A mortgage is a binding legal contract between you and a bank that lends you significant money. You are borrowing money to purchase a real estate, and it is crucial that everything goes well with your financing. Otherwise, you may be unable to purchase the property in the first place.
Legal issues may stem from a mortgage when the lender engages in unlawful practices. Always have an experienced mortgage lawyer looking out for you in the process. If there is any dispute with the lender at any point in the process, you must have an experienced mortgage lawyer representing you.
If you hire a real estate lawyer during the transaction process, they will also handle issues regarding the mortgage with your lender. If the issues arise after you already took out the loan, you can hire a lawyer proficient in mortgage litigation because you may need to file a lawsuit against the lender, or you may be subject to a foreclosure action.
To understand why you may need a mortgage attorney, it helps to know the various tasks they may perform for you at certain points in the mortgage process.
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Assisting with Reviewing Mortgage Documentation
Your mortgage is a lengthy and binding contract between you and the lender. The lender provides you with money to purchase a property, and you are obligated to follow the terms of the agreement, which includes a requirement to make regular payments of the interest and principal. The interest rate you must pay is far from the only key term of a mortgage contract.
A mortgage attorney will review the contract that you must sign. There is likely a main document and a handful of addendums. Each one imposes legal obligations on you that you must be aware of before you sign the document. You must understand what each document means before you sign it. The bank has already had their attorney draft the document, and you need to know what everything means because you are expected to follow the terms of the mortgage to the letter. Otherwise, your property can be subject to foreclosure in the future.
Mortgages are not always as straightforward as they may seem. If you are involved in a complex real estate transaction, the terms can be far more extensive than in a residential deal. A mortgage attorney can help simplify a complex transaction and ensure you understand what is happening.
Negotiating with Mortgage Lenders
While many mortgages involve documentation and agreements that the bank imposes on you, there may be some room to negotiate, depending on the type of transaction involved. You may have more leverage to negotiate when there is a more specialized type of transaction, and some terms may not fit your own situation.
Contracts that lenders hand you to sign are not always set in stone. Even if the lender gives you a standardized agreement, there may be some room to negotiate if there are terms that you may need to change. There may be some terms of the contract that you may want to change if there is a situation in which you have some bargaining power. Then, a mortgage lawyer may mark up the document on your behalf and provide it to the lender for review.
Banks do not always show a willingness to negotiate with borrowers, but they may do so under certain circumstances. You have a better chance of negotiating with the bank when a mortgage attorney contacts them on your behalf.
Helping You with the Closing Process
Mortgage lawyers play an extremely critical role in the real estate transaction closing process. Typically, you hire them after you agree on a purchase price with the seller and in advance of the deal closing. Before you can reach closing, you may need to address legal issues that arise during the transaction process.
For example, your transaction can hit snags if you discover defects during the home inspection process. You may need to negotiate the purchase price entirely or work with the seller to get them to make the necessary repairs for the property to be in the condition you want. You have the right to walk away from the deal if there are material defects and the seller will not take the appropriate action or reduce the sales price. Your mortgage attorney may negotiate with the seller’s attorney to reach a resolution that allows the deal to go through.
Other parts of the closing process might potentially subject you to liability. For example, you can possibly be in jeopardy if you cannot secure mortgage funding for the property, depending on the language of the sales agreement you signed when you “went to contract.” Your mortgage attorney can help keep you out of trouble if you are having difficulty qualifying for financing.
Addressing Foreclosure Issues
The bank may be trying to foreclose on your home because they claim you have fallen behind on your mortgage payments. However, they must go through a legal process before they are allowed to foreclose on your home. The court must sign off on the foreclosure after the bank has given you proper notice. You have the right to due process, where you can get your day in court.
There are times when you can fight a foreclosure. The bank is not always right when they are trying to take your home. You must file an answer to the lender’s lawsuit and persuade a judge why the bank was not following the proper procedure and respecting your rights under the law. Either way, if you choose to fight a mortgage foreclosure, you must go through the civil court and have the help of a mortgage attorney in building your defense.
If you believe a foreclosure might be in your future due to past-due payments, contact a mortgage lawyer. They can assist you well before the lender files a foreclosure action. An attorney might negotiate another solution with your lender, such as a loan modification or deed in lieu of foreclosure, which can minimize the damage to your credit and finances. In many cases, the right lawyer can help you stay in your home.
