have been made for their work. Subcontractors that were not paid by the contractor or homeowner in full may also file a construction lien on the property.

Other examples of involuntary liens include child support liens, and civil judgment liens. Child support liens may be imposed when a person fails to make their court-ordered child support payments. The receiving parent may have a court impose a lien on the property of the paying parent. Judgment liens are, simply put, liens that an individual may place on the real property of another individual. This is done in order to secure payment for the lawsuit that they won against that person.

Is It Possible to Remove a Lien From My Property?

If a lien has been placed on your property, the title to your property will be considered “clouded.” As such, it will most likely be especially difficult to sell your property. Property buyers frequently inquire as to whether the seller has a clean title to the property. When all of the lienholders on a property release their liens, a clean title will be created and the owner of the property will have full legal ownership. Because of this, it is important as a borrower to remove any liens that have been imposed on your property.

Some examples of ways in which a borrower can contest or remove a lien from their property include:

  • Paying Off All Loans: A borrower can remove any liens on their property by simply paying off all of the lienholders. Borrowers may be able to negotiate with the lienholders by sending settlement letters, or by negotiating payment of the lien. Although this may seem like a simple solution, it is important to remember that many borrowers end up in this situation because they are somehow unable to make their payments;
  • Filing For Bankruptcy: As a borrower, if you are unable to make your mortgage payments even with refinancing, filing for bankruptcy may be an option for you to consider. Bankruptcy could erase your mortgage loan. However, this will cause you to lose your house, as the lender maintains their right to foreclosure; and
  • Filing a Lawsuit: If you believe that the lien that has been placed on your property is invalid, you may have the option to contest the lien by filing a lawsuit against the lienholder. If the court determines that the lien is invalid, the lien will be removed from your property and your title will be cleared.

A mortgage lien release, or satisfaction of mortgage, is a legal document that is provided by the lender. This document states that the mortgage has been paid in full, and as such, there is no longer a lien on the property. Again, a lien is placed when the terms of a loan have not been satisfied. So, satisfying the terms of the loan is one way to obtain a mortgage lien release. The loan must be completely repaid in full, as agreed upon, and including any late fees or other payments as required by the lender.

Do I Need an Attorney for a Mortgage Lien Dispute?

If you are experiencing any sort of dispute related to a mortgage lien, you should consult with an experienced local mortgage attorney as soon as possible. An attorney can help you understand your legal options moving forward, and will represent you in court as needed. If you should find yourself considering suing your lender, your attorney can file the suit on your behalf and guide you through the process.

Save Time and Money - Speak With a Lawyer Right Away

  • Buy one 30-minute consultation call or subscribe for unlimited calls
  • Subscription includes access to unlimited consultation calls at a reduced price
  • Receive quick expert feedback or review your DIY legal documents
  • Have peace of mind without a long wait or industry standard retainer
  • Get the right guidance - Schedule a call with a lawyer today!

16 people have successfully posted their cases

Find a Lawyer