Homeowner Protection Laws. Should You Sue Your Lender?

Legislators are telling you that they have seen enough fraud committed by the mortgage banking industry, and they have passed homeowner protection laws which gives homeowners some distinct advantages in legal battles with their mortgage lender.

When this mortgage crisis began, who knew how it would all play out? A huge bubble had popped, and someone was going to have to take some losses. However, the details were yet to be determined, and the mortgage mitigation industry was born.

Homeowner Protection Laws - Loan Modification

Lawmakers first passed homeowner protection laws to regulate an uncharted, yet rapidly growing “loan modification” industry. These measures were enacted to ensure proper protection of consumers. Most state legislation erred on the side of caution, and quickly eliminated non-attorneys. Ultimately, the Federal Trade Commission’s MARS rules made the industry unpalatable to any non-attorney. As a result, the “loan modification” folks began to work under the “supervision” of an attorney, in order to remain compliant. These law offices perform mortgage mitigation work, and can be quite effective at negotiating loan modifications. Their goal is to negotiate a settlement before anyone has to go to court. But, even these firms are ultimately asking the bank for assistance. If they encounter an unreasonable bank or investor, their efforts can fail.

Should You Hire an Attorney?

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In the beginning, most judges were siding with the banking industry. From a judge’s point of view, the situation amounted to a proverbial can of worms and “policy” decisions were often made. If judges sent a message that you could stop paying your mortgage without consequence, you would likely stop paying. As a result, violations of RESPA and TILA were routinely categorized as “minor violations”. That is, until some aggressive attorneys started to challenge the rampant fraud and deception which had taken place.

Homeowner Protection Laws - National Mortgage Settlement

Following a few victories for homeowners against the MERS system, foreclosures stalled. Shortly thereafter, the “robo-signing” scandal was splashed across America’s television screens in a CBS 60 Minutes expose. It was revealed that banks had brazenly resorted to spending billions of dollars on operations to fabricate fraudulent mortgage documents. Many of these banks are the same lenders that created the mortgage crisis, and would even today attempt to convince you they are your friends.

In addition, lenders and servicers promoted propaganda campaigns designed to undermine consumer trust in mortgage relief assistance providers. To this day, some lenders sponsor campaigns designed to discourage homeowners from retaining foreclosure defense attorneys. They then convince you to work directly with them. The idea of getting “free” help with a troubled mortgage sounds enticing to a distressed homeowner. However, if a bank is offering you a seemingly generous offer, you should ask yourself why!

Homeowner Protection Laws - Homeowner Bill of Rights

The fact is that many of the loans held by lenders today do not have the documentation to prove the lender’s standing to foreclose. In addition, many homeowners have been mistreated by banks in the mitigation process to a degree that is sometimes now illegal. As a result, many states have passed a Homeowner Bill of Rights. These homeowner protection laws govern a bank’s conduct during the foreclosure process. Without the proper documentation, foreclosure can be a potentially costly proposition for a lender. In California, for example, attempting the foreclosure process without the proper documentation would make the lender subject to fines and penalties.

Homeowner Bill of Rights - Dual Tracking

The HBOR’s also give homeowners rights to proper treatment by lenders and servicers, and make “dual-tracking” illegal. Dual-tracking is the deceptive practice of engaging a homeowner in mortgage relief negotiations, while simultaneously moving forward with foreclosure. In the past 8 years, many homeowners have been misled by their lenders. They were told they were “working on” a loan modification, only to watch their home be sold at auction.

Fortunately, the days of spending months begging for assistance from your lender are over. Today, there are law firms that offer actual attorney representation and can file lawsuits against your lender.

Homeowner Protection Laws - Should You Sue Your Lender?

In most cases where the causes of action are substantial enough to file suit, foreclosure attorneys are able to obtain an “injunction” or “Temporary Restraining Order” which stops the foreclosure process until the homeowner’s case can be resolved. This aggressive approach can give homeowners the upper hand in negotiations with their lender. Additionally, experienced foreclosure attorneys now have a greater knowledge of which loan portfolios are most likely to have improper documentation. Reputable foreclosure defense attorneys offer a free initial consultation and should have a list of questions regarding your loan.

In conclusion, the days of jumping through hoops and begging your lender for help are over. Homeowners can now demand justice by filing a lawsuit against their lender and have a legitimate chance of prevailing in their case. Initially, these lawsuits are more expensive than hiring a “loan modification” attorney. However, taking this aggressive approach gives you a chance to end up with a mortgage that makes sense. Thanks to new homeowner protection laws, you could even end up with a monetary settlement or award for damages. Like most things in life, the litigation proposition offers a greater initial risk and greater potential reward. So, if you have had enough of your lender yanking your chain, or think your lender has broken laws to your detriment, schedule a consultation with a foreclosure defense attorney and find out if you have a viable case.

Should You Hire an Attorney?

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