How (and Why) You Sue
There are a number of reasons why a person might file a lawsuit against a mortgage company, and not all of them involve an actual mortgage loan. For example, unsatisfied customers have sued mortgage companies for violations of the Consumer Financial Protection Bureau, known as the CFPB, recent mortgage servicing rules. These rules came into effect on January 10, 2014 and were designed to protect borrowers from abusive lending and mortgage servicing practices. However, not all mortgage companies are following these rules. If your mortgage company has been negligent in its provision of mortgage services, such as by failing to respond to qualified written requests (QWRs), you could be going after them for a lawsuit.
Another common reason for a lawsuit would be if a mortgage company is guilty of fraud. If the mortgage company that you have worked with lied to you, misrepresented certain facts about your mortgage, failed to disclose pertinent information about your mortgage, or engaged in any activity intended to deceive in regard to your mortgage, then you may have a fraud case on your hands . Mortgage companies are meant to act honestly and openly with their clientele, so if they haven’t, they are acting fraudulently.
Some mortgage companies can also be accused of engaging in foreclosure fraud as well. For example, if a mortgage company illegally forecloses on a person’s home or engages in predatory lending tactics, such as foreclosure rescue financing, then the mortgage company could potentially be sued.
In addition, a mortgage company can be sued for a breach of contract. If the mortgage company that you worked with breached an agreement that existed between the two of you, you could have a valid lawsuit on your hands. Of course, a breach of contract would need to be discussed with an attorney, who handles contract law, to determine if one occurred and if there are any legal options available to you.
Is Your Case Strong?
The first step to determining if you have a claim against a mortgage company is to look at your mortgage or deed of trust itself. Each mortgage has slightly different terms and provisions, but many of the issues homeowners have involve a failure by the bank to follow the procedures outlined in the mortgage. These types of deviations from the a mortgage’s terms lead to a loss of various rights by the bank, and often allow a homeowner to void the bank’s foreclosure.
If you discovered that your mortgage servicer failed to follow any of the following rules or guidelines, you may have a legal claim for wrongful foreclosure: There are many more rules and possible violations, so this list is not exhaustive. If you are concerned about violations or believe there may be violations, check your statements from your loan servicer. You can request copies of your mortgage and related documents from them as well. Any time you don’t understand something in your mortgage, or suspect your lender has engaged in wrongdoing, you should consult with an experienced attorney.
Collecting Important Documents
The key to a successful lawsuit against a mortgage company is to gather all related documentation, which is the best way to prove your case. Common documents can include the original loan agreement and disclosure forms, a mortgage or deed of trust, closing papers, property tax statements, and an account history. Keep in mind that documents are the cornerstone of a lawsuit – having closing papers may be enough to establish a counterclaim under TILA when the creditor fails to provide you with certain disclosures. A proof of claim in bankruptcy must also be accompanied by sufficient documentation. Some documents that serve as strong evidence are canceled checks, bank statements, records of other transactions, credit reports, and any correspondence between your mortgage company and you, including emails. If a trial is needed, the judge and jury want to see proof and documentation, so having everything in one place is important.
How to Retain an Experienced Lawyer
Engaging the services of a qualified attorney to represent you is always advisable. A lawyer experienced in the area of mortgage litigation will be better able to properly assess your particular situation and advise you on the best course of action. If you are facing potential litigation, it is important to consult with a lawyer soon as the statute of limitations for various types of claims against a lender may apply if a lawsuit is not filed within a certain time period. A delay in initiation of an action could later result in a claim being barred by the statute of limitations and an action being dismissed. In addition, an attorney can provide you with a confidential consultation at no additional cost prior to taking any further action.
When seeking a lawyer for representation against your mortgage servicer, it is first important to look for someone who practices in the area of mortgage litigation. Although there may be some crossover with other areas of practice, attorneys specializing in other areas of litigation may not be as familiar with the specific issues associated with mortgage disputes. It is advisable to review the lawyer’s professional background. Once you have narrowed your choices down to an attorney with experience and a good reputation, you should set up an initial consultation. At that meeting, you should present information related to the mortgage and the potential claim(s) you wish to assert. This information will assist the attorney in probably developing a strategy for proceeding with a claim on your behalf. Even though it is customary for an attorney to charge a fee for the time spent during an initial consultation, it is well worth it to learn your rights under applicable law and to become informed about the potential claims available to seek resolution of the lender’s wrongful conduct. This is especially true considering the amount of money usually involved when problematic real estate transactions or foreclosure litigation are concerned.
