Mortgage Lender Laws (2024)

A mortgage lender is an entity that provides financial support to a borrower when they are purchasing a home and cannot afford the sale price. The mortgage lender will usually give the borrower the funds in the form of a mortgage loan. Thus, it is not surprising to learn that in most cases the mortgage lender is either a bank or another type of lending institution. Some mortgage companies may even offer a variety of loan services to suit the needs of a borrower.

In general, mortgage lenders are often subject to numerous laws that are designed to protect the rights of borrowers. For instance, a mortgage lender is forbidden from discriminating against a borrower based on their race, gender, religion, and so on. Mortgage lenders also cannot engage in fraud or any other practices that could result in unfair terms in the mortgage contract and might ultimately cause a borrower to suffer financial harm.

A common example of an action that may constitute fraudulent, unfair, or a deceptive practice is when a mortgage lender deliberately targets certain types of borrowers in the hopes that they will default on the loan and can charge them excessively high fees. This type of scheme is known as “predatory lending.” A borrower will have a right to sue any mortgage lender who participates in such practices and inflicts damage upon them.

Given the complexity of mortgage issues, it may be in your best interest to consult with a local mortgage or real estate lawyer for further advice about your particular mortgage case. A lawyer can explain the terms of your mortgage loan agreement and can help you negotiate a more favorable deal with your mortgage lender. Your lawyer can also make sure that you understand the various benefits and risks associated with each type of mortgage loan.

What Do Mortgage Lenders do?

As discussed above, mortgage lenders may offer a number of different loan services to borrowers who are or intend to purchase a home. Of course, a mortgage lender’s most important task in such cases is issuing the mortgage loan itself.

Some other responsibilities that a mortgage lender may have in connection with mortgage loan documents and real estate transactions include:

• Discussing the various loan options and terms with a borrower;
• Selling different types of securities to finance the loans they give to borrowers;
• Finding the right type of mortgage loan or lending institution for a borrower (e.g., mortgage brokers);
• Evaluating a borrower’s financial situation;
• Setting up the installment payments for the mortgage loan;
• Hiring appraisers to assess a property before a mortgage loan is issued to a borrower;
• Informing prospective homebuyers about their options regarding loan repayments; and
• Conducting research on the market price value of homes in a certain area to determine the rate of a mortgage loan or other service.

In most situations, however, a mortgage lender will typically present the borrower’s mortgage loan repayment plan during negotiations and incorporate the finalized version in the mortgage contract. The terms of a mortgage loan contract will also dictate whether or not the parties can modify the mortgage loan contract in the future.

On the other hand, there are some cases where it may not be necessary for a borrower to take out a mortgage loan in order to purchase a home. This can happen when a person who is selling their home agrees to assume the roles of both the seller and the lender. In other words, instead of having to borrow money from a bank or mortgage company, the buyer can arrange a deal directly with the seller for funds to purchase the home.

Finally, it is important that a borrower confirm they are working with an actual mortgage lender and that the funds backing their mortgage loan are not tied up in an illegal scheme. A borrower can avoid being the victim of fraud by having a lawyer help them with the mortgage loan process and by performing due diligence on a particular mortgage lender before they decide to do business with them.

Can Mortgage Loans Be Disputed?

Generally speaking, once the documents for a mortgage loan have been finalized and signed by both parties, the mortgage loan is typically treated as a legally binding agreement. This means that the mortgage lender and the borrower will each be obligated to uphold the terms of the written mortgage contract.

However, there are a few occasions when it may be possible for a party to dispute the terms of a mortgage loan agreement. Some grounds that may give rise to a dispute and permit the parties to modify or cancel their arrangement include the following:

• If a judge issues an order that compels the parties to amend, terminate, or create a new mortgage loan contract;
• When some of the terms used in a mortgage loan contract are deemed to be invalid or the entire contract itself is in violation of the law;
• If there is evidence that the mortgage lender engaged in fraudulent practices or coerced the borrower to agree to its terms when forming the contract. Any such actions are illegal and will most likely render the mortgage loan contract as null and void.

Disputes over mortgage loans can lead to further consequences like a lawsuit and a hefty damages award. Thus, it is usually best for the parties to resolve any issues amongst themselves. Even better is if the parties are able to hammer out all of the fine details during the negotiations stage of the mortgage loan contract.

In cases where the parties fail to reach an agreement or the issues require the intervention of a court, the parties should retain their own separate counsel to assist with the next steps. Oftentimes, the next steps will involve either revising the contract or awaiting a court’s decision on the matter.

On the other hand, if it is the borrower who caused the mortgage loan dispute to occur, then the dispute may lead to other lawsuits that involve different legal issues, such as defaulting on the mortgage loan or the judicial sale of a home.

Do I Need to Hire a Lawyer for Help With Mortgage Lender Laws?

Persons looking to purchase a home may not have a choice, but to ask a lender for a mortgage loan if they cannot afford a home’s listing price. Borrowers should be careful when working with a mortgage lender since interest rates can fluctuate and lending policies might not be so clear. Therefore, it is strongly recommended that you hire a local mortgage lawyer to assist you in navigating deals with lenders for a valid mortgage loan.

A lawyer who has experience in handling mortgage loan issues can advise you of the relevant laws in your area and can explain your rights and obligations under a mortgage loan contract. Your lawyer can also help you to negotiate, draft, and review a mortgage loan contract for the length of the contract.

In addition, if you need to amend an existing mortgage loan agreement or create a new one, your lawyer will be able to assist you with these tasks as well. Lastly, if you think you need to file a lawsuit against a mortgage lender for fraud or coercion, your lawyer can help with this process and can provide representation in court.