If a foreclosure action is found to be legally questionable, it can not only put a end to foreclosure but it can also potentially void your mortgage. Sometimes, an appraiser may conspire with the lender and fraudulently inflate the value of an assessed property to help the lender justify a predatory loan. Or a broker inflates the loan application numbers unbeknownst to the homeowner, qualifying them for a loan they wouldn’t have received otherwise. The scores of possible injuries are numerous.
If you suspect that some sort of fraud or misconduct occurred, you may be entitled to various damages and attorney fees. At Mortgage Fraud Examiners, our examinations can determine if there was a breach of contract, errors that possibly void the contract, fraudulent conduct, and/or statutory/regulatory violations. If we are able to locate these abuses, all documents related to your foreclosure may be invalidated and there may be a valid claim for damages.
As the nation’s financial crisis has shown, misconduct is rampant within our financial system. Your mortgage transaction and/or the foreclosure process may have violated regulatory and legal standards. If this occurred, one of our skilled mortgage transaction analysts can reveal any technicalities that can help your attorney put a stop to your foreclosure or change the dynamics of your mortgage arrangement.
Solving Problems For Over 30 Years
The areas of foreclosure defense, mortgage, and other financial issues can be incredibly complex. Even if you are willing to negotiate and work with your bank in an effort to keep your home, you may not even understand where to start. We at Mortgage Fraud Examiners can help guide your attorney through the complex foreclosure process.
Below, are just a of the few of many established lines of attack where the bank had to negotiate on the homeowners terms, not theirs. Some have resulted in homeowners receiving multi million dollar awards and free title to their property.
Sometimes an appraiser will inflate the value of a property to please particular lenders to obtain repeat business from these lenders. Other times, however, appraisers may be colluding with lenders and receiving kickbacks for fraudulent appraisals. Remedies for appraisal fraud can include actual damages, punitive damages, and attorney fees. See, http://www.nakedcapitalism.com/2014/12/bill-black-mortgage-appraisal-fraud-baack-bank-execs-profit.html
Breach Of Contract
Just as you have an obligation to pay your mortgage, the lender has a responsibility not to interfere with your ability to do so. Lenders who quietly reward brokers for bringing borrowers to them -and subsequently pass on the cost of the reward to the borrower – may share liability for the broker’s breach of fiduciary duty. Other examples may include force placing insurance, resulting in more expensive insurance premiums.
The most common use of appraisal fraud is for a loan originator and appraiser to collude together to obtain a value to qualify borrowers for larger loan amounts than they would otherwise be able to obtain. This often results in borrowers purchasing properties for more than they are worth, as well as being unable to sell or refinance when needed at a later date.
There are many parties to a mortgage transaction over time, and each of them has a reason to defraud a borrower. Servicers commonly defraud borrowers by misstating amounts owed, or charging for inflated insurance or other products to receive kickbacks. Lenders defraud borrowers to obtain higher interest rates, fees, and amounts owed. Appraisers defraud borrowers at lenders request to obtain repeat business relationships with lenders. Closing, loan originating, and real estate agents defraud borrowers to commonly hide details of the transaction so that it closes without questions. Sellers defraud purchasing borrowers as to the nature of the home. The list goes on. Every single person that touches the mortgage transaction that gets paid generally has a reason to defraud the borrower and hide his or her fraudulent actions.
Fraud is unique in that a lawsuit can be brought from when it is found or should have been found, which can be many years later. Damages can be actual and punitive damages, as well as attorney’s fees. In addition, fraudulent acts are generally also unfair and deceptive acts.
Credit Reputation Damages
Upon determining that there has been a statutory violation, legal error, contract breach, or tortuous conduct regarding a foreclosure, you may have experienced economic damages. If your credit reports or credit scores have eroded due to any type of error, you may have legal remedies available to you.
We are often able to determine that the Notary’s Commission is invalid, or documents were notarized without actually witnessing the borrower sign documents. This may invalidates documents in question and can lead to beneficial concessions from the lender, and possible punitive damages. Notary Fraud, improper notary jurats or acknowledgements, and improper borrower identification within mortgages and deeds of trusts can lead to the document not being considered being of proper form to give notice as a recorded document, and may make the mortgage or deed of trust subject to discharge in bankruptcy as an imperfect lien, or inferior to other liens and mortgages.
Legal Description Errors
Security Instruments including Mortgages and Deeds of Trusts secure repayment of the Note to property. However, when the legal description saying what property is secured is in error, this may leave repayment of the Note as an unsecured debt, subject to possible discharge in bankruptcy and other bona fide purchasers and creditors.
Recoupment can be used as an affirmative defense or counterclaim. Based on the behavior and actions of the Note holder and their agent, including the servicer, one can claim damages against the amount owed.
Typically, unconscionability refers to extremely unfair or one-sided terms in a contractual agreement, usually unbeknownst to the other party. This defense is focused on the events surrounding the creation and closing of a mortgage loan. Unconscionability can give the court great leeway in deciding whether a mortgage contract can be avoided or changed. Unconscionability typically involves review of the terms of the loan, ability to repay the loan, and situation of how and why the loan was originated, including serial refinancing to strip a borrower’s equity with closing costs and prepayment penalties.
Common law rescission, or an unwinding and setting everyone as close to the beginning before the loan was made is commonly asked for to undo unconscionable loans.