Filing a Suit
Once you have investigated the law and have evidence to move forward, you need to file a complaint with your local Circuit Court, Superior Court, District Court, or County Court – whatever the name is for the court in your jurisdiction. The name of the court will also depend on the amount in controversy. In some states, there may be a separate court for small claims cases. You have to research this for your own particular situation, but the clerk’s office of your court should also be able to help you.
You may need to fill out a form complaint, borrow a sample complaint from another case, or write your own complaint. Generally, your complaint will need to briefly identify who you are, who you are suing, why you are suing them, and what sort of damages you seek (just monetary damages, or do you need other specific actions performed?). You may be able to get assistance with drafting a complaint from free legal aids, if you have Internet access, and from other available resources.
Once you have filed your complaint and paid the requisite filing fee (or had the fee waived), the court will assign you a case number and a random trial judge. The clerk of court will then either serve the defendant (often through their attorney) or you will be ordered to serve the defendant with process.
Within a short time frame, the defendant (and their attorney) will file an answer to your complaint, likely denying most, if not all, of your allegations and possibly raising due process issues about your ability to maintain the lawsuit against them. They may ask the court to dismiss your claims in total or in part. They may well raise motions and affirmative defenses. If you were to appear in court the very first time your case was called, you would be met by dozens of attorneys and judges who would be very interested to see how you pro se would handle the motions at hand. Although either or both of you may get the judge’s ear at that hearing, at least one or both of you will not be heard at that time, since the court cannot hear all of the motions at one hearing and the case will be continued again.
In some states and under certain circumstances, you may be required to go through binding arbitration to adjudicate your claims. In that case, you will have less opportunity to argue your side of the story, as the arbitrator may only ask you a few questions as part of the process. The arbitrator will make an award, including, possibly, an order to pay the other side’s attorneys fees. You probably will not have the right to a jury trial if your claims are sent to arbitration.
Once the court has finished hearing your case, there will be a decision. Be sure you understand fully your rights of appeal and how and when they expire.
The Process of Litigation
Many people wonder about the litigation process when they decide to sue a mortgage company. Lawsuits are highly complex matters involving many legal nuances. The laws governing the lending industry, especially in terms of consumer protection, have many caveats and exceptions. It’s only through litigation that you can find out the merits of your case and what remedies are available to you. The courts require that the parties complete what is called the discovery stage. When you sue the mortgage company, they will likely sue you back. Within discovery, the court orders both parties to share all evidence relevant to the case so they can determine if there is a legal basis for the lawsuit and what damages were caused by the actions of the other.
It is likely that you will be deposed, or asked to testify not under oath before the court. You can expect to be questioned concerning your examination by the bank’s lawyers. In simple terms, it’s their job to break you down line by line on all the statements you made in the original dispute against them. This includes any details or sentences that were explicitly contradictory to your testimony. Your lawyer will advise you on how to prepare for the deposition. Any indications of being untruthful could be used in a court of law to refute your version of events. If there are any discrepancies that you cannot remember , admit it! Do not guess or fabricate answers answering the interrogatories to the government agency or under oath in front of the court. It will be one of the most important pieces of evidence submitted by the mortgage company’s lawyers during the discovery stage. The court will assume you had time to go through your information and prepare for the case. It certainly doesn’t mean you should sign anything they ask without the consent of a lawyer, but remember that they are preparing their witnesses to testify and will use everything to their advantage. You will also be asked to provide financial evidence, which may include income and expenses. The difference between these two can establish whether you have the means to pay the mortgage company, which in turn, could influence the court’s decision.
After discovery, the mortgage company’s lawyers will likely try to negotiate a settlement. This usually involves agreeing that they will forgive some legitimate debt owed by you in return for the dismissal of legal action against them. Unless you’re facing foreclosure, this may be a good option, although your attorney will advise you on this matter. There are many cases in which the mortgage company’s lawyers continue to fight, despite your case having legitimate reasons for the court to disband the case. If they can’t reach an amicable agreement, it’s likely that your case will proceed to trial.
Pursuing Settlement
Before proceeding with any lawsuit, it is oftentimes best to first consider whether settlement is possible. If it is, settlement is typically the most expedient approach, and it is usually the least expensive approach. You can settle sometime before the lawsuit is filed for instance, you can settle during the litigation process prior to trial, or you can even reach a settlement during trial.
