The mortgage lending process is complicated. From pre-qualifying to estimating a loan to underwriting and closing, mortgage lending can be a long and painstaking process. With a long process comes the increased potential for mistakes to occur, potentially leading to legal battles between client and broker.
Specific complaints involved in a mortgage lending process can lead to possible lawsuits against the lender, such as predatory practices, negligence, or fraud. What's more, intentional illegal practices, such as redlining, prevent individual races of people from having the opportunity to live in specific areas. When these issues arise, some legal complaints may be brought against the lender.
Here's a closer look at some common errors that could lead to lawsuits for mortgage brokers and lenders.
The mortgage lender might promise specific numbers in a lending process or even a lower interest rate. But not all promises are guaranteed. When there is no written explanation of what the two parties agreed to, this matter can lead to further disruptions. The borrower can end up making payments with higher monthly rates through these unexpected changes and feel they have a legal case to make against their mortgage lender.
Whether it's in print or digital, paperwork problems can present significant legal issues for mortgage lenders. Most errors that happen within the mortgage paperwork process resolve before the procedure takes effect. However, if errors are not resolved, they could lead the borrower to pay higher mortgage payments, disrupt money transfer, or prevent necessary renovations or repairs.
The Devil in the Details
To piggyback on the note above, changing the fine print in the paperwork agreement can lead to a legitimate grievance against the mortgage lender. For example, the lender might have made the modifications to ensure that the loan would process without considering how these changes could impact the borrower's ability to repay the loan. If the borrower cannot make these payments, this could be attributed to predatory lending methods, which negatively impact the borrower.
This kind of grievance can lead to a valid lawsuit against the lender for one agent's inconspicuous actions. The client bringing the charges against the lender may need to provide comprehensive records of all interactions and communications with the lending agency to improve the chances of favorable results in negotiations.
As mentioned above, some errors from mortgage lenders aren't accidental. Instead, there are intentional steps lenders can take to keep certain people from obtaining a loan. Under the Equal Credit Opportunity Act, lenders can't base credit and loan approvals on a person or entity's characteristics. If the potential borrower feels they have suffered discrimination in some form on their application, they may file a complaint against the broker.
Mortgage Broker Insurance
Like other industries, mortgage brokers need to operate with proper Mortgage Broker Insurance to protect against the legal, financial, and reputational fallout from legal claims made against them. Even if the claims are unfounded, alleged discrimination undoubtedly paints a lender in a bad light.
Having Mortgage Broker Insurance protects litigation and is tailored to cover the inherent risks that these professionals face. This coverage helps protect brokers from errors during the entire loan process, from start to finish.
About Axis Insurance
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (877) 787-5258 to speak with one of our professionals.