There are many different types of legal questions or issues that may come up when a borrower borrows money from their mortgage lender for a purchase. These are typically based on the loan agreement between the borrower and the lender.
A mortgage contract, or loan agreement contract, is similar to most other categories of contracts. Due to this, the same contract remedies will be available if a party breaches the mortgage contract as for other types of contracts.
The types of issues that can come up between individuals and mortgage lenders can include, but are not necessarily limited to:
- Discrimination: Under the Fair Housing Act and Equal Credit Opportunity Act, mortgage lenders cannot discriminate against a borrower based on certain characteristics, including:
- Gender;
- National origin;
- Race;
- Religion;
- Other federally protected characteristics.
- Mortgage fraud: If incorrect or false information is given on a loan application, which may be charged as a criminal offense, mortgage fraud has occurred.
- A borrower can use a mortgage lender’s fraud as a legal defense to foreclosure.
- Predatory lending: Mortgage lenders may target buyers who are more susceptible, for example, elderly or first-time borrowers, and offer them loans at abusively high interest rates or offer them unreasonable loan terms.
- Foreclosures: Borrowers being behind on making their payments on their mortgage leading to a foreclosure is a common issue between mortgagors and mortgagees.
Every borrower needs to review their mortgage lending documents carefully prior to signing them. It is important to have a New York attorney review any New York mortgage documents prior to signing them to help ensure issues do not come up in the future.
What Is a Mortgage Lender?
Mortgage lenders, called mortgagors, provide funds to borrowers so they can purchase a home or property. Mortgage lenders can be individual people.
More commonly, mortgage lenders are groups, such as financial institutions, including mortgage companies and banks. There are also 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.
When the borrower borrows funds for a home or property, they use that as security for their loan, typically in the form of a real estate lien. The borrower will then make regular payments to the mortgage lender to pay off their lien and satisfy the loan.
When the borrower fulfills all of their obligations under the mortgage loan contract, the title to their home will then be transferred to them. In addition, other parties can be involved in the mortgage process.
One of these parties is the mortgage broker, who is a third party that is hired by the borrower. A broker can help a borrower look into different loan options from different lenders as well as help them find the best available loan.
A real estate agent is another party that may be involved in a real estate transaction. A real estate agent helps a borrower find a property they want to purchase in addition to working with the mortgage lender and broker.
Purchasing a home or property is usually one of the biggest investments that an individual makes in their lifetime. However, some errors and disputes arise during the purchase process.
Who Regulates Mortgage Companies?
Mortgage companies are regulated by the United States federal government. Because this is the case, lenders are required to adhere to certain rules provided by the government.
The federal rules and mortgage lender laws require that mortgage lenders treat all borrowers fairly and equitably. The mortgage industry is regulated by the government using congressional acts and federal agencies.
Congressional acts governing mortgage companies include:
- The Real Estate Settlement Procedures Act (RESPA);
- The Truth in Lending Act (TILA);
- Regulation Z;
- The Dodd-Frank Wall Street Reform and Consumer Protection Act.
These acts require mortgage lenders to provide information about mortgages to allow consumers to make meaningful comparisons between different mortgages.
What Happens if a Mortgage Company Makes a Mistake?
When a mortgage company makes a mistake, it can be frustrating. It is important for a borrower to know what steps they can take to correct the error.
A Notice of Error can be used by a borrower to correct many types of mistakes, such as:
- Not paying taxes or insurance;
- Charging unreasonable fees;
- 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 recording the satisfaction of a mortgage.
If an error does arise, it is important for the borrower to keep accurate documentation. If a lender receives a Notice of Error, they are required to do one of the following:
- Provide contact information so the borrower can follow up;
- Correct the error;
- Provide notice of the correction.
The loan provider may respond in one of several ways, including:
- Correct the error and confirm the correction was completed in writing;
- Request additional information;
- Investigate the error and explain why an error did not occur;
- 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 that a mortgage servicer respond to a Notice of Error within five business days. A lender can take more time, typically up to 30 business days, to investigate and respond to the notice.
If a borrower needs help understanding a response they receive from their lender, it is important to consult with a local foreclosure attorney.
What Should I Do if I Have a Dispute with a Mortgage Lender?
When borrowers have disputes with a mortgage lender, they should review their original mortgage loan document so they can understand their rights and obligations under that contract. The mortgage contract will also contain the duties and obligations of their lender.
A borrower should also review any other documents they have related to their property and mortgage, such as:
- Communications between:
- Real estate agents;
- Brokers;
- Lenders;
- The purchaser;
- Sales contracts;
- Mortgage contracts;
- Any other legal documents.
Once the borrower reviews their contract and the documents listed above, they should consult with their lender to determine if their issue can be resolved. This step is important, as there are some contracts that require borrowers to exhaust all available administrative remedies before they are allowed to pursue legal action, such as a lawsuit, against their lender.
Borrowers should keep detailed records of any communications they have with their lender, including letters and emails. If a borrower cannot resolve their dispute with the lender, they can consult with a lawyer and consider taking legal action.
Can I Sue My Mortgage Lender for Negligence?
When mortgage lenders are negligent, they can be sued in court. For example, when lenders negligently fail to include the terms that the parties agreed to or if they breached their fiduciary duty, they may be held liable.
A borrower can also sue a mortgage lender if it negligently made a false representation to induce the borrower to agree to an unreasonable loan.
How Do I File a Complaint Against a Mortgage Company in New York?
When a borrower needs to file a legal claim against their New York mortgage company, they should consult with a local New York lawyer. Many claims against lenders involve a breach of contract.
This type of legal claim allows a borrower to obtain reimbursement for economic losses they suffered because of the lender’s error. There may also be remedies in equity or non-monetary remedies, such as:
- Canceling the mortgage contract;
- Ordering specific performance under the contract;
- Rewriting the mortgage contract to better reflect the agreement of the parties.
In some legal dispute cases with mortgage lenders, the parties may reach a mortgage settlement and resolve their issues outside of a courtroom.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you need to file a lawsuit against your New York mortgage company, it is very important to speak with a New York mortgage attorney. Your lawyer will review your mortgage contract and any other related documents.
Your lawyer will then advise you of your rights and obligations under that contract, as well as advice on how to best resolve the issue. LegalMatch can help you find a lawyer in New York who can help you resolve your issue with your lender.
