Second Home Mortgage Lawsuits

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 What Is A Mortgage?

A mortgage is the transfer of an interest in real estate as security for repayment of a loan. An example of this would be the real estate lien on your property through your bank or financial institution for money borrowed to pay for the property.

A mortgage transaction generally involves someone who is purchasing a home, borrowing money from a lender, and entering into a written agreement with the lender for that loan. The real estate then exists as collateral for the loan. If the homeowner defaults on the loan, the lender may foreclose on the property and have it sold in order to reduce the debt.

There are several different types of mortgages, including:

  • Jumbo Mortgages: Loans that exceed the loan limits set by corporations who buy mortgages from lenders. However, this type of mortgage also comes with a higher interest rate;
  • Two-Step Mortgages: Mortgages that are a combination of fixed rate and adjustable rate mortgages generally beginning with a fixed-interest rate followed by an adjustment. This leads to a new fixed rate for the remaining term of the loan. These loans are ideal for borrowers with bad credit scores;
  • Assumable Mortgages: Loans given to a buyer or assumed by a buyer. Assumable mortgages reduce monthly payments and allow you to save on closing costs. However, the disadvantage is that sellers generally sell their houses for more to make up for using this type of mortgage;
  • Sub-Prime Mortgages: Also ideal for buyers with bad credit scores, as they provide people with money. The disadvantage is that this loan is accompanied by a higher interest rate and more burdensome terms. Because rates and terms vary, buyers should research before settling on a lender for this type of mortgage;
  • Bi-Weekly Mortgages: Mortgages that provide buyers with an option to cut down on the length of the loan terms. However, this can be a poor choice for a homeowner who cannot make frequent payments because the payments are generally every two weeks, instead of the typical schedule of once per month;
  • Balloon Mortgages: Less common than other types of mortgages, it involves a substantial payment being required at the end of the term of the loan to cover the unamortized loan principal;
  • Fixed Rate Mortgages: The defining features of a fixed rate mortgage are that the interest rate and the amount that you pay each month remain the same over the entire mortgage term, traditionally 15 or 30 years. Lenders may offer variations on fixed rate mortgages, including five- and seven-year fixed-rate loans with balloon payments at the end of the mortgage term;
  • Adjustable Rate Mortgages: This mortgage has an interest rate that fluctuates according to the interest rate in the economy. In the beginning, the rate is generally discounted at a lower rate; over time, the rate will go up and down in response to the market. “Option Adjustable Rate Mortgages” allow the borrower to choose, on a monthly basis, whether to pay a minimum amount, an interest-only amount, an ordinary principal plus interest amount, or an accelerated payment amount; and
  • Interest-Only Mortgages: Allow the borrower to pay only the interest amount each month without paying any of the principal for several years of the loan. These mortgages can be troublesome, as eventually, the borrower must pay off the interest payments and principal. The shift in the amount of these monthly payments can shock many, and as such, they frequently result in foreclosures.

What Is A Second Home Mortgage?

Nearly all homeowners take out a mortgage when they first purchase a home. However, in many cases, the home buyer must take out a second mortgage for various reasons. This could be because they have been having difficulty making payments on the first mortgage, so a second mortgage could help them financially to keep their property.

Second home mortgages are taken out for many other purposes, such as paying off credit debt or for saving money in the future. This is because the interest from a second mortgage is often deductible, while credit card debt generally is not. Second mortgages can also be drawn for the home’s restructuring or remodeling.

What Are Some Of The Legal Issues Associated With Second Home Mortgage Lawsuits?

It is imperative to note that taking out a second mortgage is not without its risks. While they can be helpful financial tools, the reasons for a second home mortgage lawsuit can include:

  • Inability To Pay: The homeowner needs to ensure that they can meet the terms of the new mortgage contract. This requires careful planning as well as financial foresight;
  • Foreclosure: If the homeowner cannot keep up with payments, the home may be subject to foreclosure. As such, having a second or even third mortgage on the house can make the foreclosure proceedings considerably more complicated; or
  • Mortgage Fraud: Working with mortgage lenders can put the homeowner at risk of fraud, especially when working with an unknown or disreputable company for their second mortgage.

Legal remedies in a second home mortgage lawsuit generally result in the court allowing the mortgage lender to levy on the person’s property if they need to make up for payments. In other cases, a defense may be available for the homeowner. An example would be if the lender engaged in fraud or deceit during the signing phases.

What Are Some Of The Legal Issues Associated With Mortgage Lenders?

While mortgage lenders are subject to laws that were created to protect the borrower, there are instances in which a borrower may face legal issues when dealing with mortgage lenders. Some of the most common disputes include:

  • Contract Disagreements: Every mortgage loan document must be formalized into a written contract. As such, if a borrower was not presented with a written document or if they disagree with any terms within the contract, they may have a legal claim against the lender;
  • Lender Discrimination: Lenders may not discriminate against borrowers based on race, religion, gender, national original, and other protected classes;
  • Predatory Lending: Predatory lending occurs when lenders target first-time buyers, younger buyers, or elderly buyers to acquire loans that they cannot afford and in which they will likely default; or
  • Mortgage Fraud: Other types of mortgage fraud may arise, including using fake documents or fraudulent tax information.

Disputes with a mortgage lender generally require legal action. The following steps should be taken if you believe that you have a dispute with your mortgage lender:

  • Review your mortgage loan documents, and when necessary, have an attorney review the documents as well. These documents should contain relevant information that will be useful when filing and stating your claim against the lender; and
  • Collect all documents related to the mortgage and the lender, such as documents associated with the mortgage contract and communications with the lender throughout the lending process. This also includes sale contracts for real property, mortgage contracts signed, and other legal documents associated with your relationship with the lender.

Do I Need A Lawyer For Second Home Mortgage Lawsuits?

You should hire a mortgage lawyer if you need assistance with negotiating and reviewing terms for a second home mortgage.

Your mortgage attorney can help you understand your legal rights and options according to your specific state’s laws. An experienced attorney will also be able to represent you in court, as needed, should the issue result in a lawsuit.

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