If you're like many homeowners fighting foreclosure, you may have wondered if you can sue your mortgage lender. After all, it's been proven that the banks have lied, forged documents, deceived people in desperate need of help, and broken countless laws. It's happened with loan origination, servicing, and in the foreclosure process. If you can't sue for that, then what in the world can you sue for?
Technically speaking, you can sue. You can pretty much sue anyone for anything. All you need is the money to pay the attorney's fees. The question is whether you should. Is it worth the considerable time, effort, and expense? Every situation is different, so the answer will have to be decided on a case-by-case basis, but there are some things everyone should look into before they decide to file a lawsuit against their mortgage lender.
What is Your Goal?
If your goal is revenge for all the grief the bank has caused you, suing isn't going to do it. Most mortgage lenders are far too big to be harmed by any one homeowner. Your bank is like an elephant, and you're the mosquito whose bite they don't even notice. And don't forget that the banks have already paid out billions to settle lawsuits, and they're still in business. So even a best case scenario for your lawsuit isn't going to make any difference to them.
If your goal is to get financial compensation for what's been done to you, that's going to be tough to accomplish. Remember that banks have effectively-limitless money to spend on lawyers to fight back, and the penalty for what they did, even if you could prove it, may not be very much money.
Also keep in mind that, if you stopped paying your mortgage for any reason, you're at fault as well. If you go to court, a judge might acknowledge that your mortgage servicer broke laws in the administration of your loan, but she'd also have to acknowledge that you broke your contract when you stopped paying your mortgage. Just because the bank did something wrong doesn't mean you're going to get your home for free, or a million dollars in damages.
So be careful of going too far down the rabbit hole of blaming your bank. However deserving of that blame they are, and they are, you still have obligations from the contract you signed when you borrowed money to buy your home. Any judge or jury is going to take that into consideration .
Has Someone Already Sued Your Lender?
Before you decide to sue, look into whether or not somebody's already done it for you. The National Mortgage Settlement of 2012 is a settlement with most states, the federal government, and the largest banks to settle numerous lawsuits related to mortgage servicing misconduct. The settlement requires the banks to provide $26 billion in relief to distressed homeowners through refinancing, loan modifications, and cash payments. A lot of the misconduct is foreclosure related and includes robosigning documents, not following proper foreclosure procedures, and dual-tracking, which is leading a borrower to believe approval for a loan modification is coming while pursuing foreclosure.
The deadline to make a claim for a cash payout through the National Mortgage Settlement has passed, but exceptions may be possible for eligible borrowers. Visit nationalmortgagesettlement.com for information.
Smaller lawsuits have been settled as well. You may have gotten a card in the mail letting you know you're eligible to claim a share of a cash settlement with your bank. The settlement often comes as a result of a class action lawsuit filed against the bank for some kind of misconduct, such as violating credit reporting rules. Unfortunately, each homeowner's share of the settlement is often only a couple hundred dollars or less.
Is There a Better Alternative to Suing?
If your goal is to sue so that your lender will pay attention and give you a loan modification that allows you to avoid foreclosure, don't bother. Settlements and government programs require many banks to consider distressed homeowners for home-saving loan modifications that reinstate their mortgage and lower their monthly payment to an affordable portion of their income. The main program is the Home Affordable Modification Program (HAMP), and it doesn't cost anything to apply.
Unfortunately, trying to get a HAMP modification has been a nightmare for a lot of people who have applied on their own, sometimes numerous times, and been denied. If this has happened to you, consider working with a law firm that has extensive experience getting loan modifications for people in your situation. An experienced firm will know how to present your case to the bank so that you have the best chance of getting approved and avoiding losing your home to foreclosure.
HAMP is scheduled to expire at the end of 2016, so the time to take advantage of it is now. Don't procrastinate or let your desire for revenge cause you to miss out. You don't need to have good credit to get a HAMP modification, and it's the only hope many distressed homeowners have for keeping their home.
Only you can decide whether or not you should sue your lender. Think about what your goals are, how much money it will cost to sue (a lot), and what your odds of success are (slim). If your goal is to keep your house, but your payment is unaffordable, getting a loan modification is your best bet. Make keeping your home your number one, urgent priority. You can always sue later, but you won't be able to get your home back once its taken from you in foreclosure.
Images courtesy of Stuart Miles and fantasista at FreeDigitalPhotos.net
