If you are facing foreclosure or have received communication from your lender which is regarding your late payment , or are increasingly concerned that your loan may have been excessively priced or be subject to predatory lending practices - you should consider finding a good attorney and look at your loan documents/ communications in light of the various laws protecting home owners / debtors who have been a sold a loan where disclosures were not made properly or where laws governing the selling and communication process have not been followed properly.
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What is a Predatory Loan ?
Although there is no universal or clear-cut definition of a predatory loan, experts agree that it is the result of misleading and coercive tactics deliberately bought upon unsuspecting homeowners (typically on a home equity loan or mortgage refinance) where excessive interest and costs are assessed and/or the loan is made without regard to the homeowner's true ability to repay, which is a state violation (C.R.S. §38-40-105) and federal violation (HOEPA) and/or certain disclosures are avoided or not made properly which should have been.!!!
Some of the laws which are constituted for your protection are:
Truth in Lending Act (TILA)
The purpose of the Truth In Lending Act is to require a meaningful disclosure of credit terms so that the borrower will be able to compare the terms of different loans available to him and to protect the consumer against unfair lending practices.
If you can prove to the court that the documents provided by the lender don't meet the requirements set forth by law, you may be able to have the entire foreclosure procedure rendered null and void. Furthermore, the foreclosure judgment could be withdrawn (even after the redemption period has expired) if you can prove that the lender didn't make a reasonably sufficient effort to contact you or that some other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 still take the opportunity to answer each point of the lender's contention with explanations that you think the court should consider.
Not only can TILA be used to immediately stop the foreclosure process (if you currently are in foreclosure), but it also lets you avoid bankruptcy. Once TILA and/or RESPA violations are discovered in your loan documents, your lender will be eager to discontinue the unlawful foreclosure process and settle the dispute. As an homeowner, you have a 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 (hence you can cancel your loan up to three years later) if you're not given a notice of the right to cancel the loan, OR if you did not receive notice with all of the required material disclosures. TILA also requires lenders to disclose the terms of loans in an understandable manner - though this point is somewhat subjective it is definitively arguable. The "National Consumer Law Center's Truth in Lending" manual provides detailed information on how this law can be used to Challenge predatory lending.
Real Estate Settlement Procedures Act (RESPA)
RESPA was designed to give home buyers and sellers better disclosure of settlement costs; and to elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. RESPA generally covers loans secured with a mortgage placed on one - to - four family residential properties. These include most purchase loans, refinances, assumptions, equity lines of credit and property improvement loans. RESPA also requires that written disclosure of estimated settlement costs be provided to the borrower. The Good Faith Estimate is the form that itemizes these costs at the beginning of the application process. HUD's HUD-1 or -1A Settlement Statement itemizes these costs exactly at loan closing. The fees can vary based on changes in the loan that may occur between the time of origination and closing.
RESPA mandates that borrowers receive disclosure documents at various times during the loan process. At the time of application, or within three days afterward, 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 service the loan or sell it to another party. These are very important and specific documents / statements which must be provided and you should check if you have received these. Then there are also disclosures required before closing of loan in case you are being referred to a settlement provider. RESPA requires the referring party to provide you with an Affiliated Business Arrangement Disclosure. This form will remind you that you are generally not required, with some exceptions, to use the affiliate and are free to look for another provider. Finally, at the time of settlement also disclosures are required which includes Annual Escrow Statements.
State Unfair and Deceptive Acts and Practices Laws (UDAP)
Some of the unfair practices and loan terms found in predatory mortgage loans 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 may bring claims for practices such as repeated and unnecessary refinancing ("flipping") of loans, making unaffordable loans to consumers to acquire the equity in the property, or misrepresenting the loan terms. Excessive fees and costs, and other terms that are disadvantageous to the borrower may be challenged as well.
Home Ownership and Equity Protection Act (HOEPA)
The Home Ownership and Equity Protection Act, is an amendment to TILA. This section of law covers certain high rate home equity loans. In addition to notice of the right to cancel and other disclosures required by TILA, if a loan is covered under HOEPA, lenders must provide borrowers with additional disclosures of the "annual percentage rate" (APR) and monthly payment three days prior to closing. These disclosures must also include provisions telling the borrower that they are not required to sign the loan agreement simply because they received the disclosure statements, and they may lose their home if they do not meet their obligations under the terms of the loan. In addition to the disclosure requirements, HOEPA prohibits the inclusion of certain terms in the loan contract. A loan covered under HOEPA may not include the following:
Terms which increase the interest rate in the event of default. If you fall behind on your mortgage payment, they cannot increase the interest rate. Balloon payments prior to ten years. The lender cannot put a stipulation in your loan that requires the total amount of your loan to be paid off in the first ten years or even a payment that is much larger than your regular monthly payment. Negative amortization. If the amount of your monthly payment 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 roll any payments into your loan. This would result in additional interest charged on interest itself, which is prohibited by state and federal usury laws. Extending credit to individuals without regard to their ability to repay the loan. This is a big one folks! A lender cannot put you in a loan based on fictitious income information that was grossly exaggerated in order to make it appear that you qualified for the loan. Disbursement of funds payable solely to a home improvement contractor. On a home improvement loan, the lender cannot pay the contractor directly. The check must be made solely to the homeowner or made to the homeowner and the contractor together.
If you are facing foreclosure and your loan is less than three years old, you are still protected under federal law! Violations of HOEPA's disclosure provisions and inclusion of prohibited contract terms will make your lender liable to you for actual damages, statutory damages and attorney fees and costs. HOEPA violations are also subject to TILA's extended right to rescind.
How will Legal professionals Use these laws
If you have employed legal professionals to deal with your foreclosure, these attorney/lawyers would scrutinize or audit the mortgage documents you received upon the closing of your loan(s) and look for TILA, RESPA and/or HOEPA violations by your lender. Nearly every loan has at least some violations. They may 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(s).
They reach a settlement agreement with the lender (most cases) or continue on to trial in rare circumstances.
Please remember:It is NOT necessary for you to make mortgage payments while the lawsuit is pending.
It is also unlawful for the lender to report negative information about you to the Credit Reporting Agencies while the lawsuit is pending under the Fair Credit Reporting Act.
Additionally, in the state of Florida, for almost all mortgages, foreclosure laws give you or your defense attorney the right of "reinstatement." This means that, if at any time during the foreclosure litigation process the borrower comes up with the money for the late payments or can make a deal with the bank to cure the arrearages or late payments, legally the bank must dismiss the foreclosure action.
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