Failure to Establish Conditions Precedent
Many homeowners want to get a foreclosure action thrown out of court right away. Using a failure to establish conditions precedent, you can successfully use this defense to attack a lender’s pre-foreclosure process. We can help you obtain any evidence needed to prove the need of a condition precedent.
A common condition precedent to foreclosure that servicers often fail to properly provide is a Notice of Default within the guidelines as agreed upon in the Mortgage, Deed of Trust, or Security Agreement. Different lenders and different loan types, such as FHA, often specify specific terms and disclosures to be made prior to declaring a loan in default. Servicers do not always provide these disclosures, and commonly instead provide and use their own standard Notice of Default, which is often missing specific items. This commonly happens with servicers who service multiple loan types from multiple lenders that they do not originate.
Breach of Contract
Conditions Precedent sometimes falls under state or federal laws regarding disclosures prior to foreclosure, and sometimes under Breach of Contract of the Note or Security Instrument terms. There are many different types of ways mortgage contracts are breached. A fairly common breach of contract is to commit to charging one fee for loan origination, but charging a higher fee at closing. Other common breaches include not adjusting variable interest rates properly, not properly applying or accepting payments, and cutting off access to Home Equity Line of Credit draw capacities without reason.
Damages for Breach of Contract are generally actual damages, including credit damages, and depending on jurisdiction may also include mental anguish.
Unfair and Deceptive Practices
Overreaching mortgage transactions can often be challenged under state Unfair and Deceptive Practice (UDAP) law. Broker misconduct, licensing violations, and transactions with lenders and / or brokers who are not licensed, but should be, may be void. In general, violations of consumer protection laws such as the Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Debt Collection Practices Act, and Equal Credit Opportunity Act are also considered unfair and deceptive practices.
Interstate Land Sales Full Disclosure Act (ILSFDA)
The ILSFDA applies to the sales of subdivisions containing 25 or more residential lots (or, potentially more than 100) where interstate commerce is used to sell the subdivision’s lots. There are specific requirements and disclosures that need to be made to the consumer prior to the sale and at closing when a builder wants to sell the lots.
Equal Credit Opportunity Act (ECOA)
Under the ECOA, victims of bait-and-switch tactics can file a claim for legal recourse. If you have been taken advantage of due to unscrupulous marketing strategies, ECOA provides numerous solutions, including private remedies for actual and punitive damages, equitable relief, and attorney’s fees.
The most common ECOA violation is what is known as “reverse redlining.” This is a practice where lenders target minority areas for higher interest rate, cost, and fee loans than the borrowers would otherwise qualify for. Wells Fargo recently paid $175M to settle reverse redlining claims from the US Justice Department. This is identified by reviewing the creditworthiness of the borrower relative to the loan obtained, the availability of loans at the time of origination, and data regarding the lender’s racial lending profile.
ECOA allows for statutory and actual damages, as well as attorney’s fees. Since loan terms are generally far worse, these damages can be substantial.
Fair Debt Collection Practices Act (FDCPA)
Consumers may bring lawsuits against abusive debt collectors violating the FDCPA, and may obtain damages from the debt collector. Damages may include actual damage costs of the lawsuit, and reasonable attorney’s fees. Actual damages can also include compensable credit reputation damages.
Fair Housing Act
The Fair Housing Act prohibits discrimination in residential real estate-related transactions based on race, color, religion, sex, handicap, familial status, and national origin. Common violations of this act include lenders allowing discriminatory pricing by mortgage brokers or loan originators. One can obtain relief under either the Fair Housing or Equal Credit Opportunity Act.
Home Ownership and Equity Protection Act (HOEPA)
The HOEPA Rule is a very powerful federal law governing high-cost refinance and home equity loans. Though HOEPA was enacted as an amendment to the Truth in Lending Act (TILA), the act specifically addresses abusive practices. Violations of HOEPA allow victims to pursue substantial monetary damages.
Real Estate Settlement Procedures Act (RESPA)
In addition to prohibiting kickbacks and unearned fees, RESPA governs many types of disclosures that lenders must provide at the time of closing. Enacted in 1972, this federal law enables damages, and sometimes revocation if the error triggers TILA.
Real Party In Interest
This is a procedural defense to foreclosure that can be extremely effective at stopping a lender’s ability to foreclose. The real party in interest will essentially question the ownership of the mortgage and challenges whether the foreclosing party is, in fact, the holder of the mortgage and note.
Truth In Lending Act (TILA)
For any loan transaction, banks must provide a homeowner correct disclosures at or before the time of closing. If these disclosures are inaccurate, the loan may be statutorily rescindable under TILA. The lender must also provide a “Notice of the Right to Rescind” at closing. If this form is inaccurate, incomplete, or incorrect, the loan is often rescindable up to three years after the date of closing.
The most common Truth in Lending Act violations includes unclear disclosure of loan terms, especially with regards to complex adjustable rate mortgages. In addition, the Truth in Lending Act also regulates certain disclosures that must be given when loans originate, reasonable income documentation requirements, and extra protections to take for higher cost loans.
Truth in Lending Act Violations may be asserted in any federal court in the nature of setoff or recoupment for statutory and actual damages. TILA rescission is a separate way to unwind eligible transactions and place the borrower as close as possible as if the transaction had never occurred.