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Filing Lawsuits for Mortgage Fraud
Even the lenders you think are the most reputable may not always be on the up and up. Mortgage lenders use a variety of illegal practices that can maximize their profits at your expense. These practices occur most often when banks are making loans to people with marginal credit. Subprime lending still exists, even after the 2008 financial crisis. Subprime lenders may charge extremely high interest rates or use other illegal practices.
In addition, there are federal and state laws that mortgage lenders must follow when doing business with you. For example, the Truth in Lending Act requires banks to make a number of disclosures before they can lend you money. They must make you aware of the fees that they will charge you. Unfortunately, some lenders will charge exorbitant fees and will not disclose them in advance. A mortgage lawyer can file a lawsuit against the lender for illegal business practices.
Since a mortgage is a binding legal contract between you and the lender, each of you has rights and obligations under the agreement. The lender can breach the contract, and you have the right to sue them if they do so. Although they are infrequent, there may be various disputes with the lender that must be resolved. A mortgage attorney can negotiate with the bank to clear up any dispute, or they can file a lawsuit on your behalf.
Other federal and state laws govern mortgage lending. For example, the Truth in Lending Act requires lenders to make certain disclosures in a way that is accurate and prominent. Simply stated, you cannot be taken by surprise by any fees. In addition, mortgage lenders must disclose how your payments might change if you have an adjustable-rate mortgage. Some lenders may try to paint a rosy picture of your payments and how your mortgage is affordable to get you to do business with them. Other lenders may engage in illegal high-pressure tactics when doing business with you. Before you know it, you may be locked into a mortgage with unreasonable terms.
You have a legal right to sue the lender under TILA or any other state law that governs mortgages. If you win a lawsuit under the TILA, you can be entitled to the following damages:
- The actual damages that you suffered from the wrongful action
- Twice the amount of finance charges that you paid to the lender
- Statutory damages between $200 and $2,000
- Reasonable attorney’s fees for your lawyer
Borrowers may also be victims of discrimination, either in the terms they are being offered or whether their loan is approved. You can file a lawsuit against lenders for discrimination. There are often large class action lawsuits against financial institutions for discriminatory practices. If you have experienced discrimination when applying for a mortgage, contact a mortgage lawyer immediately to discuss what happened.
Your attorney can review the circumstances and advise whether the lender engaged in unlawful discrimination, giving you the right to take action and seek legal relief.
Filing a Lawsuit for Discriminatory Mortgage Practices
Anti-discrimination laws exist in lending on both the state and federal levels. The Fair Housing Act applies to every part of your mortgage transaction, whether it is the approval of the loan itself or the actual terms of the deal.
If the bank acted in a discriminatory manner, whether denying your mortgage application in the first place or in the terms they imposed on you, it is possible to file a lawsuit against the bank. You can seek damages from the lender for the harm they caused you. If your mortgage attorney can prove discrimination in the lending process, you can be entitled to substantial financial compensation. However, discrimination cases are not easy, and banks will vigorously fight them because they know the stakes.
Should I Hire a Mortgage Attorney?
Of course, it can cost money for you to hire a mortgage attorney. However, you must perform a cost-benefit analysis to determine whether this investment is worth it. In the end, you will likely find that this money is worth spending because it can provide you with various protections and someone who has the capacity to take on the bank should you need it. Most homebuyers will hire a mortgage attorney, even though law does not require it. You are simply making too large of an investment when you buy a home to leave anything to chance. The last thing you want is to purchase a home and be locked into an unfavorable situation that hiring a mortgage lawyer might have prevented.
The Risks of Not Hiring a Mortgage Lawyer
There are many risks of trying to go it alone without legal help from a mortgage lawyer, which include:
- Being at a disadvantage to the bank, where practically every major decision and document goes through their own mortgage lawyers
- Signing a binding contract without knowing the exact terms that you must follow and any potential pitfalls
- Being subjected to illegal business practices that a mortgage lawyer would have identified and addressed
- Having to navigate a transaction process without the peace of mind that hiring a mortgage lawyer gives you
Whether you need to pay a mortgage lawyer upfront depends on the type of representation they will provide. If you are hiring them to help with a transaction, you may pay an attorney a flat fee for their services. If you are filing a lawsuit because they committed fraud or discriminated against you, it may not be necessary to pay them anything out of your own pocket. In these cases, a mortgage lawyer can represent you on a contingency fee basis. This means they will only receive fees if you win your case, and the defendant may be the one responsible for paying their fees. You will not need to pay a real estate attorney anything at all if you do not receive any money in your case.