One of the main laws related to real estate lending in Pennsylvania is the Mortgage Licensing Act, which requires any person or company in the business of mortgage lending or brokering to have a Pennsylvania license. The act also establishes the minimum standards for education, experience, and background checks to qualify for a license.
Another key law related to mortgage lending in Pennsylvania is the Homeowners Emergency Mortgage Assistance Program (HEMAP). This program helps homeowners who are facing foreclosure because of a temporary financial hardship, such as job loss or illness. HEMAP provides these homeowners with short-term loans if they are eligible to help them stay in their homes while they recover from their temporary hardship.
There may be many reasons why people might have disputes with a mortgage lender in Pennsylvania. Mortgage lending involves many technicalities and complexities. Lenders and servicers may exploit these to take advantage of mortgage borrowers in a number of ways. A few of them are as follows:
- 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: Under federal law, a mortgage servicer is required to evaluate a borrower’s complete loss mitigation application and notify a borrower of their options for loss mitigation within 30 days of receiving 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 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 change or refinance their mortgage. A person is likely to pay the fee but never receive the service
- A person guarantees a borrower they can stop a foreclosure or get the borrower’s loan modified. Guarantees of this type are never, in fact, available
- A person who is a stranger to their mortgage agreement may advise a borrower to pay them instead of their mortgage lender in exchange for a promise of some kind. A borrower should never pay a stranger for help with their mortgage
- 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 a person’s mortgage company claims to offer “government-approved” or “official government” loan modifications, which are non-existent
- 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 may 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 Pennsylvania 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 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 business that lends people money to fund their purchases of their homes. Banks, credit unions, and other corporate entities are in the mortgage business. Mortgage lenders also make loans that are secured by the equity that borrowers have in their homes. Borrowers may use the loan proceeds for various purposes, e.g., to fund a renovation project for their home.
Basically, a mortgage lender provides a certain amount of money to the borrower. The loan is secured by the borrower’s ownership interest in the home that they purchase with the loan funds.
The borrower pays the loan back over a period of years. The number of years the borrower has to repay the loan is part of their loan agreement. It is common for borrowers to repay their mortgage loans in full within 15 or 30 years. If the borrower fails to pay, the lender can foreclose on the borrower’s home.
The borrower also pays interest on the principal amount that they borrow. In addition, borrowers have to pay a host of costs associated with buying a home and taking out a mortgage loan. Also, most lenders require many buyers to purchase mortgage protection insurance for their mortgage loan under certain circumstances.
This insurance is designed to pay off the mortgage loan in full if the policyholder, i.e., the mortgage borrower, were to die before the loan is paid in full. Some MPI policies also offer coverage for a limited period if the borrower should be temporarily without employment or incapacitated after an accident.
Loan servicers are also important in the mortgage industry. Lenders sometimes pay a small percentage of the loan payments they receive from a borrower to a company that performs tasks related to loan management and collection for them.
Who Regulates Mortgage Companies?
In Pennsylvania, the state’s Department of Banking and Securities enforces Pennsylvania’s mortgage lending laws. This department’s responsibilities include regulating mortgage lenders and brokers and loan originators who operate in Pennsylvania.
In addition, a number of federal government agencies are involved in regulating mortgage companies and enforcing federal mortgage lender laws. The Consumer Financial Protection Bureau (CFPB) was created to serve as the main agency responsible for enforcing financial and consumer protection laws and regulations, including those that apply to mortgage lending.
The Federal Reserve Bank 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. These programs provide trillions of dollars in mortgage insurance for U.S. homebuyers. The FHA supervises Fannie Mae and Freddie Mac. These are federal programs that provide liquidity to the mortgage market.
Several federal laws and regulations govern the mortgage industry and give a number of federal agencies the authority to issue regulations. Some of them are as follows:
- Regulation Z of the Truth in Lending Act: Regulation Z provides borrowers with the guidance they should have to make informed decisions about interest rates, loan fees, and the terms of loan agreements.
- The Real Estate Settlement Procedures Act (RESPA): RESPA forbids the payment of kickbacks to real estate agents. It also 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 payment of fins and permanent exclusion from mortgage lending activity can be imposed as punishment for violations of these and other federal regulations.
What Happens if a Mortgage Company Makes a Mistake?
Mortgage servicers sometimes commit errors in servicing a borrower’s loan. The Federal Real Estate Settlement Procedures Act (RESPA) provides a process that a borrower may use to get the service to correct their errors. First of all, federal law gives the borrower a process for obtaining specific information about their loan account.
A borrower needs to send their servicer a letter informing them of an error they have committed. Or a borrower might ask for the information they wish to have. Federal law presumes that this letter is a “notice of error” or a “request for information.” It 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 has to answer a borrower’s notice of error depends on the type of error that a borrower reports.
A borrower wants to send their notice of error or request for information to the specific mailing address that the servicer provides expressly for this service. Or they might be able to send their notice of error to the lender online. A loan servicer’s website might provide information about where to send a notice. A person may always call the servicer and ask for the address.
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.
Can I Sue My Mortgage Lender for Negligence?
In some circumstances, suing a mortgage lender for negligence might be possible. However, every mistake of a loan servicer would not offer grounds for this type of lawsuit. Actions on the part of a lender or servicer that might amount to negligence would include failing to include terms that the lender and the borrower agreed on in the loan contract.
Or actions that amount to breach of a fiduciary duty might be grounds for a lawsuit for negligence. But 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 Pennsylvania?
Of course, one option a person always has 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. If a person plans to represent themselves in a small claims action, a local Pennsylvania lawyer would still be able to offer help.
A person would have to select the appropriate court in which to file their lawsuit. A person can sue for up to $12,000 in a small claims action in the Pennsylvania Magisterial District Court. A person can sue for more than $12,000 in a Pennsylvania court of common pleas.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
If you have a problem with your mortgage lender or servicer, you want to talk to a Pennsylvania mortgage attorney as soon as possible. Your home is important to you, and you do not want to put it at risk. LegalMatch.com can connect you to a lawyer quickly who will be able to guide you to the best resolution possible.
