There may be many reasons for disputes with a mortgage lender in North Carolina. 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 an 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 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 generally 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 or servicer, such as the following:
- Mortgage fraud: Involves providing false information on a loan application, potentially resulting in criminal charges. Mortgage lenders engaging in fraud may also be challenged by borrowers in defense against facing foreclosure;
- Wrongful foreclosure: A common issue arises when a mortgagor falls behind on payments, leading to the lender seizing and selling the property to settle debts. Unfortunately, lenders do not always act appropriately in these situations. Wrongful foreclosures can occur due to errors such as inaccurately processing payments or miscalculations of the amounts paid. In such a case, it’s best to hire an attorney who is an expert in foreclosure law;
- Predatory lending: Occurs when lenders target vulnerable buyers, offering loans with excessively high-interest rates or unreasonable terms;
- Discrimination: Prohibited under the Fair Housing Act and Equal Credit Opportunity Act, lenders cannot discriminate based on race, gender, religion, national origin, or other federally protected characteristics;
- Tax issues: Legal action against mortgage companies may also arise from their alleged incorrect computation of interest or taxes and their involvement in unlawful credit practices.
What Is a Mortgage Lender?
A mortgage lender is an entity, 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 Mortgage Companies?
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.
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 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.
North Carolina has adopted its North Carolina Secure and Fair Enforcement Mortgage Licensing Act (NC SAFE Act), which establishes the licensing requirement for mortgage bankers, brokers, and loan officers in the state. The North Carolina Commissioner of Banks (NCCOB) has the authority to issue licenses and regulate mortgage brokers, non-bank mortgage lenders, and the loan originators who work for these entities.
The NCCB also enforces the NC SAFE Act. Reportedly, mortgage lending by people who are not licensed under the NC Safe Act in North Carolina is a significant and continuing problem. Another common violation of the NC Safe Act in the state is fraudulent misrepresentation in connection with mortgage loans.
Yet another common violation is “impermissible net-branching.” Net branching is the practice of licensed mortgage companies allowing unlicensed mortgage companies to operate illegally under their licenses.
One requirement of the NC SAFE Act is that loan originators send the schedule of fees and costs for servicing loans to borrowers and to the NCCOB as well. A local attorney in North Carolina would be able to provide additional information about how North Carolina regulates mortgage lending.
What Should I Do if I Have a Dispute with a Mortgage Lender?
A borrower should keep careful track of the activities of its mortgage lender and servicer. If they find mistakes, their best bet is to use the “notice of error” process. If that is not successful, a borrower will contact the CFPB about their issue. If these efforts do not produce a good result, a borrower would want to consult a North Carolina 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. 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 North Carolina?
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 no more than $10,000 in a small claims court in North Carolina. People with claims for more than that amount should file in a district or superior court. North Carolina district courts handle cases for damages between $10,000 and $25,000. Superior courts are for cases seeking more than $25,000 in damages.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you have a problem with your mortgage lender or servicer that you have been unable to resolve, you want to talk to a North Carolina mortgage attorney. LegalMatch.com can quickly connect you to an experienced lawyer who is familiar with the web of laws that apply to mortgage loans. Your lawyer will be able to help you find a solution to your mortgage issue.
