There are numerous categories of legal issues that may arise when a borrower is dealing with their mortgage lender. These issues are often based on loan agreements between a borrower and a lender.
Loan agreement contracts, or mortgage contracts, are similar to other types of contracts. Because of these similarities, contract remedies will be available if one of the parties breaches the mortgage contract.
Categories of legal issues that may arise between individuals and mortgage lenders may include, but are not limited to:
- Mortgage fraud: When false or incorrect information is provided on a loan application, which may be charged as a criminal offense, mortgage fraud has occurred.
- If a mortgage lender commits mortgage fraud, the borrower can use that as a legal defense to foreclosure.
- Predatory lending: Mortgage lenders may target buyers who are more susceptible, for example, first-time borrowers or elderly borrowers, and offer them a loan at abusively high interest rates or offer unreasonable loan terms.
- Foreclosures: Legal issues commonly arise between mortgagors and mortgagees is when a borrower is behind on making their payments on their mortgage and it leads to a foreclosure.
- Discrimination: Mortgage lenders are prohibited from discriminating against borrowers based on certain characteristics under the Fair Housing Act and Equal Credit Opportunity Act, including:
- Race;
- Religion;
- Gender;
- National origin;
- Other federally protected characteristics.
All borrowers should review their mortgage lending agreements very carefully prior to signing them. In addition, an individual should have a Florida attorney review any Florida mortgage documents before they sign them to prevent disputes from arising in the future.
What Is a Mortgage Lender?
Mortgage lenders give funds to borrowers, who are called mortgagors, so that they can purchase a home or property. A mortgage lender may be a group, such as a financial institution like a bank or mortgage company.
Mortgage lenders can also be an individual person. In addition, there are government-sponsored mortgage lenders, including the United States Department of Veteran Affairs (VA) loans and the United States Department of Housing and Development’s (HUD) Federal Housing Administration (FHA) loans.
The borrower provides the home or property they purchased as security for the loan, usually in the form of a real estate lien, in exchange for funds to purchase the property. The mortgagor makes regular payments to their lender to satisfy the terms of the loan in order to pay off the lien.
Once the mortgagor completes all of their obligations under the loan contract, the title to the home will then be transferred to the mortgagor. There are also other parties that may be involved in the mortgage process.
One party is a mortgage broker or a third party that is hired by a mortgagor. This is different from the lender who provides the funding for the loan.
Brokers can help individuals research different loan options from different lenders and assist them in finding the best available loan. Another party that may be involved is a real estate agent.
Real estate agents help individuals find a property to purchase as well as work with the mortgage lender and broker. Buying a property or home is typically one of the largest investments that the individual will make.
In some cases, unfortunately, errors and disputes occur during the process.
Who Regulates Mortgage Companies?
The federal government regulates mortgage lenders. Because of this, lenders have to follow certain rules that are set out by the United States federal government.
These mortgage lender laws and federal rules provide that mortgage lenders have to treat all borrowers fairly and equitably. Generally, the federal government regulates the mortgage industry through federal agencies and congressional acts.
Acts that govern mortgage companies include:
- The Truth in Lending Act (TILA);
- Regulation Z;
- The Real Estate Settlement Procedures Act (RESPA);
- The Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under these acts, lenders are required to disclose information about mortgages so a consumer can make meaningful comparisons between different mortgages.
What Happens if a Mortgage Company Makes a Mistake?
It is important to know what steps to take when a mortgage company makes a mistake, as it may occur. A Notice of Error may be used to correct mistakes, including:
- Payments that are improperly credited or applied;
- An inaccurate payoff balance being provided;
- A wrongful foreclosure in violation of mortgage servicing laws or without proper cause;
- Not paying taxes or insurance;
- Charging unreasonable fees;
- Not recording the satisfaction of a mortgage.
When an error does occur, it is essential to keep accurate documentation. Once the lender receives the Notice of Error, they must do one of the following:
- Correct the error;
- Provide notice of the correction;
- Provide contact information so the borrower can follow up.
The provider of the loan may respond in one of several ways:
- Correct the error and confirm the correction was completed in writing;
- Investigate the error and explain why an error was not present;
- Request additional information;
- Informing the borrower that the company needs 15 business days to investigate and respond to the notice.
The Real Estate Settlement Procedures Act (RESPA) requires mortgage servicers to respond to a Notice of Error within five business days. They can take more time, usually up to 30 business days, to investigate and respond to the issue.
If an individual needs assistance understanding the response they receive from their mortgage lender, they should consult with a local foreclosure lawyer.
What Should I Do if I Have a Dispute with a Mortgage Lender?
If there are any disputes with a mortgage lender, it is essential for a borrower to review their original mortgage loan document so they can understand their rights under the contract.
This contract contains information such as the borrower’s rights and obligations under their contract and the obligations and duties of the lender. Borrowers should also review and keep other documents related to their property purchase and mortgage, including:
- Mortgage contracts;
- Sales contracts;
- Communications between:
- Real estate agents;
- Brokers;
- Lenders;
- The purchaser;
- Any other legal documents.
Once a borrower has reviewed their mortgage contract and has gathered the documents listed above, they should contact their lender to determine if the dispute can be resolved. This is an important step, as certain contracts require that the borrower exhaust all available administrative remedies before they can pursue legal action against their lender.
It is very important to keep detailed records of any communication with a lender, including emails and letters. If the borrower is not able to resolve their issue with their mortgage lender, they can consider taking legal action.
Can I Sue My Mortgage Lender for Negligence?
Yes, when a mortgage lender is negligent, they can be sued. If, for example, the lender negligently failed to include the terms agreed to by the parties in the agreement or if they breach their fiduciary duty, it can be held liable.
Borrowers may also be able to sue lenders if they negligently make false representations to induce a borrower to agree to what would be considered an unreasonable loan.
How Do I File a Complaint Against a Mortgage Company in Florida?
If a borrower needs to file a complaint against their mortgage company in Florida, they should consult with a local Florida lawyer. Typically, claims filed against lenders are based on breach of contract.
A breach of contract claim allows the borrower to recover the economic losses they suffered due to the lender’s error. Remedies that may be available in breach of contract cases that do not involve monetary compensation include:
- Ordering specific performance under the contract;
- Rewriting the mortgage contract to better reflect the agreement of the parties;
- Canceling the mortgage contract.
If, for example, an accidental foreclosure occurs, a court may order that a foreclosure process and result be rescinded. In some cases, a mortgage settlement may be reached between the parties and they can resolve their issue outside of the courtroom.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you believe you need to sue a Florida mortgage company, it is essential to consult with a Florida mortgage attorney. Your attorney can review any documents related to your mortgage and provide advice about your obligations and rights under the contract.
Your lawyer will also provide you with information on the best way to resolve your issue. LegalMatch is an excellent way to find a lawyer in Florida who can help you resolve your issue with your mortgage lender.
