The role of the mortgage lender is simple. He or she invests money into a real estate loan with the intention of making money off of any interest that is charged to the borrower. It can be a good investment because it can bring in a steady stream of income over a long period of time. But it’s not without its risks.
It’s also important to understand that borrowers have certain rights under the terms of the mortgage, and they are guaranteed by the state in which they live. That doesn’t mean that lenders don’t have rights as well, and that becomes relevant if there is a problem with the loan.
Any mortgage is attached to the title of the property (also called a deed), and it is considered to be the “proof of ownership” for any piece of real estate. This title will show the borrower as the legal owner of the property, and it is granted under the condition that he or she makes periodic payments throughout the life of the loan. If the borrower fails to meet that obligation, the lender has the right to foreclose. This means that he or she has the right to sell the property.
Foreclosure laws vary from state to state, so it’s important to understand how they are handled in your area. Foreclosures will fall into one of the following categories:
- Judicial – Where the lender files a lawsuit against the borrower. This can involve various court proceedings, which will depend on the circumstances of the case.
- Non-Judicial – The courts are not involved in the foreclosure process.
Regardless of how a foreclosure is classified in your state, borrowers have the right to defend their position, and they always have the right to an attorney. Lenders have the same right, as borrowers may try to stop the foreclosure process.
Discrimination and Fair Lending
Lenders are not allowed to discriminate against a borrower for any reason. This means that they should never deny an application based on a person’s race, color, national origin, or any other factors related to the person’s status or disability. Not complying with this rule can lead to serious legal consequences.
Redlining is the use of high-pressure sales tactics with the intention of exploiting people within a certain group. This type of predatory lending is often targeted toward minorities and low-income groups.
Some of the common sales tactics they use may include but are not limited to:
- Charging excessive fees
- Charging high interest rates
- Lending money to people who are not able to pay it back
- Charging “prepayment penalties”
- Signing loans on homes that are worth less than the principal amount
- Giving away “single premium credit insurance”
- Asking for “balloon payments”
Many of these tactics are illegal, and borrowers should always talk to an attorney if they have been a victim of these scams.
Hiring a Real Estate Attorney
While financing a home loan can be a lucrative investment, it’s not without its risks. That’s why you need to talk to a qualified real estate attorney. He or she can represent you if a legal issue should arise, especially if you decide to foreclose on a property that is attached to a defaulted loan.
If you want to find out how we can help you, get in touch with us today!