Mortgage litigation involves legal action related to aspects of a home mortgage loan, including foreclosure and disputes between lenders and borrowers. It can also involve residential and commercial mortgages. Borrowers may file lawsuits against lenders for alleged breach of the mortgage agreement, and litigation can arise from predatory lending practices. Class action mortgage litigation has been successful in some jurisdictions.
Mortgage litigation is a form of legal action taken in a court of law and involving certain aspects of a home mortgage loan. While mortgage foreclosure actions may be the most common type of litigation, there are also a number of other lawsuits that fall under the category of mortgage disputes. This type of litigation includes lawsuits filed not only by the mortgage lender or financial institution that owns the mortgage note, but also those filed by borrowers for alleged breach of the mortgage agreement.
Mortgage litigation can also involve residential mortgages between individuals and mortgage lenders, or commercial mortgage law, which affects business home loans. Thus, while litigation may involve many different types of lawsuits, all mortgage disputes involve a claim by one party that the other party has violated a mortgage loan agreement in some way.
Traditional litigation takes the form of a mortgage foreclosure action, in which the mortgage lender uses mortgage laws to bring a lawsuit against the borrower for default or violation of the mortgage loan agreement. The most common mortgage foreclosure action occurs when a borrower fails to make mortgage loan payments under the mortgage agreement. The mortgage lender has a security interest in the property underlying the mortgage loan, so the lender can bring a lawsuit against the borrower for non-payment as agreed. Ultimately, due to the security interest that the lender holds in the property, the borrower will most likely lose possession of the property and the lender will repossess it through the mortgage foreclosure process.
Mortgage litigation also includes lawsuits brought by borrowers against mortgage lenders. Just as borrowers must comply with their mortgage loan agreements, mortgage lenders must comply with the terms of the mortgage loan and any applicable state and federal housing laws. Increasingly, borrowers have turned to litigation for various violations of the law, including overcollateralisation practices, illegal private mortgage insurance practices, unauthorized charges and fees, and inappropriate interest rate adjustments on adjustable rate mortgages. .
Litigation can also arise from predatory lending by mortgage brokers and financial institutions; such practices may violate state and federal laws. These practices by lenders have not only generated litigation from individual borrowers, but have also led to extensive class action mortgage litigation, which has been quite successful in several jurisdictions.
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