In general, most people cannot afford to buy a home outright. Instead, they will usually have to take out some sort of loan to help them finance the purchase. A loan will allow the buyer to purchase the home at the closing, while simultaneously giving them more time to pay back the lending institution in smaller or more manageable increments over a certain period.

Although there are many different kinds of loans that a buyer can apply for, a mortgage loan is the most common type that is used when purchasing a home. A mortgage loan, also known as a “deed of trust”, is a written legal agreement between a lender and a borrower.

This agreement will essentially say that in exchange for borrowing money from a lender to purchase a home, the borrower promises to pay interest on the loan. They also promise to convey title to the lender in the event of a default.

What this means is that if a borrower fails to repay the loan or cannot keep up with loan payments, then the lender is legally allowed to take possession of their property. The lender can resell it at auction to recoup the amount that the borrower still owes on the loan.

As with any contract, borrowers are free to negotiate with lenders to set or change the terms of their mortgage loan agreement. There are also various types of mortgage lenders as well as mortgage loans that borrowers can choose from to meet their financial needs.

Given the number of options available, it can sometimes be difficult for a borrower to determine what type of lender or loan would work best for their particular situation. Therefore, you may want to consider hiring a local real estate lawyer or mortgage attorney to assist you with this process.

What is a Mortgage Lender?

A mortgage lender is a person or an entity that loans money to a borrower in exchange for interest payments on a residential or commercial property. In addition to providing mortgage loans to prospective homebuyers or real estate loans to homeowners, a mortgage lender may also offer other types of loan products and services.

For example, mortgage lenders sometimes sell mortgage-backed securities to finance the mortgage loans they provide to borrowers. Aside from selling mortgage-backed securities, these types of mortgage lenders may also offer debentures, common stock, and long-term notes.

Another example of a service that a mortgage lender may provide is arranging mortgage loan deals. For instance, mortgage brokers are sometimes categorized as mortgage lenders. While mortgage brokers are not directly involved in financing the mortgage loan, they do act as intermediaries between lending institutions and borrowers to “broker” or orchestrate mortgage loan agreements.

Also, it is generally recommended that a borrower hire an attorney to navigate the mortgage loan process. However, part of a mortgage lender’s job includes providing important advice to borrowers about mortgage loans as well as answering an individual borrower’s specific loan questions.

Are There Different Types of Mortgage Lenders?

There are several different types of mortgage lenders. Oftentimes, a borrower will select a mortgage lender based on their particular needs or financial situation. Some common examples of mortgage lenders include the following:

  • Direct mortgage lenders: A direct mortgage lender typically refers to a bank or another standard lending institution that works directly with the borrower. For instance, a borrower can apply for a mortgage loan by working with a mortgage banker. In contrast, a borrower cannot directly apply for a loan with a mortgage broker.
  • Correspondent mortgage lenders: Correspondent mortgage lenders are those that underwrite and fund mortgage loans with money that comes directly from the lender itself. The finance company SoFi is an example of a correspondent mortgage lender. In some cases, these types of lenders may also sell loans to larger lending companies who will then resell them to private or public investors.
  • Portfolio mortgage lenders: Similar to correspondent mortgage lenders, portfolio mortgage lenders also underwrite and fund their own mortgage loans. They may also provide their own loan services and/or products. The loans that these lenders offer are slightly different from the loans supplied by a traditional mortgage lender since they can be sold to investors for a profit.
  • Secondary market lenders: As discussed above, some mortgage lenders sell mortgage-backed securities and other financial instruments to finance mortgage loans. These lenders are known as secondary market lenders. This category of lender often includes mortgage loan programs sponsored by the federal government like Fannie Mae.
  • Subprime mortgage lenders: Subprime mortgage lenders work with individuals who have poor credit histories or cannot afford to purchase a property outright. These types of mortgage lenders have the ability to offer loans at lower rates or have implemented loan approval guidelines that make it easier for a borrower to secure a mortgage loan. However, borrowers must be cautious when working with subprime mortgage lenders because they are often associated with more risks than benefits.
  • Alt-a mortgage lenders: Similar to subprime mortgage lenders, this category of mortgage lenders provide mortgage loans to persons who have low credit scores, lack documents that prove they have a steady income, or cannot afford to make a down payment on a home. As with subprime mortgage lenders, there are considerable risks that borrowers should be aware of when working with an alt-a mortgage lender.