In most cases, the decision to settle should be made after the lawsuit is filed. This is so because once the lawsuit is filed, a mediation will often be scheduled which may provide odd parties with a better opportunity to evaluate their respective positions from an informed perspective. Moreover, the mediator appointed by the Court will usually supplement the parties’ understanding of the case based upon the mediator’s experience in handling similar cases.
If the parties are able to reach an agreement on the terms of settlement, then a stipulation of settlement ("Stipulation") would be prepared. The Stipulation would be presented to the Court and a Conference would then be held during which you and the opposing party would each be required to answer questions posed by the Judge, along with your respective Counsel, regarding the content of the Stipulation. Once the Judge orally confirms that he or she approves of the Stipulation, the Judge will direct the attorney for the party who prepared the Stipulation to submit an Order to the Court which memorializes the Stipulation. The Order would then be "so ordered" by the Court. A Stipulation is then treated as a contract between the parties. Translation:-if you agree to be bound by its terms, be prepared to live with your decision.
Alternatively, the party’s respective counsel may also agree to postpone the conference and to instead engage the services of a mediator. Often times this choice is a good one because the mediator’s objective will be to get the parties to reach an agreement in terms of settlement. The mediator’s compensation is also typically paid by the mortgage company if an agreement is reached.
If no agreement is reached in uniform with the terms of the Stipulation, or if no Settlement is reached, the litigation process will continue until a judgment is rendered after trial.
Possible Outcomes and Remedies
So what happens if you play hard ball with the mortgage company? First, you may end up with financial compensation. This will certainly depend on the specific facts of your case and the allegations in your pleading. If you are seeking money damages, the law requires you to show evidence of actual damages. In addition, an award of punitive damages is possible. Each state has its own standards for awarding punitive damages, but generally they are not available unless you make a case for fraud or intentional misconduct. Punitive damages require showing that the defendant’s conduct was so outrageous that the award is intended to punish and discourage it from continuing the misconduct. As a practical matter, punitive damages awards are typically much smaller than compensatory damages (the money you have actually lost). There are a variety of ways to determine the amount of the award, including the magnitude of the harm, the degree of wrongfulness, reprehensibility, the economic impact of the award, whether there was a criminal finding, and the existence of intentional misconduct or fraud.
You could also be looking at some kind of injunction or loan modification. Again, depending on the situation, an award of non-monetary damages is possible. A judge could order that your loan be modified or refinanced to more closely match your financial capacity. This is especially likely if a mortgage foreclosure is at issue and it can be shown that you were the victim of predatory lending practices. For example, if the mortgage company engaged in excessive charges or made misrepresentations of material fact, such as an inflated appraisal or use of bogus documentation, a judge may be inclined to modify the loan or grant equitable relief to avoid foreclosure. This relief may be equitable in nature or in legal form, such as making an award of attorney’s fees or change in the terms of the promissory note.
Proactive Steps
Foreclosure cases usually come about inadvertently (and then, perhaps, shockingly) after a homeowner has tried to resolve a disputed matter between themselves and a mortgage company. In many cases, the homeowner believes they have a good case; but once court proceedings are initiated, the homeowner turns out to be incorrect. This section discusses some of the more common myths that can lead to disputes, and how to avoid them.
First, a homeowner should know their loan inside-and-out. What are the terms? How long is the term? Will the interest rate increase, and if so, when? Obviously, understanding a loan requires a good deal of attention to detail; but a homeowner, at a minimum, should keep the following documents for easy access: the note, the mortgage, a payment history, and the monthly statement . Having these documents ready and knowing the answers to these questions can provide the homeowner with a level of confidence to proceed as they go about disputing any issues with their mortgage company.
Second, the homeowner should know the hierarchies of authority within the loan servicer and remain persistent. This means that if a homeowner initiates contact with a company, the contact must stay persistent with all correspondence and be prepared for the run-around. In other words, he or she must ensure that all agreements are confirmed in writing – and recorded in their records. If applicable, the homeowner should speak only to an agent at the mortgage company, or at least a specific department, to deal with the dispute, instead of scattershot. This means if the homeowner is dealing with the collection department, have all communication go through that department; however, it may be necessary to speak with other departments.