Lenders make mistakes or violate the law more often than you realize, which can hurt you financially and even lead to bankruptcy or foreclosure. In this article, we’ll break down the common reasons to sue a mortgage company, so you know what to look out for.
If you believe your mortgage lender has participated in misconduct and hurt you, you should speak with an attorney who specializes in mortgage problems. An attorney can help you sue your mortgage company, file mortgage complaints, and advise you on your case.
Contact Denbeaux & Denbeaux today to learn more about how we may be able to help you sue your lender and win.
Servicing Errors & RESPA Violations
Under the Real Estate Settlement Procedures Act (RESPA), mortgage lenders are legally responsible for managing loan accounts, including communicating any changes or updates clearly with borrowers. RESPA was created to stop unfair practices that increase costs to borrowers and to make sure lenders manage loans properly so borrowers aren’t pushed toward wrongful foreclosure.
Servicing errors themselves are not automatically illegal. If your lender makes a mistake, they have the opportunity to correct it. It is when the lender fails or refuses to take corrective action that the servicing error becomes a violation and is grounds to sue.
Some examples of common servicing errors include:
- Not responding to an information request or mortgage company complaint within the legal timeline
- Mortgage company not applying payments, or misapplying payments to the wrong account
- Mismanaging escrow funds
While servicing errors are not immediate grounds to sue, there are direct violations of RESPA that are. These include kickbacks, illegal referrals, dual tracking, and failing to disclose affiliated business arrangements. These actions are considered direct violations of the law, and when they happen, borrowers have the right to take legal action immediately to recover damages.
Mortgage Fraud and Misrepresentation
Mortgage fraud occurs when a lender or servicer intentionally misleads a borrower in a way that causes financial harm, often for the lender’s financial gain.
Examples of mortgage fraud include:
- Adding hidden fees or inflating charges on your loan statements
- Falsifying records
- Changing loan terms after you’ve already signed the paperwork
Misrepresentation occurs when a lender provides incorrect, incomplete, or misleading information. If it causes you harm, you can sue a mortgage company for misleading information.
Some examples include:
- Telling you that foreclosure won’t happen during modification review and then foreclosing
- Telling you that extra payments will reduce your principal when they’re applied to fees
- Not providing complete or accurate information about how loss mitigation options can impact your credit
If the lender’s actions harm you financially, you can take legal action by suing predatory lenders to recover your financial losses.
Negligence
Negligence is similar to fraud and misrepresentation because it deals with your lender’s actions causing you harm. However, the key difference with negligence lies in intent. In negligence, the lenders aren’t intentionally trying to cause harm. Still, if their actions or inactions cause you to suffer financial damages, you can sue your mortgage lender for negligence.
Some examples of negligence include:
- Forgetting to apply payments leading to fees or foreclosure
- Mishandling or ignoring loan modification or forbearance applications
- Failing to communicate important deadlines
If your lender’s carelessness caused you to incur fees, miss critical deadlines, or face wrongful foreclosure, you have the right to sue your mortgage lender.
Foreclosure Process Violations
New Jersey is a judicial foreclosure state, meaning the foreclosure process is handled by the court system. Because of this, there are strict laws and timelines that both lenders and borrowers need to adhere to. If your lender violates the legal foreclosure process, you may be able to sue your mortgage company.
This could include situations where your lender:
- Does not provide proper notice that they are initiating foreclosure
- Violates foreclosure timelines
- Does not provide you with loss mitigation options as an alternative to foreclosure, or properly review your application
When lenders ignore these rules, it can result in wrongful foreclosure. A foreclosure defense attorney can review your case, identify violations, and take action to protect your home.
Discrimination
Another reason you can sue your mortgage company is for discrimination. Under the Equal Credit Opportunity Act, lenders are legally prohibited from discriminating against borrowers based on race, national origin, religion, gender, marital status, age, or disability. If you believe you are being discriminated against throughout the lending or loss mitigation process, you may be able to sue your mortgage company.
Examples include:
- Being denied a loan or a modification for reasons unrelated to your financial situation
- Getting offered worse loan terms than other borrowers in similar situations
- Experiencing different treatment or delays throughout the borrowing process compared to other borrowers
While discrimination can be hard to prove in court, it’s not impossible. If you can show that your lender’s actions were based on discrimination and caused you harm, you can sue your mortgage company to recover damages.
Work with an Attorney to Sue Your Mortgage Company
Suing a mortgage lender can feel intimidating, which is why having an attorney on your side when suing a mortgage company can be extremely valuable. An experienced mortgage error lawyer can help you understand your options, like filing a complaint against your mortgage lender.
Contact Denbeaux & Denbeaux today to speak with an experienced attorney who can review your case, help you understand if you have grounds to sue your mortgage company, and support you through the legal process.
