Mortgage lenders often have a hard time adhering to the requirements of the federal law known as the Fair Credit Reporting Act, which may create liability for them when attempting to file a foreclosure lawsuit or pursue a nonjudicial foreclosure. The Fair Credit Reporting Act (FCRA) creates requirements that lenders must follow to when reporting consumer information to the credit agencies.
Inaccurate reporting of information may cause damages to borrowers and create liability on the part of mortgage lenders for a wide array of mistakes. The FCRA governs the reporting of all information to credit agencies, whether it be inaccurate or not. Whether or not the borrowers have defaulted on payments is irrelevant to application of the FCRA on information reported.
There are a number of specific rules that mortgage lenders and all creditors must comply with when offering credit to a possible borrower and in the ongoing operation and servicing of the loan. Lenders often have a very difficult time following all of these guidelines while also attempting to comply with all of the other federal and state lending laws and routinely misreport information about consumers' loans to the credit rating agencies.
If a lender denies credit or even a debt modification on the basis of information received from a credit agency, the consumers must be provided with a statement indicating that they can obtain a copy of their credit report from the reporting agency at no charge. The request must be sent to the company which provided the credit information within 60 days of the denial of credit by the lender.
Also, the creditor (or servicing company ) may not report information to credit agencies that it knows or has reason to believe is false or inaccurate. With the poor quality control most banks seem to have in place in their collections and foreclosure divisions, mistakes are more common than many homeowners might believe. In case any errors are discovered, the creditor is also required to correct the mistake on the borrowers' report.
There is a specific notice requirement for housing loan lenders when offering credit to borrowers. It is called the "Notice to the Home Loan Applicant" and includes information for the borrowers' use. This document provides information regarding disclosure of credit scores, an explanation of the credit scoring system, and instructions to contact the lender if the borrowers have questions about the terms of the loan.
The credit bureaus themselves also have to follow guidelines in the FCRA, including verifying any information that a consumer challenges as inaccurate. The verification must be done within thirty days of receipt of the dispute. If a record can not be verified, it must be removed from the credit report.
Intentional violations of the Fair Credit Reporting Act allow homeowners to recover damages in three ways. The first is actual damages between $100 and $1,000 for each violation of the law. The second is any punitive damages that the courts may award to the foreclosure victims. And finally, homeowners are entitled to lawyers fees and the costs of any legal action they bring against the lender for violations of the FCRA.
In practical terms, violations of the FCRA may be used by homeowners to offset liability in a foreclosure action or lawsuit. When homeowners are preparing their answer to the foreclosure lawsuit the bank files, they may wish to include violations of the FCRA as counterclaims to sue the mortgage company for damages as outlined above. Depending on the amount and type of violations, along with any legal representation the homeowners utilize, such violations can create a large liability for the mortgage company.
Author Resource:-
Nick publishes articles on the ForeclosureFish website, which aims to teach homeowners how they can prevent on their properties while they still have time. The site describes various methods to hold onto a house, including foreclosure loans, deed in lieu, mortgage modification, filing bankruptcy, and others. Visit the site today to read more and discover what options you can use to avoid the loss of your home: http://www.foreclosurefish.com/
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