Should You Sue Your Bank Over Your Home Loan? Are Loan Fraud, or Predatory Lending, Lawsuits Available in Florida?

Posted By on July 28, 2011

You obtained a home loan – maybe several years ago.  You are suspicious that something wasn’t right about that deal.  Maybe you’re living in your home, paying that mortgage payment every month, and just wondering about it.

Maybe you have an underwater mortgage.  Or, maybe you’ve already received a Notice of Acceleration from the lender.  Maybe they’ve begun foreclosure proceedings or you’ve already moved out and the bank has taken possession of the home (could’ve already sold it to someone else).

Do you have a legal claim against that lender?  Maybe you do.

Loan Fraud, or Predatory Lending, Lawsuits – What Are They?

Under the law, when someone is harmed by the intentional acts of another, then the wrongdoer can be held to pay not just for the actual harm he/she/it has caused, but the law also allows for “punitive” damages — the law allows for additional awards of money to be given to the victim as a “punishment” as well as an example that this behavior is wrong and not to be tolerated in our society.  These laws, based upon intentional wrongdoing, are called “torts.”

In Florida, banks (as well as mortgage servicers, appraisers, and others) can be liable under tort law for committing fraud or negligence on their customers.  Loan fraud is wrong, and victims can sue for it.

Predatory lending is one big example of loan fraud that is commonplace in Florida today.  In fact, a study released last week by the Center for Responsible Lending and discussed in the Huffington Post confirms that predatory lending remains “a part of mainstream American banking.”

The Definition of Predatory Lending

Predatory lending has been defined by the federal government as wrongdoing by lenders, mortgage brokers, real estate appraisers, or home improvement contractors who:

  1. Sell properties for much more than they are worth using false appraisals.
  2. Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
  3. Knowingly lend more money than a borrower can afford to repay.
  4. Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
  5. Charge fees for unnecessary or nonexistent products and services.
  6. Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
  7. Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
  8. “Strip” homeowners’ equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
  9. Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

Banks Have a Fiduciary Duty to Their Borrowers Which Many Have Ignored in Loan Fraud

The law recognizes that banks and mortgage lenders have a special, unique relationship with their customers, and legally this means that these borrowers are owed a special duty of care, a “fiduciary duty” by these institutions to do the right thing.   When a borrower relies on the lender – through its underwriting process – to figure out if the borrower can really afford the home, through investigation of the borrower’s income and credit rating, then the lender has a duty to make sure that the borrower can truly afford to take out that home loan.

The problem in the past few years is that greedy lenders have ignored industry underwriting standards and had a flippant attitude when they investigated the potential loan, and many loans were approved that were based on fraud.

Result?  These banks knew or should have known that these home loans and mortgages couldn’t be repaid – they were doomed either because of income, or credit issues, or because the appraisal was bad and the real value of the property is not nearly the value that the appraiser established so the loan fraud could happen.

What To Do If You Are a Possible Victim of  Home Loan Fraud

If you believe that you or a loved one have been the victim of Loan Fraud, Negligence or Predatory Lending, then don’t procrastinate.  There are deadlines for filing claims (“statutes of limitations”) that apply here, and there are also concerns that the defendant banks, appraisers, mortgage brokers, etc. will still be around to be pay for the damages they’ve created.  Act now by contacting a Florida real estate loan fraud attorney or reviewing the details provided by the Department of Housing and Urban Development today.

Comments

8 Responses to “Should You Sue Your Bank Over Your Home Loan? Are Loan Fraud, or Predatory Lending, Lawsuits Available in Florida?”

  1. Kathryn says:

    thank you for your informative website. I have a question: could a bank be countersued for fraudulant mortgage?

  2. KAK says:

    We have a jumbo mortgage originated in 2007 that we wish to refinance. We have excellent credit and no late pays. We were turned down by the 1st mortgage-holding bank due to a low-balled appraisal valuation. I believe the impetus for this started with the bank’s attempt to correct a Reg B violation allowed by the Regulation to be remedied by reopening the incorrectly-denied application. Confusion created by that caused a further backroom problem resulting in an interest rate mistake that, if the refinance closed, would have caused a loss of income (due to mismatched funds required to fund the refinance) to the branch and would have spotlighted the mistake of a particular lending team. I have regulatory appraisal experience and I know that the value is off, mkt value was not estimated and was not qualified as being something else, for more reasons than one or two that I do not have time or room here to list, appraisal fraud was committed, the bank action was a regulatory violation for reliance on an appraisal report that was outside regulatory requirements (because I told them so and provided documentation) to make its credit decision since the appraisal is not aligned with USPAP guidelines for many, many reasons. Our house is a unique, classic, custom home of Q1 quality with extensive detail and was compared to ubiquitous tract subdivision homes of Q3 quality rating (no offense intended). No overimprovements per appraisal but no value given for the many improvements or upgrades that are generally referenced but not valued. Appraiser didn’t lift a pencil to record the upgrades, improvements or superior features to that of the comps. I checked every comp out myself. No cost approach performed for nonsensical reason.

    While at our home, appraiser said they are afraid of FNMA recourse to banks and that it will then fall to the appraiser so they cannot include upgrades and improvements, in other words we only do low-ball valuations. I have further proof of this but too complex to write here.

    Sounds like a violation of appraiser independence and a symbiotic relationship between the two as I understand this is not uncommon today with their mutual recourse concerns. The correction is better work and higher fees that we would have paid gladly if they asked.

    This was a perfect storm.

    We appealed and gave them enough information to send back to the appraiser, including but not limited to, customized architectural plans drawn by a top-quality architect and author; but they sat on it, lied about the veracity of the rest and then when the evidence was overwhelming, they said appeal time is over, too bad, wish it were better. Is this legally actionable? The state is Florida. The bank is a large HC, multi-state subsidiary bank corporation. Thanks, my eyes are sadly opened.

  3. Hi KAK,
    Comments asking for personal legal advice and answers to legal questions cannot be provided in blog comments, but happy to chat with you should you wish to call the office. Thanks much for writing it is appreciated.

  4. marilyn k dorlac says:

    Preditory loan by bank of america

  5. Heidi kirby says:

    I lost my husband had 5 yrs left on loan 307 per month ….

  6. Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat. Your comment has been edited down to protect your privacy.
    Thanks,
    Larry

  7. Tricia Parker says:

    I want to sue US bank and an appraiser for an extremely bad valuation.

  8. Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.
    Thanks,
    Larry

Leave a Reply

Please note: Comment moderation is currently enabled so there will be a delay between when you post your comment and when it shows up. Patience is a virtue; there is no need to re-submit your comment.

css.php