As previously mentioned, a borrower will want to choose a mortgage lender based on the type of loan they need and their current financial situation. For instance, a borrower who requires a mortgage loan to buy a house can simply work with a direct mortgage lender like a bank. On the other hand, if the borrower has a low credit score or lacks a steady income, then they may want to consider the risks of working with a subprime or alt-a mortgage lender.

Again, borrowers should consider hiring a lawyer to perform general due diligence and background checks on mortgage lenders before applying for a mortgage loan. While a mortgage lender’s interest rates or loan arrangements may seem like a good deal, a lawyer can review the fine print and warn a borrower about any associated risks or disadvantages. A lawyer may also be able to recommend a better mortgage lender and/or loan options.

What are Some Common Disputes with Mortgage Lenders?

One of the most litigated issues involving a mortgage lender is that of mortgage fraud. There are many ways for mortgage lenders to carry out mortgage fraud schemes. Some scams may depend on the type of property in a real estate transaction, while others are mainly centered around forged or fraudulent legal documents. Either way, the bottom line is that there are various mechanisms that mortgage lenders can use to defraud borrowers.

For instance, appraisal fraud is a common example of a mortgage fraud scheme. Appraisal fraud can occur when a property appraiser intentionally misrepresents or inflates the value of a particular piece of property (usually, a house).

The appraiser does this by assessing the property and creating a report that contains skewed calculations or figures. The report is then used as the basis of the real estate transaction since it provides the value of the house and thus the sale price. In such a scenario, the property appraiser is usually involved in the fraud scheme. They might partner with a mortgage lender to receive a cut of the benefits.

After the real estate transaction is complete, the mortgage lender and appraiser can collect their portions. Meanwhile, the borrower may start losing funds immediately, and if not, will eventually feel the effects of the scheme in one way or another.

A borrower can avoid being defrauded by a mortgage lender if they take the necessary precautions. For example, borrowers can prevent mortgage fraud by hiring a lawyer to review their mortgage loan documents and to negotiate any terms that seem like they would give the mortgage lender an unfair advantage.

A borrower can also hire a lawyer to perform due diligence on an individual mortgage lender or their company. A lawyer has tools they can use to run a background check and confirm a mortgage lender’s credentials, such as their license, education, and professional training. When a mortgage broker or a mortgage lending company uses fake credentials, it is known as “employment fraud.” In this context, employment fraud is just another type of mortgage fraud.

Additionally, the right kind of lawyer will likely have extensive experience in this industry and therefore may be able to spot a scam by simply reviewing a borrower’s mortgage loan documents. These are all steps that a borrower can take to protect themselves from mortgage fraud.

Should I Hire a Lawyer for Help with Mortgage Lender Issues?

Applying for a mortgage loan can feel overwhelming to new homeowners who are not familiar with the process. As previously mentioned, there are many different types of mortgage lenders and loan documents that contain lots of legal jargon. Thus, you may want to consider hiring a local mortgage lawyer if you have any questions about mortgages or are having issues with a particular mortgage lender.

A lawyer who has experience in handling mortgage lender issues can advise you on the best course of action to take to resolve your mortgage problem. Your lawyer will be able to answer any questions you may have about mortgage lenders or about the mortgage loan application process. If you need help with filing a lawsuit against a mortgage lender, your lawyer can also assist you with drafting the necessary legal documents and filing them in the proper court.

In addition, if you need to negotiate or renegotiate the terms of a mortgage loan, your lawyer will likely be qualified to provide these services as well.

Lastly, your lawyer will also be able to provide legal representation both in and out of court. For instance, if you need to appear in court to rectify a dispute with a mortgage lender or have decided to settle the mortgage lender dispute in mediation. Regardless of how you choose to resolve the dispute, your lawyer can help.