Homeowner initiated mortgage litigation is usually the result of legal violations committed by lenders. Lending institutions are generally large organizations that commit intentional and unintentional criminal acts on a daily basis. While a majority of those crimes are unintentional, the lender still has a responsibility as a business to act within the law. Keep in mind that “unintentional” just means there is a lack of evidence to show intent by the lender to defraud their borrowers; it does not mean that every case of unintentional law breaking is entirely “unintentional”. Violations of the law that are commonly committed by lenders are violations of federal consumer protection acts, including The Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).
Many homeowners who have legitimate cause to pursue litigation often don’t because of misinformation or misconceptions they have about mortgage litigation. For starters, homeowners often assume that they simply can’t afford the services of an attorney. Homeowners forget that attorneys who practice real estate and financial law work with financially unstable clients on a daily basis. These lawyers understand the homeowner’s situation and in many cases can provide free or low cost consultation and an affordable payment plan. When put into perspective, the cost of an attorney is nothing when compared to the amount of time, money, and frustration avoided by being able to save a home.
Another reason why homeowners avoid litigation when they are facing foreclosure is because they think that any money they have should be put towards their suffering mortgage, not an attorney or other tactics to avoid foreclosure. What the homeowner in financial distress doesn’t realize is that the law provides financial protection to potential victims of lender fraud. Federal law and some state laws prevent lenders from pursuing mortgage payments while lender and borrower are wrapped up in mortgage litigation. This means that while a judgment from the court is pending, homeowners are required to make no payments to their lenders. Since this is a matter of federal law, lenders are also forbidden from reporting derogatory information about a borrower for failing to make mortgage payments while litigation is pending. Any attempts made by lenders to collect mortgage payments or other fees from their borrowers while a case is in litigation should be brought to the attention of the presiding judge through counsel. Once this information is brought to the attention of the judge, he or she may decide to issue a stern warning and order to cease collection attempts and/or fine the lender for failing to recognize the law.
Mortgage litigation is a serious matter, and judges are not very appreciative when it becomes apparent that an intentional abuse of the system is taking place. Only those who have a valid case should pursue litigation. Mortgage litigation is not meant to be used as a way to avoid making a few monthly payments, and taking a lender to court for this reason alone could land the borrower in hot water. To ensure one has a valid grievance, the advice of a real estate attorney should be sought. Borrowers who were issued their loans before the market fell and before the government began to increase oversight of the lending industry are more likely to be victims of lender fraud and not even know it. An attorney can review prior loan documents to make sure the law was followed to the letter, and if it wasn’t can advise their client on whether to pursue litigation or not.