Lender Fraud or Misrepresentation

This article will use the terms “fraud” and “misrepresentation” generally, but please realize that these terms may have vastly different legal meanings in different states.  For instance, many states have statutes which regulate debt collection activities which prohibit certain types of fraud and misrepresentations by creditors and by debt collectors which may be applicable to a foreclosure in addition to a “regular” fraud or misrepresentation claim.  Your state may have similar consumer protection statutes.  As always, if you think your lender has lied or made misstatements to you at any point during a foreclosure process; see an attorney in your state to determine if your particular facts would give rise to a violation which could perhaps prevent a foreclosure.

What misrepresentations a lender could make to a borrower are too numerous to list.  Essentially, if a lender tells you it is going to do one thing and then does another, it could be a misrepresentation giving rise to a violation.  For example, representations which could give rise to liability (depending on the facts) are:

  • If a lender represents that it will not foreclose on the property on a given day and then forecloses anyway;
  • If a lender represents that a borrower has been approved for a modification or even supplies the borrower with a modification agreement and then fails to modify the loan; or
  • If a lender states that a payment is going to be applied to the loan in a certain way and then applies it in a different way.

There can be many potential pitfalls in a fraud or misrepresentation claim.  Certain types of misrepresentations might have to be made in writing to be binding.  Some representations might not give rise to a misrepresentation.  An attorney experienced in these types of claims in your state can be an invaluable resource to you if a violation has occurred.

Stopping a foreclosure based upon a misrepresentation as to a particular foreclosure sale may also fail to be a permanent solution.  If the lender made a representation that the foreclosure would be postponed, but it is continuing to move forward with the foreclosure, a restraining order might stop that foreclosure, but the lender would just need to re-post the property for foreclosure and refrain from making any misrepresentations as to a future foreclosure.  This type of lawsuit might stop the foreclosure, but a follow-up plan needs to be in place to deal with the arrearage.  Again, if you believe that your lender has made a material misrepresentation to you leading up to a foreclosure, please seek out an attorney licensed in your state.

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