If you are facing foreclosure or have received a communication from your lender regarding your late payment, or are increasingly concerned that your loan may have been overpriced or subject to predatory lending practices, you should consider finding a good attorney and view your loan documents/communications in light of the various laws that protect homeowners/borrowers who have sold a loan where the disclosures were not properly made or where the laws governing the sale process and communication have not been followed correctly.
What is a predatory loan?
Although there is no universal or clear definition of predatory lending, experts agree that it is the result of deceptive and coercive tactics deliberately purchased from unsuspecting homeowners (usually in a home equity loan or mortgage refinance) where costs are assessed. and excessive interest. and/or the loan is made without regard to the homeowner’s true ability to pay, which is a state violation (CRS ยง38-40-105) and a federal violation (HOEPA) and/or certain disclosures or not done correctly, which should have been.!!!
Some of the laws that are constituted for your protection are:
Truth in Lending Act (TILA)
The purpose of the Truth in Lending Act is to require meaningful disclosure of credit terms so that the borrower can compare the terms of different loans available to him or her and to protect the consumer from unfair lending practices.
If you can prove in court that the documents provided by the lender do not meet the requirements of the law, you may be able to vacate the entire foreclosure proceeding. In addition, the foreclosure judgment may be withdrawn (even after the redemption period has expired) if you can prove that the lender did not make a reasonable effort to contact you or that some other error occurred during the process. But even if you find that the lender made no mistakes and you have no defense, you should take the opportunity to respond to each point in the lender’s claim with explanations that you think the court should consider.
TILA can not only be used to immediately stop the foreclosure process (if you are currently in foreclosure), but it also allows you to avoid bankruptcy. Once TILA and/or RESPA violations are discovered in your loan documents, your lender will be eager to disrupt the illegal foreclosure process and resolve the dispute. As a homeowner, you have the right to rescind your loan up to three business days after the transaction and an extended right to rescind the loan for up to three years (so you can pay off your loan up to three years later) if you have not received notice of the right to cancel the loan, OR if you did not receive a notice with all required material disclosures. TILA also requires lenders to disclose loan terms in an understandable manner; although this point is somewhat subjective, it is definitely debatable. The National Consumer Law Center’s “Truth in Lending” handbook provides detailed information on how this law can be used to challenge predatory lending.
Real Estate Settlement Procedures Act (RESPA)
RESPA was designed to provide home buyers and sellers with better disclosure of settlement costs; and to eliminate bribes or referral fees that tend to unnecessarily increase the costs of certain settlement services. RESPA generally covers loans secured by a mortgage placed on one- to four-family residential properties. These include most purchase loans, refinances, assumptions, home equity lines of credit, and home improvement loans. RESPA also requires that a written disclosure of estimated settlement costs be provided to the borrower. The Good Faith Estimate is the form that details these costs at the beginning of the application process. HUD’s HUD-1 or -1A settlement statement details these costs exactly at loan closing. Rates may vary based on loan changes that may occur between origination and closing.
RESPA requires borrowers to receive disclosure documents at various times during the loan process. At the time of application, or within three days thereafter, the lender must provide the borrower with the Good Faith Estimate; HUD’s Settlement Cost Guide, which describes the home buying process; and a Mortgage Servicing Disclosure Statement, which tells the borrower whether the lender intends to pay off the loan or sell it to a third party. These are very important and specific documents/declarations that need to be provided and you need to check if you have received them. Disclosures are then also required prior to loan closing in the event you are referred to a settlement provider. RESPA requires the submitting party to provide you with an Affiliate Business Agreement Disclosure. This form will remind you that you are generally not required, with some exceptions, to use the affiliate and you can find another provider. Finally, disclosures including annual escrow statements are also required at liquidation.
State Laws on Unfair and Deceptive Acts and Practices (UDAP)
Some of the unfair practices and loan terms found in predatory mortgage lending can be challenged under state Unfair and Deceptive Acts and Practices (UDAP) laws. If a state’s UDAP statute covers the type of transaction or the creditor involved, advocates can bring claims for practices such as repeated and unnecessary refinancing (“repositioning”) of loans, making unaffordable loans to consumers to acquire equity on the property or misrepresent the terms of the loan. Excessive fees and costs and other terms that are disadvantageous to the borrower may also be challenged.
Homeownership and Fairness Protection Act (HOEPA)
The Homeownership and Fairness Protection Act is an amendment to TILA. This section of the law covers certain high-rate home equity loans. In addition to the notice of the right to cancel and other disclosures required by TILA, if a loan is covered by HOEPA, lenders must provide borrowers with additional “Annual Percentage Rate” (APR) and monthly payment disclosures three days before the loan is due. closing. These disclosures must also include provisions indicating to the borrower that he is not required to sign the loan agreement simply because he received the disclosure statements, and that he may lose his home if he fails to meet his obligations under the terms of the loan. In addition to the disclosure requirements, HOEPA prohibits the inclusion of certain terms in the loan agreement. A loan covered by HOEPA cannot include the following:
- Terms that increase the interest rate in case of default. If you fall behind on your mortgage payment, they can’t raise your interest rate.
- Lump sum payments prior to ten years. The lender cannot put a stipulation on your loan that requires the full amount of your loan to be paid back in the first ten years or even a payment that is much higher than your regular monthly payment.
- Negative amortization. If your monthly payment amount is not enough to cover the interest payment on your loan, the “shortage” is added to your loan balance. This type of loan violates federal law.
- Prepaid payments not allowed. At closing, the lender cannot transfer any payments to your loan. This would result in additional interest being charged on top of the interest itself, which is prohibited by state and federal usury laws.
- Extend credit to individuals regardless of their ability to repay the loan. This is a big one, folks! A lender cannot give you a loan based on fictitious income information that was grossly exaggerated to make it appear that you qualified for the loan.
- Disbursement of funds payable only to a home improvement contractor. In a home improvement loan, the lender cannot pay the contractor directly. The check must be made out to the owner only or to the owner and contractor together.
If you are facing foreclosure and your loan is less than three years old, you are still protected by federal law! Violations of the HOEPA disclosure provisions and the inclusion of prohibited contractual terms will make your lender liable to you for actual damages, statutory damages, and attorneys’ fees and costs. Violations of HOEPA are also subject to TILA’s extended right of rescission.
How will legal professionals use these laws?
If you have hired legal professionals to deal with your foreclosure, these attorneys will examine or audit the mortgage documents you received at the closing of your loan(s) and look for violations of TILA, RESPA and/or HOEPA by your lender. Almost all loans have at least some violations. They can then file a federal lawsuit on your behalf and place a lis pendens on the property to stop foreclosure (if applicable) and begin litigating your causes of action against the lender.
They settle with the lender (in most cases) or continue with the lawsuit in rare circumstances.
Please – Remember:
Also, in the state of Florida, for almost all mortgages, the foreclosure laws give you or your defense attorney the right to “reinstate.” This means that if at any point during the foreclosure litigation process the borrower gets the money for the missed payments or is able to make a deal with the bank to cure the arrears or missed payments, legally the bank must dismiss the claim. foreclosure action.
