What Is a Mortgage Lender?
A mortgage lender is a person or business that loans money to people who use it to fund the purchase of residential dwellings. Usually, a mortgage lender is a bank, credit union, or other corporate business. Mortgage lenders also make loans to existing homeowners. These loans are secured by the equity the borrower has in their home. Homeowners may use the loan proceeds for various purposes, e.g., accomplishing a renovation project on their home.
In the most basic terms, a mortgage lender provides a sum of money to the borrower. The loan is secured by the borrower’s ownership interest in their home. The borrower pays the loan back over a period of years, commonly periods of 15 or 30 years. The number of years the borrower has to pay the loan back is part of their loan agreement.
The borrower also has to pay interest on the principal amount of the loan. A borrower also has to pay a number of costs associated with buying a home and taking out a mortgage loan. In addition, many lenders require a borrower to have a mortgage protection insurance policy in place. This insurance would pay off the mortgage loan in the event of the death of the policyholder and mortgage borrower before the mortgage loan is paid in full.
Another important player in the mortgage loan industry is the loan servicer. Loan servicers are companies that are paid a small percentage of loan payments by the lender in exchange for performing certain tasks after a loan has been made.
A servicer may collect monthly payments, pay taxes, maintain records during the life of the loan, and forward the portion of a loan payment that is owed to the note holder to them and others as well. The servicer for a loan that a borrower has may well be different from the bank or other entity that originally made and funded the loan.
Who Regulates Mortgage Companies?
The state of Illinois has some significant regulations that apply to mortgage lenders and protect borrowers.
In addition, several federal government agencies are involved in regulating mortgage companies and enforcing federal mortgage lender laws. One agency was created to serve as the main agency for enforcing financial and consumer protection laws and regulations. That is the federal Consumer Financial Protection Bureau (CFPB).
The Federal Reserve also supervises the banking industry, which, of course, includes banks engaged in mortgage lending.
The U.S. Department of Housing and Urban Development (HUD) supervises Federal Housing Administration (FHA) programs, which have provided $1.3 trillion in mortgage insurance to homebuyers. The FHA supervises Fannie Mae and Freddie Mac, which are mortgage market liquidity providers.
A number of federal laws apply to the mortgage industry and give several federal agencies the authority to regulate it. Some of them are as follows:
- Regulation Z in the Truth in Lending Act: Regulation Z gives borrowers the information that they need to make informed decisions about interest rates, fees, and credit terms;
- The Real Estate Settlement Procedures Act (RESPA): RESPA prohibits real estate agents from receiving kickbacks and prevents lenders from demanding that borrowers use a title insurer whom they designate;
- The federal Department of Housing and Urban Development (HUD): Both the CFPB and HUD act on reports of discrimination.
The penalties for violating federal mortgage regulations include the payment of monetary fines to permanent exclusion from the mortgage lending industry.
What Happens if a Mortgage Company Makes a Mistake?
Mortgage servicers sometimes make mistakes when servicing a borrower’s loan. The Federal Real Estate Settlement Procedures Act (RESPA) provides a process for the borrower to make the mortgage servicer correct the mistake. The law also gives the borrower a way to get specific information about their loan account.
A borrower needs to send a letter to their mortgage servicer informing them of the mistake they have made or the information they wish to have. This letter is presumed to be a “notice of error” or a “request for information.” A notice of error tells the servicer that they must correct the error, provide notification of the correction made, and give the borrower contact information for follow-up. Or, of course, the service may tell the borrower that no error occurred and the reasons why there is no error.
How much time the servicer gets to respond to a borrower’s notice of error depends on the type of error that a borrower reports. The servicer may generally extend a 30-day response period by 15 days if, within the 30 days, it informs the borrower of the extension and explains why there is a delay.
Borrowers with complaints about mortgage lenders should first contact the CFPB via the agency’s website. The website offers many tools to help borrowers with their complaints.
The Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), and the National Credit Union Administration (NCUA) also invite borrowers to alert them about mortgage lender complaints.
A borrower should keep careful track of the activities of their mortgage lender or servicer. If they find mistakes, their best bet is to use the “notice of error” process. If that is not successful, a borrower would contact the CFPB of their issue. If all else fails, a borrower would want to consult an Illinois mortgage attorney.
What Should I Do if I Have a Dispute with a Mortgage Lender?
Borrowers in disputes with mortgage lenders should first reach out to the CFPB via the agency’s website. On the website borrowers may find many tools to help them with complaints they may have.
The Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), and the National Credit Union Administration (NCUA) also invite borrowers to alert them about mortgage lender complaints.
A borrower should keep careful track of the activities of their mortgage lender or servicer. If they find mistakes, their best bet is to use the “notice of error” process noted above. If that is not successful, a borrower will contact the CFPB about their issue. If these efforts do not solve the problem, a borrower would want to consult an Illinois mortgage attorney.
Can I Sue My Mortgage Lender for Negligence?
It might be possible to sue a mortgage lender for negligence, but every mistake of a loan servicer would not offer grounds for a lawsuit for negligence. Actions on the part of a lender or servicer that might amount to negligence would include failing to include agreed-upon terms in the loan agreement or actions that would amount to breach of a fiduciary duty by the lender. These would be especially egregious actions.
If a lender or servicer were to engage in negligent or intentional fraudulent misrepresentation, this might give a borrower grounds to sue for negligence.
How Do I File a Complaint Against a Mortgage Company in Illinois?
One of the options is to try to negotiate a settlement of the dispute. Alternative dispute resolution procedures, e.g., mediation with the lender or servicer, are always an option. Of course, if these options do not produce a settlement, then a person would think about going to court. Even a foreclosure can be resolved by a mortgage settlement.
To file a lawsuit against a mortgage lender or servicer, a person would need to prepare a complaint. When the complaint is filed with the clerk of the court and served on the defendant lender or servicer officially, a lawsuit is underway.
A person would have to choose the court in which to file their lawsuit. A person can sue for up to $10,000 in an Illinois small claims court. If a person seeks more than $10,000 in damages, they would file in an Illinois circuit court.
If a person has a significant problem with a mortgage lender, they would want to have a lawyer handle a lawsuit for them.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you have been unable to resolve a dispute with your mortgage lender or servicer, you want to talk to an Illinois mortgage attorney right away. LegalMatch.com can quickly connect you to an experienced Illinois mortgage attorney who will make sure that your rights are protected.
