Depending on the circumstances, lenders may argue to limit borrowers in bringing claims that the lender-borrower relationship was fiduciary in nature.
However, borrowers can work with attorneys to explore their options in determining whether a fiduciary duty may have arisen in regard to carrying out loan agreement terms or was assumed by a lender due the scope of their control over a borrower. Bad faith — Lenders have an obligation to deal fairly with borrowers and handle loan agreements and relationships in good faith.
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Are you a new client? Please make a selection. Therefore, it is important to carefully review your mortgage lending agreement before signing the agreement. Thus, you should feel free to ask questions and voice any concerns that you might have to the mortgage lender, in order to prevent any of the aforementioned problems from occurring.
If you have a dispute with your mortgage lender, it is important that you first review your original mortgage loan document to fully understand your rights under the contract. Next, you should gather any other relevant documents related to the mortgage contract and the sale of the home, including: sales contracts, mortgage contracts, communications between brokers, lenders, real estate agents, and the purchaser, or any other legal documents.
After gathering all relevant documents and reviewing your original mortgage agreement, you should contact the mortgage lender and see if they can resolve the dispute that you have with them. This is an important step, as some contracts require that you exhaust all of your available administrative remedies before pursuing legal action against the mortgage lender.
It is important to keep good documentation of any and all communications that you make with the mortgage lender, such as any emails or letters that you send. Finally, if you are unable to resolve your dispute with your mortgage lender, then you may consider taking legal action against them. Typically, the claim that you will file against the mortgage lender will be based on a breach of contract theory, where you will seek to recover any economic losses that you may have suffered.
Additionally, breach of contract remedies may include remedies in equity, such as:. For example, in the case of an accidental foreclosure, the court may order that the foreclosure process and result be rescinded. As mentioned above, if your mortgage lender commits negligence, you may sue your mortgage lender. Examples of this can include where they negligently fail to include terms in the loan agreement that were agreed to by both parties, or if they breach their fiduciary duties.
Additionally, you may be able to sue your mortgage lender if they or one of their officers negligently made false representations in order to induce you into making an otherwise unreasonable loan. As can be seen, there are many disputes that may arise with a mortgage lender during the process of purchasing a home. Further, the real estate process is often a complicated process involving numerous parties. Therefore, it may be in your best interests to seek out a well qualified and experienced mortgage attorney to help guide you through the process of obtaining a mortgage and purchasing a home.
An experienced mortgage attorney can help you review loan documents, assist you in contract negotiations, as well as represent and file a legal claim on your behalf against the mortgage lender, should any disputes arise. Travis Peeler. Travis earned his J. Travis has written about numerous legal topics ranging from articles tracking every Supreme Court decision in Texas to the law of virtual reality.
In his spare time off from the legal world and quest for knowledge, this 3rd degree black belt and certified instructor aspires to work with various charities geared towards bringing access to entertainment and gaming to all persons. Jose Rivera. The law, however, was that the lender owed no special duty during the application and origination process.
Only when a commitment letter was issued was there the potential for the borrower to sue the bank under some theory of lender liability.
Things have changed a bit in recent years. Until the last two decades, banks that issued loans used to keep and service their loans. Now many lenders originate loans only to sell later securitize and sell them. Now lenders are potentially liable to borrowers and applicants under a wide range of legal theories including:. Banks will also attempt to add new and onerous conditions simply to force the borrower to walk away from the loan.
Is the loan commitment or promise to loan money oral? Please visit our cornerstone page on oral loan commitments. Many times a bank will renew demand notes or short term notes and then suddenly and for no valid reason demand a business owner pledge his or her home or sign personal guarantees. The beleaguered business owner is then forced to accept the onerous terms since there is no time to secure alternate financing. See also our cornerstone page on oral promises, failure to renew loans and lines of credit.
If the loan is part of a securitized portfolio commercial mortgage backed securities , the pooling and servicing agreements are often over pages.
Contained in the fine print are hundreds of clauses, usually always drafted in favor of the bank and against the borrower. It is entirely possible to be commit numerous defaults even though no payments, taxes or insurance payments were ever late.
Some lenders encourage borrowers to default simply so the loan can be transferred into special servicing. There is usually a promise that better terms can be negotiated once a loan is in default. Unfortunately, some lenders and servicers use negotiated or technical defaults as a way of acquiring the property for their own portfolio or generating millions of dollars in default interest and fees. There is good news for borrowers, however. Courts can readily distinguish between a payment default and a technical default.
If you feel backed against a wall, give us a call. We can help even the playing field and even turn the tide against aggressive lenders. Since , there have been hundreds of thousands of foreclosure cases filed in the United States.
As a result of this flood of cases is an evolving body of wrongful foreclosure case law. Loan documentation has become so complex and banks so inept that in many cases we find that banks have failed to comply with their own notice requirements or those established by state law or ordinance. Some courts have ruled that lenders must provide advance notice before calling a loan due or declaring a default.
This is especially true with demand notes that on their face suggest a lender can call the loan at any time. Virtually every loan document contains an acceleration clause. These provisions allow the lender to accelerate all amounts due under the loan.
The entire balance comes due instead of just the missed payment.
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