Know Your Rights to Sue Mortgage Lenders for Unlawful Behavior

Written by: Christy Rakoczy

If you were a victim of unethical or unlawful behavior by servicing mortgage lenders, you may be wondering about your rights in terms of seeking restitution. Fortunately, even with the National Mortgage Settlement , there are a variety of options available to homeowners who experienced violations of foreclosure or lending laws.  Some of these options are even available to people who have already had their homes foreclosed on.

Mortgage Help

Numerous settlements have occurred in recent years that require mortgage lenders to make restitution to those they wronged.  These settlements benefit those who are currently struggling with their mortgages; who are underwater in terms of their mortgage (meaning they own more than the house is worth), or who have been the victims of unethical or unlawful treatment by their lenders.

Homeowners who are still in their homes have many options to take advantage of in order to fix the situation and hopefully remain in their homes, including refinancing under favorable terms and sometimes having a portion of the principle balance forgiven The Hope for Homeowners program outlines a number of these options for refinancing and remaining in the home.

Those looking to sue mortgage lenders who have already experienced a foreclosure on their property, however, have more limited remedies available to them.

Government Aid for Wrongful Foreclosure

A recent settlement between the government and five servicing lenders including Ally Financial, Bank of America, Citibank, JP Morgan Chase and Wells Fargo is unique in that it provides recourse to homeowners who have lost their homes as a result of wrongful or abusive foreclosure practices.   Under the rules of the settlement, individuals whose lenders violated foreclosure and lending laws could receive restitution including lost equity and interest.

Independent Foreclosure Review is also available under an order by The Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency.

Independent foreclosure review is available to anyone whose loan is serviced by a participating lender, including Bank of America, Chase, Citibank, Countrywide and numerous others.  The loan must have been in foreclosure between January 1, 2009 and December 31, 2010 and must have been a mortgage loan for your primary home to be eligible for review.  If it is determined that there were deficiencies in the foreclosure process, you may be entitled to financial compensation or other appropriate remedy. Independent Foreclosure provides a full list of banks participating.

Other Recourse

If you were the victim of a wrongful foreclosure action and are not able or willing to take advantage of government aid, there are other options available to you as well.

First, an individual lawsuit is an option. Acceptance of funds from either of the aforementioned settlements does not prohibit you from pursuing a lawsuit against the servicing lender that performed a wrongful foreclosure action. Some reasons for pursuing such a lawsuit may include:

  • The servicing lender did not provide enough (or any) time for loan modification paperwork to be completed and approved.
  • Documents for loans were not properly reviewed or notarized
  • Falsification of affidavits during foreclosure proceedings
  • Missed deadlines for loan modification processing

Seeking out a lawyer who has a strong background in and a good working knowledge of mortgages, banks, and foreclosure paperwork is crucial. Not only will your lawyer need to understand the financial language of your paperwork, but he will also need to be aware of any other lawsuits currently, or previously, charged against your lender in order to bring the best possible case against the bank that serviced your loan and foreclosed on your home.

Additionally, a good lawyer with a strong networking system will also be able to help find others who are having, or have had, similar issues to those that you have had with your lender. This will add credibility to your case and possibly allow for initiation of a class action lawsuit. A class action lawsuit will bring more visibility to the case; the more people involved, the better your lawyer’s chances of winning a case against your servicing lender.

While a lawsuit can be a useful tactic to achieve the restitution you deserve for the fraud or wrongful treatment by your servicing lender, lawsuits take time. Pursuing a lawsuit for restitution may be helpful only if you do not receive reasonable results from the other two aforementioned settlements, as it may take years to obtain compensation in court.


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