There are many different types of legal issues that can come up when an individual is dealing with a mortgage lender. These are commonly based on breaches of the loan agreements between the borrower and the lender.
A loan agreement contract is similar to other kinds of contracts. Because of this, all breach of contract remedies will be available if one of the parties breaches the contract.
Types of legal issues that can arise with mortgage lenders may include, but are not limited to:
- Mortgage fraud: Mortgage fraud occurs when false or incorrect information is provided on a loan application, which may be charged as a criminal offense.
- Mortgage lenders can be charged with mortgage fraud, for example, if they forge a mortgage contract.
- If a mortgage lender commits mortgage fraud, a borrower may be able to use that as a legal defense to foreclosure.
- Foreclosures: The most common legal issue that arises between mortgagors and mortgagees is when a homeowner is behind on making payments on their mortgage and it leads to a foreclosure.
- Predatory lending: Mortgage lenders can target susceptible buyers, for example, first-time borrowers or elderly borrowers, and offer them loans at abusively high interest rates or provide them unreasonable loan terms.
- Discrimination: Mortgage lenders cannot discriminate against borrowers based on characteristics under the Fair Housing Act and Equal Credit Opportunity Act, including their:
- Race;
- Gender;
- Religion;
- National origin;
- Other federally protected characteristics.
It is very important for all individuals to review their mortgage lending agreements carefully before signing them. Additionally, it may be helpful for a Texas attorney to review any Texas mortgage documents before signing them. This may prevent future disputes from arising.
What Is a Mortgage Lender?
Mortgage lenders provide funds to borrowers, called mortgagors, to purchase homes. Mortgage lenders can be a company or can be a group of individuals.
It is common for a mortgage lender to be a financial institution, such as a mortgage company or a bank. In addition, individuals can also be mortgage lenders.
There are also government-sponsored mortgage lenders, such as the United States Department of Housing and Development’s (HUD) Federal Housing Administration (FHA) loans and the United States Department of Veteran Affairs (VA) loans. In exchange for funds that are borrowed, a borrower gives their purchased home as security for the loan, typically in the form of a real estate lien.
A mortgagor will then make regular payments to a lender to satisfy the terms of the loan that were made in order to pay off the lien. Once the borrower fulfills all of their obligations under the loan, the title to the home will be transferred to the borrower.
Mortgage brokers can also play an important role in the purchase of a home. A mortgage broker is a third party who is hired by a borrower in contrast to the lender that provides funds for the loan.
A broker can assist a borrower by researching different loan options from different prospective lenders and help them find the best loan available. A real estate agent is another party that may be involved in a real estate transaction who helps a borrower find a property to purchase as well as works with the mortgage lender and broker.
Purchasing a home is often one of the largest investments that an individual will make during their lifetime. In certain situations, however, errors do occur during the purchase process.
Who Regulates Mortgage Companies?
A mortgage lender is regulated by the federal government. This means lenders are required to follow rules that the United States federal government sets out.
The mortgage lender laws and federal rules require that mortgage lenders treat borrowers fairly and equitably. In general, the federal government regulates the mortgage industry with congressional acts and federal agencies.
The Truth in Lending Act (TILA) and Regulation Z are both acts of Congress that protect consumers who are in relationships with federal lenders. Pursuant to these acts, lenders have to disclose information about their mortgages so the consumer can make meaningful comparisons between different mortgages.
There are also other federal laws regulating mortgage lenders, including the Real Estate Settlement Procedures Act (RESPA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
What Should I Do if I Have a Dispute with a Mortgage Lender?
When an individual has a dispute with a mortgage lender, it is very important that they review their original mortgage loan document to fully understand their rights under the contract.
This document will contain relevant information, including the rights and obligations under the contract as well as the obligations and duties of the mortgage lender. A borrower should gather any documents that may be related to their mortgage contract and property sale, such as:
- Sales contracts;
- Mortgage contracts;
- Communications between:
- brokers;
- lenders;
- real estate agents;
- the purchaser;
- Any other legal documents.
Once an individual gathers all of these documents and reviews their mortgage agreement, they can contact their lender to see if they will be able to resolve the dispute. This step is important because certain contracts require that a homeowner exhaust all of the available administrative remedies before pursuing legal action against the mortgage lender.
It is essential to keep records of all communications that are made with the mortgage lender, for example, any letters or emails. If an individual cannot resolve their dispute with the mortgage lender, they should consider taking legal action.
Can I Sue My Mortgage Lender for Negligence?
If a borrower cannot resolve their dispute with a mortgage company, they may have the ability to file a civil lawsuit. If the mortgage lender engaged in negligence, they may be sued.
For example, if a mortgage company negligently fails to include terms in a loan agreement that was agreed to by all of the parties or if they breached their fiduciary duties, they can be held liable. A borrower may also be able to succeed in suing their mortgage company if the mortgage company or one of their officers negligently made false representations in order to induce the borrower into agreeing to what would otherwise be an unreasonable loan.
How Do I File a Complaint Against a Mortgage Company in Texas?
If an individual is not able to resolve their dispute with their mortgage company, they may consider taking legal action against them. As noted above, claims filed against mortgage lenders are usually filed based on a breach of contract theory.
This allows an individual to seek to recover any economic losses that they may have suffered. The remedies that may be available for a breach of contract in equity include:
- Rewriting the mortgage contract to better reflect the agreement of the parties;
- Canceling the mortgage contract;
- Ordering specific performance under the contract.
If, for example, an accidental foreclosure occurs, a court may order that a foreclosure process and result be rescinded. In some cases, a mortgage settlement may be reached, and the parties may not have to go to court to resolve their issue.
If the individual has questions about resolving their dispute with their mortgage lender, they should consult with a local Texas lawyer.
What Kind of Lawyer Do I Need to Sue a Mortgage Company?
When you are having a dispute with your Texas mortgage lender, it is important to consult with a Texas mortgage attorney. Your lawyer will be able to review your mortgage documents, advise you of the rights you have under the contract and your obligations, and advise you on the best way to resolve your dispute.
The process of purchasing real estate can be complex and may involve multiple parties. Your lawyer will be familiar with the parties that are typically involved and which parties may be liable for certain issues. LegalMatch can connect you with the right mortgage attorney in your area for your needs.
