predatory lending, truth-in-lending violations, and foreclosure
Today I want to discuss how people get out of their mortgage by asserting that there was fraud, or violations of law, involved.
The primary law that deals with mortgage lending are the Truth In Lending laws. They are federal statutes that specify how a lender is supposed to document a loan application and loan paperwork. There are very specific requirements even including how large the typeface is in certain cases.
I spoke today with a lawyer who specializes in helping people get out of loans that were made in violation of the Truth In Lending laws.
She says that if you have some equity, and have refinanced in the last three years, and are in an owner occupied single family home, you might have a case against your lender.
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She regularly finds violations — in fact, about 12 out of 15 times, she said she reviews a file and discovers some violation.
The law lets you sue the lender and if you win, the lender pays attorney's fees.
The law's remedy is called rescission. You rescind the loan by telling the lender that you want to take it back. Rescission involves getting back to where you were before the loan was made.
That means you have to pay back the loan.
But if there was a violation, you have some negotiating room. You may be able to get the lender to agree to stop foreclosure. And you may be able to stop making mortgage payments to the lender until things are sorted out. That could take 3 or 4 years or even longer.
The downside is that you must pay an attorney. The lawyer I spoke to does not do contingency cases. She requires fees from the homeowner. That doesn't mean all lawyers do but I would imagine a lot of them do.
She also told me that a lot of cases where there are truth-in-lending violations also involve mortgage fraud. The broker lied, or encouraged the homeowner to make misrepresentations on the loan papers, or even worse. So that gets put into a lawsuit as well.
She said she can stop a foreclosure but this requires going into court to get a temporary restraining order, if the lender won't cooperate. She says the lenders are highly uncooperative, which I suppose is not surprising.
I do want you to be aware of this remedy. The lawyer I spoke with is in California. This is a federal law we are talking about but the situation is a bit different in different states due to the fact that foreclosure laws are governed by state law, not federal law.