There may be many reasons why people have disputes with a mortgage lender in Michigan. There are many technicalities to mortgage lending, and lenders can exploit these to the disadvantage of borrowers in many ways. A few are as follows:
- Failing to Stop Preauthorized EFTs: Electronic fund transfers are known as “EFTs.” Mortgage lenders sometimes fail to stop the electronic payments when a loan account is closed. This means that a borrower is charged when a payment processing attempt is made while there are insufficient funds in their closed account;
- Charging Borrowers Unauthorized Fees: Mortgage lenders and servicers often charge and even overcharge borrowers fees for services that are not authorized by their mortgage loan agreements. For example, they might charge for home inspections or broker price opinions that are not necessary and not authorized by the terms of a borrower’s loan agreement;
- Failing to Review a Borrower’s Loss Mitigation Application in 30 Days: Federal law requires mortgage lenders and servicers to evaluate a borrower’s complete loss mitigation application and notify a borrower of their options for loss mitigation within 30 days of receipt of the application. Violations are common;
- Incorrect Handling of Partial Mortgage Payments: The law requires loan servicers to take one of the following actions when they receive a partial mortgage payment from a borrower: They may credit the payment, return it to the borrower, or hold it in an “unapplied funds account.” Examiners found that, in some cases, servicers put these payments in borrowers’ escrow accounts instead of returning them to the borrower or crediting them to borrowers’ next monthly payment;
- Failing to End Payments for Private Mortgage Insurance (PMI) on Time: For borrowers with PMI, lenders and servicers are required to automatically terminate PMI payments as soon as the mortgage loan’s principal balance reaches 78 percent of the original value of the property. Experts report that often, a lender or servicer’s data is inaccurate, and the PMI is not terminated when it should be.
A borrower may have other, more serious issues with a mortgage lender, servicer, or other person, such as the following:
- Mortgage Fraud: Mortgage fraud on the part of lenders or others may be perpetrated as follows:
- A person may ask for payment in advance to get a borrower’s mortgage company to modify, refinance, or reinstate their mortgage. A person is likely to pay the fee and never receive the service;
- A person guarantees a borrower they can stop a foreclosure or get the borrower’s loan modified. There are never any guarantees of this type available in fact;
- A may advise a borrower to pay them instead of their mortgage company in exchange for a promise of some kind. A borrower should never do this;
- A company may pressure a borrower to sign over the deed to their home or to sign other paperwork that a person has not had the chance to read and understand;
- A company other than your mortgage company claims to offer “government-approved” or “official government” loan modifications.
- A company or person that a borrower does not know asks for personal financial information either online or via the telephone. A person should never provide this information to someone they do not know;
- Wrongful Foreclosure: Foreclosure can come about if a borrower falls behind on their mortgage payments. In foreclosure, the lender takes possession of the borrower’s home and sells it to pay the mortgage debt. Lenders do not always act legally in the course of a foreclosure. Wrongful foreclosures can happen because of errors in processing payments or miscalculations of the amounts paid. If a person is threatened with foreclosure, they want to consult a local Michigan attorney;
- Predatory Lending: Predatory lending takes place when lenders target financially vulnerable buyers, offering loans with excessively high-interest rates or other unfavorable and unreasonable terms;
- Discrimination: The federal Fair Housing Act and Equal Credit Opportunity Act prohibit lenders from discriminating in their lending on the basis of race, gender, religion, national origin, or other federally protected characteristics;
- Tax, Interest, and Other Credit Issues: Legal action against mortgage lenders and servicers may also become necessary when they incorrectly compute interest or taxes or are involved in other illegal credit practices.
What Is a Mortgage Lender?
A mortgage lender is a person or business that loans money to people to finance the purchase of residential dwellings. In many cases, it is a bank, credit union, or other corporate entity. In some cases, however, it might be an individual or group of investors.
In the most basic terms, a lender provides a sum of money to the borrower, who then proceeds to pay it back over a period of years. The borrower also pays interest on the principal amount owed. A borrower also has to pay a host of costs at the time they borrow the money. 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. Some MPI policies also offer coverage for a limited time if the borrower becomes unemployed or unable to work due to disability after an accident.
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 in order to perform 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 the Mortgage Companies?
Several federal government agencies regulate mortgage lenders and servicers and enforce federal mortgage lender laws. One agency was created to serve as a 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 the 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 the relevant regulations 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.
Borrowers with complaints about 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 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.
In Michigan, the Department of Insurance and Financial Services is responsible for the regulation of mortgage lenders, brokers, and servicers. In addition, Michigan has numerous laws relating to the mortgage lending and servicing industries.
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 their servicer a letter 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.
However, a 15-day extension is not allowed where the borrower’s notice of error concerns a payoff statement or specific errors in connection with a foreclosure.
A person should be sure to send their notice of error or request for information to the specific mailing address that the servicer designates for this purpose. Or they might be able to send their notice of error to the lender online through email or a secure messaging system. A loan servicer’s website might provide information about where to send a notice or a person may call the servicer and ask.
What Should I Do if I Have a Dispute with a Mortgage Lender?
One place to start if a person wants to get a mortgage to finance a home purchase or to ask questions if they have an issue with a mortgage is the federal Department of Housing and Urban Development (HUD). Housing counselors are available through a HUD-approved agency. The goal of these counselors is to help borrowers. A person can visit the HUD website at www.hud.gov to learn how to contact a counselor.
Another good option is to contact a Michigan mortgage attorney for advice as to how best to proceed.
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. 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 fraudulent misrepresentation.
How Do I File a Complaint Against a Mortgage Company in Michigan?
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 $7,000 in the small claims division of a Michigan district court. A person can sue for up to $25,000 in a district court. Cases in which a person seeks more than $25,000 belong in a Michigan circuit court.
Mortgage lending and servicing is a complex business and there are many laws, both federal and state, that apply. It would probably be best for a person to contact a Michigan mortgage lawyer if they have a problem with their mortgage.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you have a problem with your mortgage, you do not want to take risks. You need reliable information. You want to talk to an experienced Michigan mortgage attorney. Your investment in your home is important. LegalMatch.com can connect you to a lawyer who can help you protect it. Do not take chances with your mortgage; talk to a lawyer as soon as possible.
