304 North Cardinal St.
Dorchester Center, MA 02124
304 North Cardinal St.
Dorchester Center, MA 02124
A mortgage is a legal agreement that gives the lender the right to take ownership of the borrower’s property if the borrower fails to repay the loan. When you take out a mortgage, you sign a promissory note agreeing to repay the money you borrow, plus interest, according to an agreed amortization schedule. The promissory note is secured by the mortgage document, which makes the property collateral for the loan.
There are many important legal aspects to understand about mortgages:
The mortgage contract specifies the legal terms, including the borrower’sname, the lender’s name, the amount borrowed, the interest rate, the monthly payment amount, the length of the loan (term), and the property address. It is critical to review the mortgage agreement carefully before signing.
As the borrower, you have the right to prepay your mortgage by paying off the remaining principal early. However, your mortgage may have a prepayment penalty for paying off the loan too soon. You have the responsibility to make monthly payments on time and maintain homeowner’s insurance and pay property taxes.
The lender has the right to foreclose on the property if you default on the mortgage. The lender must follow legal procedures before foreclosure. The lender has responsibilities under various consumer protection laws to lend responsibly.
If you miss or make late monthly payments, you go into default or delinquency on your mortgage. After 90 days of non-payment, the lender can begin foreclosure procedures. Foreclosure can lead to loss of the home.
Each state has laws governing the foreclosure process. Generally, the lender must issue a Notice of Default, then a Notice of Sale. If the missed payments are not brought current, the home is sold at a foreclosure auction. After the sale, a redemption period allows the borrower time to “redeem” the property.
Filing bankruptcy stops the foreclosure process. You may be able to cure a default or modify the mortgage terms under Chapter 13 bankruptcy. However, the lender’s lien on the property remains valid.
Several laws exist to protect borrowers, including the Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), Home Ownership and Equity Protection Act (HOEPA), and Equal Credit Opportunity Act (ECOA). These laws regulate mortgage disclosures and prohibit discriminatory lending practices.
However, violations remain common. In 2022 alone, the Consumer Financial Protection Bureau received over 69,000 complaints about errors in mortgage servicing and lending.
Lenders cannot discriminate based on race, color, religion, national origin, sex, marital status, age, receipt of income from public assistance, or exercise of consumer rights. However, discrimination still occurs.
Black borrowers are twice as likely to be denied a mortgage as white borrowers, according to a report by the National Fair Housing Alliance. Hispanic borrowers face a denial rate 1.5 times higher than white borrowers.
With a reverse mortgage, borrowers age 62+ can convert home equity into cash without monthly payments. Loan repayment is deferred until they move, sell the home, or die. Heirs may need to repay the loan upon inheritance of the property.
Refinancing replaces an existing mortgage with a new loan to obtain better terms. Review the costs, fees, prepayment penalties, and Truth in Lending disclosures. Consult an attorney before refinancing an existing mortgage.
To protect yourself legally when obtaining a mortgage:
Some common legal issues that can arise with mortgages include:
If you face a legal issue with your mortgage, contacting the lender directly, consulting a real estate attorney, or filing a complaint with the CFPB or state attorney general can help resolve the problem. The CFPB levied fines against mortgage companies totaling over $2 billion in 2022 for various lending violations. However, justice moves slowly – the average time to resolve a mortgage dispute through the CFPB takes about 10 months.
A knowledgeable real estate attorney can:
Having an attorney protects your legal rights and can prevent future disputes.
|The percentage rate used to calculate your monthly mortgage payment amount
|The duration of the mortgage loan, such as 15 or 30 years
|The schedule for repaying the mortgage principal and interest over the loan term
|A fee charged if you pay off your mortgage before the end of the loan term
|Charges added for missing monthly mortgage payments
|An account used by the lender to pay property taxes and insurance on your behalf
|Expensive insurance the lender may purchase and charge you for if you allow your homeowners insurance to lapse
Be sure to closely review these key terms in your mortgage agreement before signing. Consulting with an attorney can help you fully understand the implications of each term.
Some common types of mortgage fraud include fabricating information on a loan application, predatory lending, mortgage servicing fraud through force-placed insurance, deed or title fraud, and foreclosure relief schemes. Beyond civil and criminal consequences, mortgage fraud has grave financial impacts. In 2022 alone, over 1 million properties were foreclosed on due to mortgage fraud and predatory lending practices according to RealtyTrac data.
Mortgage fraud carries serious legal consequences including civil liability, government fines, and criminal prosecution. Work only with reputable lenders and thoroughly research any promises of mortgage relief to avoid fraud.
This comprehensive guide covers the key legal aspects of mortgages. Be sure to consult an attorney to protect your rights before taking out a mortgage loan. Carefully reviewing the mortgage agreement and understanding your obligations as the borrower can prevent many legal problems.